IT’S NO FUN DEALING WITH REFUNDS
Disclaimer: My company, DMSE Sports, does not typically own the races we manage, so the decision surrounding whether to refund for a canceled event resides strictly with the client. As such, I believe I can be objective regarding this topic, as I can see both sides of the argument.
Event refunds are a complex issue. I’ve been on both sides of the issue—as a race director faced with the possibility of issuing refunds, and as a participant of a canceled event. Whether a road race issues refunds for a canceled event is dependent upon several factors.
We’ve been in a pandemic for two years, and never in the history of our sport has there ever been more race cancellations. In 2020, DMSE’s clients canceled the 35 events we had scheduled for the year. In 2021, we were only able to conduct and manage the final 10 races/events we usually have scheduled each year. As such, the issues regarding race cancellations and race refunds are a hot topic.
Before the pandemic, many—if not most—race contracts did not address the possibility of a cancellation and what would happen if that were to occur. Now, every race-related contract being written includes significant language regarding the agreement and the understanding as to what happens if a race is cancelled. Sponsors, especially, want to see such clauses included as they feel they are not getting their full return if a race doesn’t actually happen.
As such, here are some important points both races and participants need to consider:
The race needs to be very clear at the time of registration as to exactly what their refund policy is. No surprises. Whatever it is it is, and those registering for the race either agree to it and sign up or don’t agree to it and don’t sign up.
Entrants should be required to check a box before their registration goes through and is accepted, acknowledging they are aware of the refund policy and that they are agreeing to it.
If refunds are not offered, many runners may wait and wait to register until closer to race day. As such, it is harder to predict what the field size will be. Thus, the refund policy can really have an impact on when people register for the race. If the race doesn’t usually close out quickly and early then planning becomes difficult and a wild guessing game in terms of ordering t-shirts, medals, and overall race preparation.
Another option that some races offer are deferrals to the following year. However, this is just prolonging inevitable financial challenges to the event the following year.
The phenomenon of the “virtual” race truly accelerated during the pandemic, especially in 2020. Races offered a virtual option for a slightly lower fee. Some races that had already collected entry fees for an in-person race but then had to cancel went right to a virtual option, giving entrants no other choice.
One idea in terms of trying to encourage runners to sign up early is a tiered refund system. For example, registrants who sign up four months before the race will receive a 100% refund if a race is canceled, 75% if they register three months before, and 50% if they register two months before, and no refund after that. If the race wants to be generous and customer friendly, the same concept could apply if the runner wants to withdraw from the race for whatever reasons, (i.e., a percentage refund if they withdraw before a certain date).
The mechanics of issuing refunds can get complicated, too, depending on the online registration company. It depends on who has the money when the refunds are being sent: the online company or the race? You also have to consider the policies of the bank where the money might be sitting as well as any cost incurred in processing refunds.
The reason why many races don’t offer refunds has to do primarily with the sunk costs incurred prior to the cancellation of a race. Some of these sunk costs could include labor, advertising, insurance, marketing, website hosting, t-shirt deposits, medal deposits, non-refundable deposits on equipment rentals, printing costs, signage, banners, site fees, race management company overhead and the list goes on and on. A major consideration that has the most impact is when a race is cancelled. The later it is cancelled the more sunk costs have been incurred.
If a race is cancelled but all the t-shirts have already been ordered and received, then an added challenge is deciding if you should actually mail the t-shirts to the registrants if you are not offering a refund. Of course, to do this the race incurs the cost of this mailing: labor, supplies, and postage. If you don’t mail them, what do you do with them?
Another runner expense in question could be the online registration fee, which typically is in the $4.00 to $7.00 range. In most cases, this fee is not refundable by the online registration company and the race really has no say in this policy.
Both the race itself and those who have registered should incur their fair share of the cost and both assume the risk of a possible event cancellation. Until the pandemic, races weren’t typically canceled, and if they were, it was usually because of severe weather, and these conditions aren’t usually known until close to race day.
Many ask why all races don’t purchase cancellation insurance? Some races have it, but most don’t. Depending on what is being insured, it can get pricey. If a race does secure cancellation insurance, guess who is paying for it? The participants’ entry fees. And, even though it really doesn’t matter who decides to cancel the race, if the permitting authorities do so, there is a little less pressure put on the race. But, if the race decides to cancel then the participants feel they have more of a right to seek some sort of consideration.
Every race has a different take on offering refunds, granting partial refunds, or offering deferrals. One of my clients is refunding 100% of the entry fee if the race is cancelled no matter what. Their position is they want to protect their brand. If a race can actually afford to do this, great! Unfortunately, most races cannot.
So, as you can see, offering refunds can be a delicate balance between maintaining good customer relations and protecting the brand, but not losing so much money that the race goes out of business. That is not good for anyone.
In the end, the lesson here is for races to determine the policy upfront, communicate it clearly, and be sure everyone understands it, all while being transparent and as fair as possible.