Contract Negotiations Part 2 – Much more than Dates/Rates/Space

In the first part of this series, we discussed four key points necessary to forming a successful agreement: Open communication and full disclosure (on both sides); providing dates for the event as well as any pre/post needs; understanding the going market rate for all types of rooms; and securing a specific, detailed agenda of all space committed by the hotel to your group. Now you are all caught up.

Back in the ’80s many chains went to “simplified” contracts with just the basics. This was done due to customer pressure. Clients loved it; hotels hated it! That was then, this is now. Today’s average contract has four to six pages of legalese that spells out what happens when you over-commit to rooms, miss F&B minimums, cancel, or what will happen in case there is a Hurricane Katrina-type disaster, to name a few examples. You might say it’s like an insurance policy; it is made to cover almost any instance and, primarily, to heavily protect the venue rather than you or your group. Even though you didn’t write the contract, you still can even the playing field. So, get out your red pen and let’s take a look at what contract clauses you can change to better protect your group.

Take a proposal/contract for your next meeting and do the following:

1. Locate and identify any/all non-applicable, vague or inappropriate clauses that need to be changed/deleted.
2. Look for “what’s missing” — items that will further protect you and your company.
3. Determine the best way to incorporate all that is new or that has changed into the document, contract or agreement. This may mean drawing up a new contract; utilizing the current agreement, but striking through certain items; or adding an addendum that specifies agreed-upon changes.

Here are some key contracting issues that have the greatest potential to negatively affect your event and some tips on how to avoid the pitfalls inherent with each.

Attrition

This is by far the No. 1 issue planners have to deal with at one time or another. How it is spelled out in your agreement dictates how you will deal with it if and when your meeting attendance does not materialize. The best way to avoid paying any shortfall is to not have a clause in your agreement that states you will. In today’s economy, many venues will agree to a “no attrition” contract in order to secure your business. But, if you can’t avoid an attrition clause:

• Base the damages you’ll pay on the hotel’s lost profit, not revenue. This will reduce the amount due and the pain of writing the check, especially if the hotel was able to resell rooms originally reserved for your block.

Carefully word your attrition or performance clause to cover:

• Sold-out conditions at the venue — don’t allow the venue to “double dip.”
• An audit of your room bloc. Make sure that you’ll receive credit for all attendees staying at the venue, however they booked/paid for their rooms.
• How damages will be paid. Base them on a cumulative, not daily, basis.
• How any credits for unused comps and free rooms can be used.
• What a re-booking credit will consist of and how it may be applied.

Don’t forget to address food and beverage attrition:

• Stipulate any damages must be based on food and beverage profit.
• Include a clause that will keep you from having to pay taxes/service charges on damages, except where legally required to do so.

Cancellation

Having to cancel an event is never enjoyable. I am not talking about “we can’t do this in May, but we can in August.” I am referring to “this meeting will not happen” situations. Many things can cause you to cancel, such as economic downturns, company merger/acquisitions or a strategic change in company direction. Natural disasters also create an immediate need to cancel or relocate events. A well-written cancellation clause will protect both you and the hotel in the event that something happens. So, when negotiating your cancellation clause:

• Make sure that you specify a specific time period that enables you to cancel without incurring a penalty. For example, “XYZ Company may cancel this event within one year of the start of the event with no cost or penalty.”
• Specify what causes will allow you out of the agreement. For example, a change of ownership/management or a change in financial condition (bankruptcy, foreclosure), etc.
• Define what force majeure (acts of God), impossibility and/or rights of cancellation for cause mean for your group. Pay attention to what will work for you or may work against you. The more specific this clause is, the better the outcome. If you need clarification, think about what happened to groups in the wake of 9/11, the H1N1 outbreaks or the recent volcanic eruption in Iceland and determine what kind of instances might make it impossible for your attendees to travel.

Notice of construction

This is something that should be present in all agreements. There is nothing worse than arriving and finding out that the floor above, below or next to you is being reconfigured during your meeting or event. This clause specifies what the notification process about any planned improvements/repairs that may interfere with your event will be and what the recourse/remedies will be provided by the venue.

Quiet enjoyment clauses

These serve as a way to ensure that your functions will be free from unnecessary noise, distractions, disturbances or interruptions that are in reasonable control of the hotel/venue. For example, if you were trying to conduct certification testing, imagine what would happen if a dance was being held in the adjacent ballroom section. This clause should specify what your venue will agree to compensate you for this type of inconvenience, if not resolved.

Overbooking/relocation (aka “walking your guests”)

Be sure to spell this out in your contract. Specify:

• What type of accommodations and provisions will be provided your guests, if relocated.
• That rooms relocated will count toward group contracted totals.

Sustainable initiatives

I also recommend that you always add “green” or sustainability clauses that focus on encouraging both the venues and the attendees to discover opportunities to renew, reuse and recycle, whenever possible.

::

In closing, let me encourage you to do three things:

1. Keep and maintain a complete history on each meeting/event that you do, from contract inclusions/exclusions and room pick-up to how much you spend in all areas.
2. Keep a list of all the items that you must include in your agreements. Develop a list for rooms-only contracts, meeting space-only contracts, and rooms and space contracts.
3. Never, ever, be afraid to ask for assistance. You won’t become an expert doing this once or twice a year. Seek out those who know the market, have the industry contacts and the knowledge to make you a hero.

There are many more items that we could delve into, but if you focus on what was covered in Part I of this article and don’t overlook the above terms, there is a pretty good chance that both you and your venue will be satisfied with the resulting agreements you make. Remember to always assemble contracts with respect to both parties. If you do so, they will foster great meetings as well as long-term relationships that will pay dividends for you and your clients for years to come.

“This originally appeared on Plan Your Meetings (http://www.planyourmeetings.com), a free educational and social resource for meeting and event planners. For more meeting industry best practices, news, educational tools and advice, become a PYM Planner.” ( http://www.planyourmeetings.com/subscribe/)

Advertisement

~ by KJ on 2010/04/23.