These are unprecedented times for meetings due to the Covid-19 outbreak. For the week ending March 21, group occupancy at U.S. hotels was at less than 1 percent and had declined nearly 100 percent in each of the top 25 U.S. markets compared with a year prior, according to STR. Cancellation and force majeure clauses in contracts are more important than ever. BTN's Donna M. Airoldi talked to Bizly chief strategy officer Kevin Iwamoto, meetings industry attorney and College of Coastal Georgia professor Tyra Warner and negotiation consultancy Scotwork North America CEO Brian Buck about how meeting managers can mitigate losses, and the leverage a strategic meetings management program can bring a company.
BTN: What should a meeting manager do if there is a need to cancel or postpone a meeting or event?
Tyra Warner: They need to [make] sure that everybody is aware of the financial repercussions internally before any decision is made. I can't count how many times I've heard that the decision has come down from above to cancel a meeting, but then the CEO gets the bill for $500,000 and says, 'Are you crazy? Why did you cancel that?' Next, communicate with the hotel and be as transparent as possible. Put it in writing, and do it as soon as possible, because cancellations are usually on a sliding scale, so the sooner you cancel could affect how much you have to pay. Be clear about whether it's a cancellation, a postponement or whether you are claiming force majeure.
BTN: With Covid-19 now a pandemic, how does force majeure work for meetings?
Warner: Legally with force majeure, the contract terminates without liability. It's like the contract self-destructs. And there is no obligation to rebook or renegotiate anything. Clearly for any meetings that are immediate, it's a slam-dunk force majeure, especially with many city and state governments issuing no-gathering orders. [But] there is a gray area. People with meetings in June and July may want to cancel, but some facilities are saying we should be fine: 'You can cancel, but we will not assume it is a force majeure.' So, a lot of people are taking a wait-and-see approach.
Brian Buck: With force majeure, either party could cancel the agreement. … From a negotiation point of view, a force majeure will create conflict, and it presents an opportunity to resolve conflict in a valuable way for both parties. … You can get out of a bad relationship, … [or you can] look for opportunities to create a new relationship, whatever that may be. The things you will fight will be opinion: 'We don't know how long this is going to last,' or, 'This will affect us for 12 months.' At some point, you need to trade opinions and place bets on [them]. If you believe everything will be back to normal in six months, and [the other party] believes it will happen sooner, then you can formulate an agreement that would be an upside for you if it takes six months or more to get through this, or an upside for [the other party] if it takes less.
BTN: What are some other ways meeting managers have tried to mitigate their losses?
Warner: People have turned to teleconferencing or videoconferencing, especially when they have had big-name speakers.
BTN: Does a company with an SMMP have a better chance of recouping some losses for a cancellation than a company without one?
Warner: It depends on the contract. They need to use the leverage of having an SMMP … of having numbers and size and some diversity in meetings. [They could] possibly negotiate multiple contracts with sister properties or through a national sales rep, which could be advantageous for rates, terms or other things. They should negotiate to apply a certain percentage of cancellation damages to a future year booked, to another meeting … to a meeting booked by another division within [that] company or a subsidiary.
BTN: Are there other benefits to having an SMMP during times like this?
Kevin Iwamoto: In times of crisis and emergency, SMMP managers have an advantage, because if they've consolidated their program or are tracking data, they know where all these events are and all the logistical information. [They] can much more quickly and effectively start to report that information to senior leadership so that they can create appropriate go-forward strategies and back-up strategies … and make the best decisions to manage through the crisis.
BTN: What will the meetings landscape look like post-crisis?
Iwamoto: If this pushes into quarter three or four, you're going to find that a lot of companies without government support, they just can't financially make it. Some of these companies won't be there. [It would be] really devastating. … But the buyer-supplier relationship is always a strong one. You need each other to pull off a really successful event. I don't think that will change.
BTN: How can meeting buyers support their suppliers better in this crisis and as we emerge from it?
Iwamoto: I would take a look at all the preferred suppliers they are using and do some outreach and ask, 'How can we support you, and are you doing ok?' Start talking about rebooking and postponement. Reassure them they will get this business when the crisis passes. Maybe take a look at deferred credits or things they have on hand that they can put back into the budget and revenue coffers of the suppliers. … Take a look at events and canceled space and attrition. How much was covered by insurance? How much was not? What was the total downside to all the cancellations/postponements? They should talk to suppliers on how to reuse and rebook that space. … Don't wait until the crisis is over to have those conversations. [They] should be brainstorming and jointly doing exercises now.