Coronavirus and canceled events: Venues get a crash course in postponement clauses

This article is part of a Fortune Special Report: Business in the Coronavirus Economy—a look at the impact of the pandemic on more than 50 industries.

Karen Jiménez, director of events and sales at the Prince George Ballroom, a historic event space in New York City, has rarely had to reschedule weddings booked for her venue. If she ever did, the client typically incurred a change fee for moving the date. But given the current COVID-19 public-health crisis, she’s been rescheduling nonstop for the past two weeks, including having a lawyer adjust the venue’s contract to add “pandemic” along with a rebooking clause.

“We have to be human about it all,” says Jiménez. “The fact of the matter is everyone is bleeding right now, so we have to approach this from the perspective of how we can come together and fix it.”

For the hospitality and events industry, that’s been to rally behind the phrase “postpone, don’t cancel,” so venues have rewritten their legal agreements, drafted new postponement procedures, and waived fees to keep the business on the books.

For any event, the venue is one of the most costly line items. That’s especially true for weddings, as the average cost for a venue is $10,500, according to WeddingWire’s 2020 Newlywed Report, just released this week. That’s about one-third of the total cost of the wedding. Venues are not only the shelter for an event, but often provide the catering as well. In addition to a flat fee for use, many venues have a food and beverage minimum based on the guest count. Each venue, then, has a calculation for all these variables to make a profit on an event—or, at the very least, break even.

The current fallout from travel restrictions, caps on social gatherings, and “shelter in place” guidelines have clients, both corporate and social, in the tough position of changing their plans. Most corporate clients have outright canceled their brand launches, conferences, and trade shows, but social events, especially weddings, are a much more emotional affair. Those clients, say venue representatives and event planners, have sought to postpone, and venues are trying to minimize the damage.

“We’ll be lucky to get out of this with less than a million-dollar loss in revenue this year,” says Kate Turner, managing partner of 23 City Blocks Hospitality Group in St. Louis. “I think what people forget when dealing with these situations is that on the other side of a venue are people too.”

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The hospitality group runs popular venues like the Caramel Room, as well as a catering company. Her team has been stressing collaboration and timeliness, working to get new addendums out to clients within 24 hours. It’s a huge lift as half their clients were affected by the recent mandates on social gatherings. They are taking the hit to their bottom line by giving full refunds to cancellations for weddings within a 90-day window and no penalty for date changes in 2020.

Her approach is similar to that of venues across the country and even in Mexico: Be pro-couple in the short term. Beyond that, though, it’s case by case, with some upholding contracts. Gretchen Culver, chief revenue officer of Bellagala, a hospitality company with three venues in Minnesota, says the firm has had to carefully weigh the pros and cons of allowing couples to change their dates. They have waived a lot of fees for spring 2020 weddings, but outside of certain parameters, there may be some financial obligation from the client. “We can’t just take more events in 2021 to make up for lost revenue in 2020,” she says of the supply and demand. “There are only so many Saturdays in the summer.”

“Even though I’m in Mexico, the crisis is the same for everyone,” says the director of Club Industrial in Monterrey.

For Tere González Elizondo, director of Club Industrial in Monterrey, Mexico, it also meant making the hard decision to still charge some fees. Immediate cancellations resulting from the mayor’s declaration of a state of emergency led to refunds for some weddings.

Going forward, though, Elizondo is more than happy to change the dates for upcoming spring events without penalty. But when a client asked about changing the date for a November 2020 event, she had to ask herself, as a venue that hosts 50 weddings a year, at what point do you still waive the fee with all the unknowns?

“We decided to enforce the contract for events from June onward,” she says. “We’re suggesting they wait to decide closer to the day. We just don’t know what will happen the rest of the year.”

The Avon Theater is a historic landmark and venue in Birmingham, Ala.

Courtney Wolf, a planner who also runs the historic Avon Theater, an event space in Birmingham, Ala., noted that her contracts, like those of many others in the business, have “strong and clear language” regarding cancellations and reschedules. “The venue rental fee is due in full according to the payment schedule, regardless of anything—including acts of God,” she says.

That’s a reference to a force majeure clause, a legal term protecting a venue from not receiving payment owing to unforeseeable circumstances. It’s been unclear whether or not the COVID-19 pandemic falls into that category, preventing clients from reclaiming deposits.

As Jiménez says, it’s about being human and rewriting that clause with the help of an attorney. Wolf is having an attorney rewrite hers. Jiménez admits the Prince George Ballroom team is lucky; as a nonprofit as well, they have other funds to lean on. But some venues simply can’t absorb the cost of waiving fees. For example, Culver says for cancellations, they are sticking to the contracts and aren’t giving refunds.

Some venues have already decided to close altogether because of the mass number of cancellations and postponements. Landmark Hospitality, which owns several venues in New York and New Jersey, closed all 11 spaces and laid off 800 people, according to a former employee. It’s unclear if they will reopen. The director of sales for a group of venues in Charleston, S.C., had a similar story, though noted that he hoped they would reopen and rehire in the coming weeks. And even large organizations are not immune: Marriott International put hundreds of employees on furlough, including some handling their events.

It’s led many event planners to jump into the conversation. Amy Shey Jacobs of Chandelier Events is negotiating with venues to lower the minimum cost for events with smaller guest counts, and Sarah Drake of Cole Drake Events in the Napa Valley has everyone on text for the most immediate communication. Annie Lee of Daughter of Design is inspiring couples to consider a midweek date and asking venues to offer discounts for rebooking those dates as it’s an off-peak time. “Keeping as many events on the books is critical to keep the cash flow incoming, even if at a discount,” Lee says.

Then, there’s still the sales cycle of new business. Culver adds that she’s usually hosting dozens of venue walk-throughs at this time of year, so she has gotten creative about booking these new clients for 2021: She’s conducting virtual tours of her venues to show off the spaces and offering a “more generous cancellation policy to ease their minds about the uncertain future.”