COVID-19 and Trade Associations: The Impact So Far

Summary of Keypoints

• COVID-19 has caused significant financial losses for trade associations, primarily due to cancellations of in-person conferences and events, which typically account for about 35% of annual association revenue.
• Membership dues revenue has also declined as member organizations reduce expenses, compounding the financial strain caused by event cancellations.
• Survey data from the American Society of Association Executives (ASAE) shows substantial projected losses, with many associations reporting six- and seven-figure revenue impacts and more than half having no insurance coverage for cancellations.
• Associations have responded by cutting costs and operations, including reducing services, furloughing or laying off employees, closing offices, and reducing employee pay and benefits.
• To offset losses, many trade associations are exploring alternative income sources, including activities that may generate unrelated business income (UBI), while certain CARES Act provisions related to UBI and loss carrybacks may provide financial relief despite PPP funds being unavailable to associations.

Given shut down orders, social distancing, and travel restrictions, trade associations are facing extraordinary financial losses due to in-person event cancellations.  

Further losses are being experienced in dues revenue as members look for ways to reduce their own expenses.  According to the Professional Convention Management Association, conferences and events account for an estimated 35 percent of total annual revenue for associations. 

Indeed, meeting cancellations alone have dealt an astounding setback to associations.  

According to a recent survey conducted by the American Society of Association Executives (ASAE)  Research Foundation, the impact of COVID-19 on trade associations has been profound:

• 29% of respondents face $100,001-$500,000 in current and projected losses due to cancellations.
• 16% face $501,000-$1,000,000 in current and projected losses.
• 10% face more than $1,000,000 in current and projected losses.
• 12% have partial insurance coverage for cancellations.
• 52% have zero insurance coverage for cancellations. 

In response to the crisis, organizations and associations who successfully reduce their losses reported taking the following actions:  

• 71% reported a reduction in services/available operations.
• 67% have furloughed employees (not working but still provide benefits).
• 55% have closed offices
• 51% have laid-off employees
• 30% have reduced employee pay and benefits

It is evident that associations are significantly and uniquely challenged to continuously deliver the services on which their members depend. 

COVID-19 and Trade Associations Seek Other Sources of Income

Many associations are now considering other sources of income, some of which  qualifies as “unrelated business income (UBI).” UBI is any income derived from an activity that is unrelated to the tax-exempt purpose of the organization. 

While the Paycheck Protection Program (PPP) portion of the CARES Act was not made available to trade and professional associations, other provisions around UBI and the carry-back of losses do apply to professional and trade associations. 

To discover how these provisions of the CARES Act can benefit your professional or trade association, download our free eBook below.