Will the pandemic impact the venue finding agency business model?

Venue finding agencies have been among the hardest hit during the global pandemic, raising questions about whether the business model will need to evolve in the long term.

Pure venue finders, or agencies that get a significant proportion of their revenue from venue sourcing, have had their sole or main source of income cut off for more than a year. Unlike event management, production or full-service agencies, they haven’t been able to pivot to virtual as their services rely on live events actually taking place in hotels and venues.

Most venue finders are funded through a 100 per cent commission model, which means corporate clients get the service for free and venues pay agencies up to 10 per cent commission on the revenue. However, since that payment is only made after the event has taken place, it can be months or even up to two years after the work was actually delivered till they realise that income, depending on the lead time of the project.

While enquiries for live events are on the rise in some regions, which is great news and means venue finders can finally start earning again, it could still be some time before they actually get paid for the work they are delivering now. Angie Mason, Director at Absolute Corporate Events and Co-Founder of Meeting Allstars, has been in the venue finding market for over 30 years and says its heart breaking to see the impact of the pandemic on agencies. “I’ll be stunned if more than 70 per cent of venue finders come back after this. Unless you had lots of cash in the bank, or you’ve been able to do another job, or you have got support at home, how can you survive without any money coming in for more than a year?”

In order to maintain and retain their client base, many venue finding agencies also continued working hard during the pandemic to negotiate the best possible outcome for the client in terms of postponement and cancellation terms. Some events have been postponed multiple times over the past 15 months, and each time, venue finding agencies have worked diligently with both client and venue to renegotiate new dates and contract terms without getting paid for this additional work.

“Our value to clients over the past year has been starkly evident as we have renegotiated venue contracts on their behalf due to multiple and often repeat postponements of the same event, resulting in considerable savings and cost avoidance for clients in the process,” says Eventful Founder and Managing Director Caroline Lumgair Wiseman.

Highly skilled service

 A pure venue finding model on its own is difficult to maintain during a time when you can’t run live events. Although the current situation is far from normal and we are living in unprecedented times, it raises questions over whether clients should actually start paying for what is, when done properly, a high value professional service.

A good venue finder provides a valuable knowledge-based, connections-based service that covers everything from compliance and venue contracting to risk assessment and cost control. Venue sourcing is expected to become even more complex post-pandemic, with the increased focus on new safety and cleanliness protocols, sustainability, hybrid capabilities and increased pressure from clients for more flexible contract terms.

Dale Parmenter, Group CEO at DRPG, admits that the agency doesn’t make a profit from venue finding, which it offers as part of full-service portfolio. “We’ll drive the negotiation and price down on venues because the client can then spend that extra money on production. For us, that is fine because we can afford to do it. But if I was only making money out of venue finding I would be really concerned about how things will return post-Covid. I’m not sure it’s a sustainable model,” he explains.

“Anybody can just go online and pick a few venues out. That is not the skill of it. The skill is, knowing if the venue is right for the job. What are the technical requirements, is it Covid-safe and does it fit with the client’s sustainability requirements? You do then start to wonder if it should be fee based?” It’s certainly difficult to think of any other industry sector, where a similar valuable consultative service is provided to corporate clients for free.

Angie Mason, Absolute Corporate Events

Mason says that while she realises the commission model has its challenges in the current climate, there is no viable alternative. “It is a travesty that all this work is being done but no revenue is coming in, but that’s how it is right now. It’s not going to be that way in the future,” she says.

“The commission model is actually pure genius because the hotels and venues get that extension to their sales and business that they couldn’t normally reach for 8-10 per cent of the revenue, and the client gets a fantastic expert service at no cost. I don’t think that will change because there is not a really good model to replace it. How are you going to replace that revenue? The client is not going to want to pay it and the venue finder is not going to want to lose it.”

Perceived value

It comes down to perceived value, because if clients are not paying for something, then perceived value is always less. However many agencies are understandably nervous to broach the subject of fees for a service that has always been free. With event budgets already under pressure, clients are unlikely to have the additional budget or willingness to suddenly start paying to cover the cost of venue sourcing.

Post-pandemic, venue finding specialists may need to be more strategic in their thinking and widen their offering to add more fee-based services or collaborate with partners that enable them to do that. Eventful has actually already done both. Lumgair Wiseman says the agency has been working closely with clients to offer a strategic meeting and event management consultancy service they are willing to pay for, alongside complimentary venue sourcing, which she predicts will be more in demand as the recovery begins.

“This will be driven by pent up demand for live events alongside the resource challenges that corporates may now face as some have restructured or moved event professionals to different roles within the organisation,” she explains. Eventful was also acquired by Aeorema Communications Plc in March 2020 and is now able to offer a broader spectrum of strategic communications and creative solutions in collaboration with sister agency Cheerful Twentyfirst.

Caroline Lumgair Wiseman, Eventful

Mason agrees that we will continue to see more collaboration and partnerships between venue finding specialists and other event management agencies but thinks it will be difficult for agencies to start charging fees for some of their services. “The difficulty is, where do you draw that line between what is included as part of your service and what’s billable and what isn’t? It would have to become industry standard, because you can be sure that if you are going to charge for X, another agency won’t. That is just the nature of business and competition. So unless we start having conversations at an industry level, I can’t see it working,” she says. 

Parmenter agrees that it would have to be an industry-wide move: “Perhaps now is the right time, because we have that level of collaboration across the industry that we haven’t had before. If everyone said to the client that it is going to cost this much per day, maybe they would value the service and expertise a bit more?”

Ian Cummings, Global VP, Commercial at CWT M&E, believes it goes beyond the commission-model and that the industry needs to have a conversation about the wider challenges that agencies are facing around payment terms and cashflow. “We should use this time to address the issue of cashflow and getting upfront payments in terms of deposits from clients,” he says.

“We are essentially an industry on a time-based model. If we are working on cancellations or re-bookings, then we need to be charging for that time somehow. We shouldn’t be expected to renegotiate postponed events three or four times on the basis that we are only going to get paid when that event goes ahead. Commission can offset cost, but our costs are our peoples’ time, and we need to be paid for that, and we need to be paid early on for it like any other service business.”

Cashflow is major issue for event agencies right now, with almost half (47%) citing it as their biggest challenge, according to our survey. Perhaps then, it’s less about changing the commission-based model completely and more about agencies finding ways to protect and preserve cashflow so they are better prepared to handle the next crisis. Many venues do pay commission on cancelled bookings, but payments could also be made upfront on deposits so venue finding agencies don’t have to wait quite so long till they get paid.

“At the end of the day, nothing is for free – you have to pay for it in one way or another. I think it’s fair to say to clients that these are our costs based on time, and if and when we collect some commission, we can offset those costs. I do think we need to move to that as an industry because a lot of agencies, especially smaller ones, have been caught out from a cashflow perspective during this pandemic,” says Cummings.

As we tentatively return to live events in venues, one of the few things we can be certain about is that venues and agencies will be a lot hotter on ensuring commission on cancellations and commission on deposits to help with cashflow. There will be a renewed focus on contracting and terms will be under more scrutiny than ever by all parties.