Contracts: How to Negotiate the Best DealFebruary 1, 2017

Planners Share Their Advice on Contending With Contentious Clauses By
February 1, 2017

Contracts: How to Negotiate the Best Deal

Planners Share Their Advice on Contending With Contentious Clauses

CIT-2017-02Feb-Contentious_Hotel_Clauses-860x418Taking appropriate steps to understand hotel contracts and unique clauses that may become contentious is paramount in the corporate meeting and incentive travel industry.

When Anthony Taccetta, corporate event planner and owner of Anthony Taccetta Event Design in New York City, works with a hotel negotiating contracts and clauses, he makes sure everything is in writing and is put on a timeline that gets shared with hotel personnel well in advance. The timeline should be signed off by appropriate parties to ensure all the details will go according to plan. Beyond the obvious room block, meeting space, cancellation, relocation, etc., there are a few clauses in traditional hotel contracts that are requiring a bit more detail and conversation in today’s hotel market.

 “It is critical to approach negotiations with the goal that the contract is written clearly enough that it can stand alone and be implemented by people not directly involved in the contracting process.”
— Nicole McCoy

As Nicole McCoy, director, global sourcing for Bishop-McCann, a fully integrated event management agency in Kansas City, Missouri, explains, the popularity of services such as Airbnb requires meeting planners to pay closer attention to attrition clauses to ensure that projected and contracted blocks are attainable.

“Work with the hotel to define contingency plans if you anticipate a disruption to your room block utilization due to those outside forces. Additionally, hotel renovations have been on the rise in the last year, and as a result, it’s crucial to ensure the contract outlines how the parties agree to work through it.”

It’s not always known at the time of signature that a renovation will be occurring, so McCoy suggests that clauses cover the client’s expectations of the timeliness of notification, a communication plan shortly following the acknowledgement, and the financial responsibilities if the event is unable to take place or if the renovation will compromise the integrity of the program. Then, if a renovation project arises, the parameters are already in place.

Planners also should have a contractual understanding of how specific elements within the hotel work. For example, how does the loading dock operate? Are there restricted hours? Is it union? Does the freight elevator require an operator? The hotel may have regular deliveries scheduled so planners need to make sure the vendors can get in and out in a timely manner.

And Taccetta makes sure he has a full understanding of what is happening in the rest of the hotel.

“There are a lot of moving parts that allow a hotel to operate smoothly and your event is just one piece of a very large puzzle, and you must understand where you fit in that puzzle,” Taccetta says.

Common mistakes planners make when it comes to hotel contracts is staffing and assuming “the hotel will take care of it.”

“Make sure you know exactly what the hotel provides, and it is clearly identified in hotel contract clauses,” Taccetta says. That may include everything from the duration that rooms are allocated to be used by your group to the number of bartenders and servers appointed to each orchestrated dining event that is scheduled.

It’s also important to make sure that the contract does not include unrealistic load in and load out times. For example, some hotels require evacuating space by noon on the last day of the program when another group is booked on that day. Meeting such a deadline for elaborate setups may result in extra cost. Indeed, it is vital that meeting planners double-check that the hotel has scheduled the group for the correct dates, and that they’re allowing enough time for setup and tear down, says Ali Pena, meeting planner and chief executive officer, Forums Corporate Event Planning, a company based in Miami that works with Fortune 500 clients.

“Because hotels have several sales reps that don’t always communicate with each other, they can make a lot of mistakes,” Pena says. “We’ve come across this problem on various occasions. For our larger conferences, the hotel will promise us that we have all of the space available and then tell us that there is a small group having a meeting in one of the ballrooms at the last minute. This creates chaos and upsets the client. It’s important that you are in contact with both the sales team and the manager of the hotel so that you have leverage when this type of situation arises.”

Negotiating Basics

When it comes to contentious hotel clauses, and even those that are not deemed contentious, communication is always the key. Therefore, during the contracting phase, it’s important to discuss how terms would impact possible scenarios to ensure both sides are in agreement.

“If a clause is confusing, further discussion with examples will be the way to create mutually agreeable language,” McCoy says. “If that isn’t successful, I would encourage a planner to seek the resources available to them through a sourcing specialist or hospitality lawyer. Depending on the overall value of the contract, outside assistance can mitigate risk and liability for a nominal cost of the overall program value.”

In the contract, the hotel needs to be clear about exactly what space you can and cannot use. Some hotels might specify a ballroom but not the foyer, which creates logistics problems for registration. Planners need to make sure they specify the exact spaces and where they are located in the hotel so that the space truly accommodates the needs of the meeting.

Hotel renovations is another area that Pena has encountered. “Although a hotel’s sales staff promises you that renovations will be over by the time your group arrives, normally renovations are delayed,” Pena says. “You should have the hotel include phrasing that guarantees what the backup plan will be if the hotel is still being renovated. Again, it’s important not only to involve the sales team but the manager of the hotel.”

Taccetta recommends that meeting and event planners make sure that every “I“ is dotted and every “T” is crossed before any contract is signed with a hotel or other venue.

“Get everything organized so that the hotel has a full and complete understanding of your timeline and goals,” Taccetta says. “Do not assume anything and have as many details as possible included in the contract.”

In fact, planners should be as specific as possible when working with the hotel on contracts. If that means showing them a rooming block, setup diagrams and other details, planners should do it as it will help avoid miscommunication.

“Put as much detail into your requirements as possible and make sure that you communicate it via email so that you have the information in writing,” Pena says. “We’ve sometimes had an issue with the hotel being sold out. It’s important to make sure that the hotel can send your attendees to a property nearby in case there are no rooms available. The property should be able to offer rates comparable or at a lower cost than the conference hotel.”

And when dealing with contentious clauses in a hotel contract, what has worked best for Pena’s team is to not only work with the sales team, but also to first contact the regional sales director in charge of the property.

“That way, you are treated as an important account right from the start,” Pena says. “You also want to meet with the hotel’s manager and establish a relationship with him or her. This will help you in case any issues arise.”

Avoid These Mistakes

Meeting and event professionals are typically experts in their field but many may not fully understand all of the aspects of the legally binding contracts or clauses, which can lead to extra fees and/or the meeting needs not being met or fulfilled.

“I think it is easy to fall into the mindset that everyone involved in the contracting process will also be at the execution of the event,” McCoy says. “This is not always the case, and happens even more frequently with contracts signed several years in advance. I think it is critical to approach negotiations with the goal that the contract is written clearly enough that it can stand alone and be implemented by people not directly involved in the contracting process.”

Also, with attendees traveling with multiple devices all requiring an internet connection, the need for dedicated internet bandwidth is more important than ever. McCoy believes strongly that AV needs should be incorporated into contract negotiations from the beginning of the process. AV can be a huge hit to the budget, and planners may leave money on the table if they don’t address those needs and associated costs during negotiations.

“Also, many hotel contracts incorporate other documents into the agreement, and it’s imperative those documents are reviewed with the same level of detail as the contract itself,” McCoy says. “Often, those documents outline further costs associated with the program — AV surcharges, room setup fees, etc. — and a planner needs to ensure such ancillary documents don’t contain any surprises. Your budget will thank you.”

When it comes to contract negotiations, planners often make the mistake of not being specific enough and not putting things in writing.

Forums Corporate Event Planning produced a major conference at one of the larger hotels in Miami Beach. They requested the use of the entire convention space because they had more than 100 meetings happening back-to-back and simultaneously.

“We were counting on the use of one of the hotel’s boardrooms for a C-level meeting and 30 minutes before the meeting was scheduled, the hotel informed us that they had scheduled another client in the room,” Pena says. “We had to scramble and have the hotel convert a suite into a boardroom so that we could accommodate the executives and place one of our team members in front of the meeting room to direct the executives to the new room. Unfortunately, the hotel did not offer us a solution to the problem so we had to think quickly, and luckily the executives were not put off by the experience.”

Pena cautions planners to “provide a detailed RFP including a rough minute-by-minute schedule, production diagrams, branding needs and everything in between. Once you receive the hotel proposal, if you can, schedule a meeting to meet with the sales staff and walk through all the spaces in your contract. Then, ask to meet with the hotel manager and discuss the importance of the event and try and have him or her stay while you discuss the logistics.”

Room Blocks & Attrition Fees

One of the key hotel clauses that often prove to be the most contentious pertains to room blocks. Room blocks offer many advantages for attendees and hosts alike. In addition to offering discounted room rates to attendees, room blocks can simplify the scheduling process and streamline the transportation of attendees when they are staying at the same locale.

However, some organizations do not want to be financially responsible if the block does not fill. Attrition fees are imposed on organizations when scheduling large room blocks. A planner can ask for a lower percentage of minimum pickup, and/or request a resell clause, which states that any attrition fee would be waived if the property is able to resell the unreserved guest rooms at an equal or higher-rated value.

The element that is most concerning to a client is the financial commitment to fill the rooms, especially for a first time event, or one without a history of room pickup to use as a reference.

“Attrition on sleeping rooms can be challenging at times especially if the client does not want to be financially responsible if the block does not meet its capacity,” says Tiffany Chalk, owner and meeting planner at Tiffany Chalk Events in Philadelphia, Pennsylvania.

And when it comes to actually managing large room blocks, where the individuals must call to reserve a room for themselves, meeting planners should ask for biweekly pickup reports and guest-name lists about two months from the cutoff date. Often there are situations where the block will be close to selling out, and planners want to stay proactive in terms of working with the hotel partner to add more availability, or find nearby partner hotels if needed.

On the flip side, if the rooms book up more slowly than anticipated, marketing strategies should be adjusted to encourage attendees to book their rooms — either by an incentive, such as a welcome gift or hotel coffee shop gift card, or just by letting attendees know of the benefits of staying at the official conference hotel.

“Any contract clauses that are not applicable to your meeting or event should have an amendment to the contract that is suitable to your meeting needs,” Chalk says. “If something is confusing, please clarify before signing off on the contract.”

Following internal company policies including legal, risk management and compliance approval, is always key. McCoy stresses that a second set of eyes is always helpful, and her department regularly exercises this safeguard to ensure each clause is looked at from all angles.

“With the volume that our sourcing managers handle, it’s so helpful to leverage that overall expertise for stronger hotel contracts,” McCoy says. “For planners that only have a few contracts per year to negotiate, or may only have one or two planners in their company, requesting outside assistance from industry colleagues or an outside resource can help a planner (avoid) feeling lost or overwhelmed in the legal language and ensure confidence that the final version of the contract is precisely what (was) intended.” C&IT

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