Coronavirus and Meetings
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As the COVID-19 pandemic has temporarily halted the global face-to-face meetings industry, planners have spent a significant portion of their time cancelling or rescheduling meetings — and in many cases, chasing deposit funds that suppliers and venues no longer had at their disposal. As part of our coverage of contractual and financial solutions that might help protect future meetings investments, Northstar Meetings Group spoke with Liz Holtby, vice president of operations at Toronto-based Meeting Escrow, to learn how the firm applies the escrow process to meeting planning.
How do Meeting Escrow’s solutions work and what kind of protection do they offer?
Let's take our flagship service as an example, the Advance Deposit Escrow Protection solution, which is in demand right now. It protects client funds by putting the advance vendor deposits into escrow trust accounts, and they stay there until after the event takes place. It protects organizations by avoiding financial risk due to catastrophic events, because the client is no longer loaning money to the supplier to guarantee future services. That said, they are still providing their guarantee by depositing 100 percent of the program value into the escrow trust account. A good analogy is the process of buying a house: You give your deposit to an attorney or lawyer who holds the funds in escrow trust until the sale is completed and then you get the keys.
What are you hearing from clients about their main concerns with prepaid advance deposits in a crisis environment like we are experiencing now?
The hospitality industry has taken a huge hit, resulting in hotels and DMCs being temporarily closed -- but is it really temporary? Cash flow is a problem and clients are wondering if their deposits are recoverable. They are concerned about programs that have been rescheduled -- will the vendors still be in business when the programs are scheduled to take place?
Who owns the money that is held in escrow?
Although Meeting Escrow is the trustee of the deposits held in an escrow account, we are never the beneficial owner. The purchaser (client) remains the beneficial owner until the vendor (supplier) becomes the beneficial owner, as defined in the vendor contract. Ownership of the deposits held in an escrow account is always defined by the vendor contract terms.
For example, let's say a company cancelled their program -- without cause -- the day after the funds were deposited to the escrow account. If the hotel contract stipulated that as of that date, a 10 percent cancellation fee would apply, then the parties would instruct Meeting Escrow to wire 10 percent to the hotel and wire 90 percent back to the client. Or, let's say the company had to cancel the program due to another COVID-19 outbreak two days prior to arrival. If the hotel force majeure clause provided for a 100 percent refund of all deposits in this scenario, then the parties could instruct Meeting Escrow to wire 100 percent back to the client.
Now, if the company and the hotel agreed to postpone the program instead of cancelling completely, all they would have to do is advise Meeting Escrow to leave the deposits in the escrow account and modify the escrow contract to reflect the new dates.
How are modifications handled when changes occur to program budgets?
As we all know, program adjustments are common practice; program budgets can go up or down. Per the terms of the Escrow Trust Arrangement, the proposed change must be submitted in writing to Meeting Escrow, acknowledging agreement by both parties of the change. Meeting Escrow then prepares an Escrow Addendum Modification document that is signed by both the client and the vendor.
Is this only about protecting the client, or are there benefits to the supplier as well?
There a number of supplier benefits, actually. Offering the deposit escrow service could be a unique selling opportunity, providing a payment benefit that competitors might not know about and serving to strengthen client relationships in the process. Suppliers also are guaranteed to receive their deposits and final payments on time, as the funds already are being held in the escrow account. Credit-card and wire-transfer fees are eliminated. And we offer the accounts in 20 currencies, so it can offer particular advantages for easing the payment process for international meetings.
What's more, given the current number of cancelled programs, this approach protects the supplier as well -- helping them to collect cash that's owed to them according to mutually acceptable contract cancellation terms.
How does Meeting Escrow make money? What is your revenue model?
Clients pay an annual base fee and a one-time trust deposit fee, which is a percentage of the funds deposited in trust with Meeting Escrow. This is our only source of revenue: We don't earn interest on client trust funds, nor do we invest these funds. Clients actually earn interest credit on the funds held in trust in accounts for U.S. or Canadian dollars.
What other services do you provide?
In addition to paying vendors, opening up escrow trust accounts and managing foreign currency transactions, we coordinate VAT recovery and we have a program designed specifically for vendors called our Secure Vendor Program. We also handle final program reconciliations, conference startup financing and a number of other financial services.