Negotiation Strategies
Contracts/Legal / April 08, 2014

Take 10 - Negotiation for Strategic Meetings Management

by Robyn Mietkiewicz

Negotiation webinar presenter Robyn Mietkiewicz of Meeting Sites Resource, answers meeting planner questions about contracts to improve Strategic Meetings Management.

1. Are there any differences that you could note in negotiating with European hotels? I've found that they are less likely to have the same attrition clauses as U.S. hotels. Would you say this is common or not?
Clearly there are many unique challenges to planning, negotiating and executing international meetings. Typically, attrition and cancellation clauses vary by both country and hotel, and generally are in the 10 percent room reduction range. Of course we still suggest guaranteeing 80 percent of your room block and doing the math to calculate on profit vs. revenue. Many international contracts include sliding scale attrition (use it or lose it), which we do not recommend.

2. As far as reselling rooms, what is an appropriate occupancy percentage for a "sell-out?” Is it appropriate to ask for history over the event dates? For example, if a hotel's average occupancy over the event date is only 75 percent can they expect me to pay attrition if they are not 100 percent completely sold out?
You are correct that a resell clause is essential for all contracts. In a seller's market, the hotel is expecting 100 percent occupancy to be "sold-out." However, we suggest language in the contract stating if a hotel achieves 95 percent occupancy, there are no attrition or cancellation obligations to the group. Hotels typically do not use historical occupancy as a benchmark, thus, we recommend 95 percent occupancy. We request hotel occupancy reports by night over our meeting dates once the event has actualized.

3. Can you explain in greater detail why a sliding scale is not a wise decision?
Often sliding-scale attrition offers 10 percent room reduction at 45 days and 5% percent attrition at 30 days, for example. The challenge here is that many planners do not know their final attendance that far out, and if they don't take advantage of the 10 percent and 5 percent, they cannot use it. Thus, we suggest guaranteeing 80 percent of the block, right up to the day of your meeting, which provides flexibility, and avoiding losing your room reduction opportunity.

4. Can you explain profit versus revenue a little bit more?
First, it's important to point out that as buyers, we want to be good partners with the hoteliers and offer fair and balanced contract performance terms. Hotel chains and independents on average make 78 percent gross profit on sleeping rooms and 38 percent gross profit on group F&B, thus in the event of performance, we prefer the hotel earn the same amount of revenues as they would had the group fulfilled. As an example, if you cancel your meeting 60 days out, if the hotel charges say 75 percent on F&B, this is a windfall since they have purchased no food and their actual real profit percentage is much lower.

5. Do you work with the hotel audit department or your primary hotel contact for the audit?
The hotel audit is most effective when working with your hotel sales contact and CSM. The audit process includes requesting a computer-generated occupancy report over your meeting dates, omitting any rooms out of service or under renovation, providing the hotel with a registered participants list to cross reference against all in-house guests over your meeting dates, capturing any pre and post room nights regardless of rate, and verifying any room blocks contracted to other groups over your meeting dates (remove their room block/attrition from the equation).

6. How do you know what the published group rates are? I've only been able to see "rack" rates.
A published rates clause is important to assure rate integrity and to minimize the chance of attendees booking rooms around your block. First, contract language should prohibit hotels from posting lower rates on their website during your specific meeting dates. In a nutshell, once the hotel contract is countersigned, we do not want any lower group rates offered by the hotel.  For your cost savings report, we ask our hotel partner to provide the average group rate in-house over our meeting dates, to verify our savings. Another option would be do use your initial rate quoted, versus your final negotiated group rate.

 7. How, specifically, did you create your cost savings report?
Regarding the cost savings report, we want transparent metrics and not inflated savings. We use a simple excel spreadsheet and list each cost savings line item, i.e., room rates, suite upgrades, discounted staff rooms, Internet comps or discounts and all other concessions listed in your agreement. Benchmark savings off of hotel group rates, not rack rates, and be prepared to defend your math as you are sharing these findings with senior management and stakeholders. Additionally, the contract risk reduction report addresses the "what-ifs," i.e. attrition, cancellation, F&B guarantee, legal and liability language, etc.

8. What language should be in a relocation clause?
In a seller's market, a relocation clause is important because hotels will oversell and expect a certain percentage of wash (or no shows). In the event an attendee is walked, it is the hotel's responsibility to assure comparable accommodations nearby, transportation, credit your room block for displaced nights, and place your guests on a priority wait list to return to the hotel with a suite upgrade, if available. I would also request an amenity and apology note from the hotel GM.

9. Regarding the addendum, that is only if there is nothing to stipulate the addendum supersedes all terms of the hotel's contract, correct?
The hotel addendum was designed to address changes and additional needs once the original contract is countersigned, not as an adjunct to the existing contract. The challenges with an addendum is that they are often attached to the hotel's contract and there can be conflicting language relating to the performance clauses. If you were to go to arbitration, the hotel's master contract would typically be the contract of record. If you use an addendum, make sure the hotel enters the exact clauses and language into their contract instead, not as a separate contract.

10. This came up in a recent LinkedIn forum discussion recently with differing opinions: If a hotel "relocates" an entire meeting to another hotel (rooms and space), is that the same as "cancel by hotel?” Or do you need a clause to protect against meeting "relocation?”
If a hotel relocates your entire meeting, this is not relocation, but instead Breach of Contract, or Cancellation by Hotel. There should be mutual cancellation obligations and we recommend this be in the form of a "Breach by Hotel" clause, stating that if the hotel cancels the group (sleeping rooms and/or meeting space), that the hotel is obligated to pay for all direct and indirect costs associated with relocating your group to another hotel. This includes marketing, attendee communications and increased room rate by virtue of relocating your meeting.

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