When negotiating a contract, create a framework of your needs, wants and interests.

Renee Radabaugh, president and CEO at Paragon Events, is a battle-tested event planner. She’s been a key part of the industry’s recovery from catastrophes like 9/11, the Great Recession and the pandemic. So, navigating crisis management through hurricanes, power outages and other curveballs is old-hat to Radabaugh.

Through it all, it’s been Radabaugh’s job to protect her clients’ events whether or not Mother Nature, a struggling economy or global turbulence had anything to say about it.

If those challenges can’t scare her, a hotel executive arguing about whether a canceled event was covered by force majeure, a contract clause tied to factors outside of an organization’s and venue’s control making it impossible to hold an event, certainly won’t.

You don’t run a thriving events company without the ability to stand up for your clients, which in Paragon’s case includes financial and insurance firms. She collects the facts, learns government regulations and trusts her instincts to create favorable contracts. They are what is needed in today’s combative corporate events climate.

At the center of most disputes related to business events is “attrition,” the legal term for the gap between reserved rooms and actual occupied rooms. If a certain percentage of the room block goes unfilled, hotels seek a financial penalty to make up for their projected revenue.

“Room block attrition is the single largest source of liability for most organizations when they have their meeting and event,” says Barbara Dunn, attorney and owner of Barbara Dunn Law PLLC.

Hospitality or Hostility?

Gone are the days of handshake deals and winks from across the table, says Jonathan Howe, Esq., president and founding partner of Howe & Hutton, Ltd., a law firm specializing in events.

Turnover in the hospitality industry, particularly since the pandemic, has greatly diminished the relationship side of hotel negotiations, Howe says. For better or worse, the process has become more transactional, and consequently, adversarial.

A good idea regardless of circumstances, planners should carefully review the entire contract and then ask a peer to do the same before signing a deal, Howe says. Assuming the same language carries over from one to the next, even at the same venue, can be dangerous.

“Changes have consequences; they have a ripple effect. And so many people don’t look at what that ripple effect might be,” laments Howe.

When all goes according to plan, both sides are likely to celebrate at the end of the day. But event planning is as much crisis management as it is developing agendas and creating experiences, notes Radabaugh. Circumstances often change for both participants and planning organizations.

In the hospitality world, hostility boils over at the arbitration table during a post-event dispute because so much is at stake.

Financial and insurance firms produce some of the most valuable events within the industry. They are traditionally high spenders because they expect a large return on investment in the form of enhanced client relationships, improved productivity among associates, and greater retention among top earners, among other KPIs.

Because the expectations are so great, planners are under enormous pressure to ensure the meetings deliver on their promise. And if circumstances limit some or all of the event, company management is not going to willingly take a total loss.

Meanwhile, venues covet big corporate spenders that splurge on F&B, pay a premium on AV, and lure attendees with a disposable income. If a business meeting or conference falls through at the last minute, hotels will not only lose out on planned revenue but will also struggle to fill guestrooms and meeting spaces designated for that group.

Due to the high volume of corporate events, it has become a seller’s market. Hotels are making demands that were previously unheard of. Making the situation more problematic for planners is that important language can be tucked away in a secondary document or addendum.

Dunn says planners need to come into the process ready for anything. She suggests building robust contingency plans that address both controllable risks (attendance, venue selection) and uncontrollable risks (economy, geopolitical issues, travel disruptions).

“Contracts need to reflect the contingencies,” she says. “You’re planning for the worst, but hoping for the best.”

Adds Dunn: “It’s all about predictability and avoiding the gotchas.”

In this article, we examine legal and liability challenges and how planners can protect their organizations while still producing an engaging and productive event.

When it comes to looking over the contract terms, “trust but verify” is a good approach.

Tips From the Pros

Most meeting planners have not gone to law school and can’t afford to have an attorney review each individual event contract.

Dunn and Howe are the most experienced lawyers in the field. They share some of their expertise with us in hopes of guiding event planners down the right path so their time and energy can be spent on creating a great event and not getting stuck in a legal showdown.

1. Identify Contract Red Flags Early

Financial and insurance meetings don’t have as much lead time for an event as an incentive trip or an annual convention. As a result, planners should carefully review RFPs and contract drafts as quickly as possible. Attrition, cancellation clauses and revenue expectations are almost universally going to be an event planner’s biggest legal and financial risks, says Howe.

Red flags to watch for include:

• Make sure the contract specifies how attrition is calculated, including slippage, room-rate definitions and what counts as a “used” room.
• Watch for clauses that tie concessions to room pickup. Missing the room block projection can trigger more than one financial penalty, says Dunn.
• Look for hidden fees buried outside typical sections.

2. Push Back on Pre-Payments

Hotels are starting to demand companies planning events onsite to pre-pay attrition rates as a form of down payment, Dunn notes. The thinking is that it’s easier to collect money upfront rather than seek compensation after-the-fact. On the opposite side, multi-million dollar firms are not going to be eager to pay more than they have to on an event they are already investing a significant sum in.

Be prepared for a struggle, warns Dunn. “Anything having to do with money – payment, deposit schedule, master account billing – hotels are consciously making a choice to toughen up those terms,” she says.

Radabaugh has also seen a shift in insurance coverage demands. “Hotels asking for bigger insurance amounts,” she says. “They used to be comfortable with $1 million. Now you are seeing $3 million. Some are asking for $5 million.”

3. Negotiate From a Low Baseline

Planners traditionally showcase their value to a hotel by using a best-case scenario for their room block and then add in a breakage or slippage rate for unfilled room nights. Given recent hardball tactics, Howe says it’s wiser to exceed expectations. “Traditionally, we always negotiated for how much breakage I can have,” says Howe. “What some savvy planners are doing now is the opposite. They start low and build up later so their attrition is based on the low number.”

“You want any additional rooms picked up later to count as a bonus rather than a liability,” says Howe.

4. Protect Your Audit

The most obvious way to protect an event from attrition penalties is to hit the promised mark. But counting can be tricky. Humans can make mistakes. Also, hotels may have differing views of how a room counts toward an event based on the booking method (third-party or direct).

Howe suggests taking a page from President Ronald Reagan’s “trust but verify” playbook. He says planners can insert the right to review the hotel’s registration list. “I have not been in a single case and not found people who should have been properly credited to the group,” says Howe.

Going a step further, Dunn notes planners can request multiple audits without unreasonable fees and ensure the group gets credit for all comparable-rate reservations.

5. Watch for “Double-Dipping”

In friendlier times, planners could trust they would not be charged for unused rooms that the hotel was able to book another way. Radabaugh says that’s no longer the case, and refers to practice as “double-dipping” because the hotel is collecting from the event planner and the attendees who got the room later. “They’re putting in the contracts a lot of extra language that says things like, ‘The cost of reselling the room is much higher than anticipated, so we’re not going to be able to allow you the resale of the rooms.’”

Dunn says, “Require credit for resale of unused rooms and spell out what documentation the hotel must provide.”

6. Lock in Early Rates

While generally a larger problem for citywides and conventions booked years out, costs can rise between contract signing and the event itself, particularly in the F&B world. Avian flu, for instance, can lead to a shortage of eggs and chicken. AV vendors may also raise their rates at the start of a new financial year. Likewise, a hotel may come under new management.

That’s why Dunn advocates for adding contract language stating that post-contract policies cannot override the agreed fees or impose new charges. Planners should also push for locking in all surcharges and service fees so they cannot be increased or added later without mutual consent, adds Dunn.

7. Build Cost Containment Safeguards

AV, service charges, administrative fees and host or resort fees are among the most aggravating charges for planners. Yet, it’s common for hotels to partner with exclusive providers that limit negotiating power. “Any language that can knock down those prices is going to be useful,” says Dunn, noting a client recently caught a bill with a much higher service charge than in the contract. It turned out to be a simple mistake but proved to be a good lesson about watching for any fees.

8. Have Your Own Contract Template

Hotels have standard clauses, fees and language for their contracts. There’s no reason event organizers can’t have the same. By creating a standard contract with a company’s preferred rates and policies, planners can comfortably know what’s in each proposal, says Dunn.

9. Review Timelines

Planners are often swamped with work as they keep up with an increasing number of demands. Failure to prepare for certain benchmarks can lead to self-inflicted wounds for missing deadlines to complete banquet event orders, dispute invoices and more. Hotels are not likely to offer leniency, warns Dunn. There are management software systems, including Monday.com, that planners can use to program in important dates to stay on track.

10. Be Ready to Walk Away

Howe always advises planners to ask what the non-negotiables are. “If any of those items are key to the success of your program, that’s when you pack up and go home because you’re not going to be able to pull the event off there,” he says.

Howe suggests creating a “needs/wants/interests” framework to structure negotiation and know what to trade. If a planner is savvy, they can gain the upper hand. For instance, if you know only a handful of attendees are driving to a meeting, try trading valet parking for a service more practical to your participants’ needs.

Security Assessments

It goes without saying that risk management goes beyond financial considerations.

Of tremendous concern to financial and insurance companies is something potentially more valuable than money: Data.

If an event’s registration information is compromised, hackers can gain access to driver’s licenses, Social Security numbers, credit card accounts and more.

“The belief that you have 100% security on the internet means you’re living on the wrong planet,” says Howe.

Protect your event against cybersecurity liability by using strong internal firewalls, monitoring, malware protection and cyber insurance, advises Howe.

Amid an increase in active shooter incidents and general safety disruptions, planners must coordinate all security layers carefully. When VIPs are in attendance or a controversial figure is scheduled to give a keynote, be sure to increase the presence of hotel security, third-party security, speaker security and local law enforcement, Howe says.

Another possible issue to think about when planning is the possibility of a government raid at your event. Both Dunn and Howe are based in Chicago, where ICE agents have conducted prominent searches for immigrants.

There are so many issues that could arise during an event and being prepared for them starts with ensuring that they are addressed in your contracts. By carefully reviewing them before signing, planners can better protect their organizations and their events. The goal isn’t to expect the worst, but to be prepared when the unexpected happens. I&FMM