Third-party pricing during the era of COVID-related cancellations and postponements can be problematic.
While in-house planners have enough on their plates dealing with taking down their programs, independent planners and other third-parties also have to contend with how they will get paid in a force majeure/COVID situation. Those who rely on hotel commissions are out of luck when the room block disappears, and it’s hard to justify charging for planning a restaurant meal that doesn’t happen. So what’s the trend with third-party pricing these days?
To find out more about third-party pricing nowadays, Prevue polled a dozen third parties, including sourcing companies, third-party and independent planners and destination management companies (DMCs). Here’s a snapshot of how these event professionals are charging for services in a COVID-19 environment.
Third-Party Pricing: The Combo Approach
By far, the majority said they used a combination of tactics, from time increments (by the hour/day/week, etc.), by markups on services provided and by built-in commissions from suppliers. For those who used just one method, charging by time increments was the most cited tactic for third-party pricing, followed by a tie between markups on services and supplier commissions. None said they charged a total percentage on top of all itemized services or that they had a specific cancellation clause that details charges in case of force majeure-caused cancellations.
A few who worked with sourcing companies said that they have changed their contracts in order to be paid in case of cancellations. In all cases, they said the contract was changed so they could charge for the time they spent sourcing if the event cancels and the planner is no longer eligible for the expected commission.
When it comes to how they prefer to get paid, the answer was overwhelmingly via an itemized invoice, said two-thirds of those polled. The rest were evenly split between open books and a day fee, a built-in markup, and “as long as it meets the overall budget and requirements, the agreed budget is paid.”
Have third parties changed their agreements to ensure they will get paid for their work, given their ongoing experience throughout the pandemic? About a third said they have changed their contracts to ensure the client is paying a fee or the missed commission if the meeting is cancelled, and one said they have added payment clauses to their agreements. A few said they have yet to find a way to ensure the end client will pay for their services if the event has to be cancelled. As one person said, “We added a small per-person fee to be paid even if the client has to cancel, but clients are hesitant to sign it because they are not used to it and they argue if they can’t travel, they don’t want to pay.”
Others reported that their current agreements seem to be working out, at least for now.
As one said, “We have only been doing virtual events, so this has not come into my contracts at this time. I do have payment clauses in all my agreements, so I envision with live meetings coming back, this will not be a problem.” Another said the contract hasn’t changed because it already includes an obligation for the client to pay an initial retainer fee, with an additional payment schedule spelled out in the contract. “We have had no issues being paid during COVID,” this person said. Another said their contract ensures that any hours spent prior to cancellation is paid, and if they are contracted for onsite support, payment for cancellation is determined based on how far out they cancel. Another said that, since their contracts spell out an hourly charge and they don’t rely on commissions, they haven’t had to make any changes.
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