This post, so well structured and level headed, somehow has me so perplexed at the same time. I cannot agree with you more on certain aspects, and at the same time, I’m so far at odds with you on others. But I think this kind of discussion is desperately needed. Whether the right people in the industry are willing to listen is another story altogether.
The bit I put in bold is the real issue for me. This is the perception so many seem to have, but the reality is it’s just not the case. The two big mistakes people make is believing that sports events are massively lucrative. They just aren’t. As a business they only make sense when all the ancillaries are added on, and even then, they still need sponsors cheques to actually make it worth while.
as I already mentioned before, the sponsors cheques normally only pay out based on a successful event taking place, and the ancillary things, like fees for having a stand in the riders village for mechanics, physios, bike shops, supplement suppliers etc etc only get paid if there is an actual event. Furthermore, your money paid over for your entry has been paid forward to a large extent to service providers many months before the event actually takes place. That is why most events sell early bird entries. Discounting an early bird entry is essentially cheaper than the interest on borrowing the money to pay the venue/Accomodation/ablution/caterers et al in advance. They may at best hold onto a small % themselves, and that normally goes towards salaries etc for the full time staff during the 12 odd months between events. The notion that organisers are sitting on your money earning interest while riding out the pandemic is simply not fair. At the same time then saying the service providers they have paid are doing the same is also not fair. Being paid for 1 event, that then has to be postponed, assuming it’s postponed before you have incurred real costs, is one thing, but that assumes they have a bunch of other paying gigs actually taking place. But when it becomes months upon months of postponements, with no new events on the horizon, but overheads still needing to be paid, it becomes a problem. Most of the value chain in the events industry is now in this boat together. They are “sitting” on deposits/entries paid in late 2019/early 2020, and no new income since. They have had to pay rent and salaries etc as long as they could. Then they had to start laying people off, downsizing etc, doing whatever to keep the lights on.
When the events can finally go ahead, the customer still expects the same service they initially paid for. The organiser still expects the services that it initially paid the service provider for, and so the expectation moves down the line. All this after effectively 18 months of zero new income. Essentially everyone has been paying Paul for the past 18 months, but there has been no new Peter to “Rob” or even legitimately bill. In normal circumstances this would never happen, because even for small companies that run 1 or 2 events a year, it remains cyclical, very much like farming, where this years harvest pays all your expenses to grow the next crop. Except in events now, it’s been 1.5 seasons without any crop, and when the crop does finally come in, the people you borrowed from (the paying participant, that entered in 2019) still wants their share.
So if you were to now insist on a refund, the organiser would need to loan the money to refund you from elsewhere, and the banks, who usually sponsor these events, aren’t exactly keen to extend credit to events companies at the moment, since they are probably already leveraged to the hilt by now.
The event companies have no choice at the moment but to try go ahead as planned, because they owe people who have already paid for that event the experience they paid for. Their only option now to try actually stay in the black, is to extend their logistics capacity to the absolute limit, and allow a limited number of new/extra entries to pump some fresh cash into the business. They cannot afford to cancel these events. The banks won’t loan them the money to refund everyone. The negative PR of a cancelation with no refunds would make any possible new format event a non starter. So, as much as they may want to go back to the drawing board and do things differently next time, they can’t do that until they have fulfilled the current obligations.
With regards to events that have already been postponed now for a second or third time, I have a terrible feeling that there will be a number of events companies that go insolvent during the course of next year, before they can even attempt to run the events they have sold entries to. When that happens, I foresee a number of threads here and posts on FB calling for the blood of the directors/owners. Because double standards when it comes to dealing with small businesses compared to huge Corporates is our second favourite pastime. For example, When everything went belly up last year March/April, the airlines and the big hotel chains just said sorry for you, and people lost thousands of rands worth of reservations/tickets. People got a bit upset, some maybe even made a snarky comment on FB, but essentially accepted it and moved on. But the same people that lost tens of thousands of rands to comair, Lufthansa, BA, SunInternational etc, and let it go, are still holding events companies to task over event entries. Those multinationals got government bailouts etc, and still paid nothing forward to the client, but everyone just accepts it for what it is. Events companies and hospitality providers got nothing, their business interruption insurance just refused to pay, everyone must just move on and accept. But every time an event gets postponed or they update their refund policy, or make changes to try and go ahead somehow, there’s threads with dozens of comments about it here, and Facebook comments into the hundreds criticising the organisers for being greedy, and earning interest on their hard earned money etc etc.
But maybe it’s time to look at this in some perspective. I’m going to use Ecobound as an example - I have no connection to the organisation, but they are a good example, since they have received severe criticism as to their handing of this, especially regards opening 2021 entries before having ran the 2020 event. There were a totals of 450 individual spots for each event (race and repeat). So a total of 900 entries at about R2650.00 per person. That means the event took in a total of just over under R2.4Mil for the 2020 event. So a total annual sales/revenue of R2.4mil for an entire 12 month period. If you take it that the event has to employ 2 full time employees just to manage the arrangment of the event, at a low salary for an event planner/logistics manager at this level (let’s assume these people have some other projects, so they aren’t paid a representative full time salary), so R25k gross per month each. That’s R600k per year.
The event needs office space, assume it’s shared with other business, (ecobound is in garden route mall, but run bikamino and 2Hell&Back from there too), so if the office rental is R20k/month, let’s call TB portion R7k. That’s a further R84k.
Entries are done online and paid by credit card. If they managed to negotiate a really sweet deal with the payment processer, they still paying at least 2%. So that’s a further R50k. Web hosting and maintenance of the online entry system, plus other IT related expenses, let’s call it a cheap R1500.00pm. Thats another R18k.
Then liabilty insurance for the event, R25k per departure, so another R50k
simce the route hasn’t really changed much over the past few years, we can assume they don’t need to do much recce trips etc. But let’s say they do about 10k km a year of driving in the planning of the event (this would probably be a lot more, but I’m being conservative). Assuming they use a typical late model 4x4 DC for this, so about R6.00km at conservative rates. That’s another R60k
They need an entertainment budget for wooing new sponsors, and reaffirming arrangements with existing sponsors, negotiating deals with suppliers/service providers etc. If they super frugal, R3000.00 a month ought to do. Another R36k a year.
So before they have paid a single service provider even a cent, or bought a single piece of merchandise for your goodie back, printed a single number board, or anything of the sort. Essentially without incurring a single direct event related expense, they have already spent at least R830k, and that’s being ultra conservative. I think it’s clear to see that once they start paying deposits to other service providers, printing race boards, making up goodie bags and so on, there is very little left out of the entry fees as “profit”. Now remember TB is actually a small event, organised by a family run small business. Unlike a lot of other events, there is no big Title Sponsor. This event actually needs to make an income for ecobound. The last successful event was in August 2019, 24 months ago. If you really think they are just “sitting” on the entry fees, think again. I do think the smart thing to do is not to enter any events for the time being, but if you had entered and are waiting on an event to eventually take place, be patient, and be thankful that you can actually afford to spend money on a hobby like cycling…