For planners with the expertise of a seasoned negotiator, the aptitude of a skillful attorney and a thorough understanding of the hotel business model, negotiations and contracts can be a relatively problem-free experience.
Realistically, though, many meeting planners only possess some of these abilities.
This understandable lack of knowledge in all phases of the negotiation and contract process can create problems that greatly impact the quality of a meeting or event, and imperil a planner’s career or an organization’s future.
Identifying the pitfalls and common mistakes in the process will help you execute a better agreement with your supplier, which will result in a more successful meeting experience for you and your attendees.
Fundamental Fumbles
“I’ve been in the industry for more than 40 years and amazingly I’m still seeing the same mistakes and issues in negotiations and contracts,” says Joan Eisenstodt, president of Washington, D.C. -based Eisenstodt Associates, and a meetings and hospitality consultant, facilitator and trainer. “Sloppy, incomplete RFPs, not reading the contract thoroughly and rushing the process because suppliers have created a sense of urgency are some reasons things get off to a bad start.
“Contracts are a time-consuming endeavor,” she continues, “and some planners have a great fear of contracts so they breeze through and don’t focus enough on the details.”
Eisenstodt suggests reading the contract out loud to fully comprehend the agreement.
“The easiest mistake to make is not double-checking the basic details of the programs, such as room rate, program rates, room block or attrition allowances,” says Liz White, a corporate and incentive planner for Covington Travel, a Richmond, Va.-based travel management company. “If you sign off on erroneous details, you may not be able to amend them.”
Knowing and fully understanding the terms you’re agreeing to in the negotiation phase and later in the contract is imperative for success.
The Convention Industry Council website, Eisenstodt says, offers a “Contract Accepted Practices” section under its “Standards and Practices” tab that provides a comprehensive review of terms, most-used contract clauses, liability issues, mitigation of damages and other important components of contracts. PageBreak
Clause for Concern
There are numerous clauses in any contract covering a wide range of issues; however, the two that typically land on everybody’s watch list, according to experts, are the force majeure clause and the attrition clause.
Force majeure, which covers problems beyond the anticipation or control of the party to a contract, is a key component to the agreement to protect groups when things go wrong.
“Make sure the force majeure clause addresses all situations for which you may be concerned,” White says. “There are several versions of this clause currently in use and the clause in your contract needs to be as thorough as you require.”
Kristina Justen, events manager for PMSI, a Tampa, Fla.-based company focused on workers compensation issues and solutions, echoes the importance of the force majeure.
“If written correctly and concisely it’s my ‘get out of jail free card’, so to speak,” Justen says. “It needs to be well-thought-out and precisely worded or you’ll run into problems later.”
Attorney Josh Grimes of Grimes Law Offices in Philadelphia, who works with associations and companies in the meetings industry, says planners should be cognizant of wide-ranging problem areas.
“Many times the force majeure might be written to only deal with the meeting venue, but other things like transportation issues that could directly impact the meeting should also be considered,” Grimes says.
In rare instances, a group might have to cancel a meeting for reasons not covered in the force majeure clause. When that happens the attrition clause moves to the forefront.
The attrition clause defines parameters on a group’s liability for failing to meet its minimum commitments. It typically has numbers or formulas for determining any fees owed. The fees are compensation to the property for rooms that might have been sold had they not been deemed unavailable because of the contract.
Generally, both parties agree on a percentage of the number of contracted rooms that need to be filled. There are also food and beverage attrition clauses.
“The attrition clause is confusing and in my experience I would say it’s calculated incorrectly about 50 percent of the time,” Grimes says. “Many planners don’t really understand and comprehend the clause, and they should ask for revisions if it doesn’t state exactly what they want.”
Every detail and penny counts, especially with regard to food and beverage.
“Be sure your food and beverage attrition allowance matches your room attrition allowance,” White says. “If fewer people are attending your meeting, your food spend will drop, so make sure you’ve accounted for that possibility in the contract.” PageBreak
Concessions Confusion
An integral part of any negotiation and subsequent contract signing is concessions, the amenities and services suppliers use as an enticement for securing your business or as an incentive for good performance.
“To be successful with concessions, it’s important to find out the value of your business to a particular hotel,” says Kate McCarthy, CMP, senior manager of meetings and events at SmithBucklin, a Chicago-based association management and professional services company. “Once you determine how valuable your group is to them, you’ll know how much leverage you have when discussing concessions. The true value of your business goes beyond just revenue generated by sleeping rooms and meals.”
Concessions are an easy thing to overlook, White says, “so you need to refer to your proposals and e-mail correspondence to be sure all are included from the outset.”
Learning the needs and desires of your group and pre-meeting preparation go a long way in securing concessions from suppliers.
“Before negotiations, I recommend compiling a list of concessions such as ‘must have’ items, a ‘wish list’ and ‘throwaways,’” McCarthy says. “Often young planners don’t fully understand leverage and how to use it. You should know what you can and can’t request and rarely give a concession without getting a concession.”
Pertinent Issues
Someone who’s not even in the room might actually guide the negotiation stage.
“Some inexperienced planners don’t realize the salesperson must sell their meeting to a revenue max manager who crunches numbers and assists in making decisions,” McCarthy says. “The salesperson is not acting alone, they’re accountable and it impacts negotiations.”
Don’t overlook payment terms if you want to receive your commission on time.
“Make sure commission is clearly spelled out and payment terms are not predicated on the hotel receiving final payment,” White says. “If you’re not acting as the agent responsible for the financial aspects of the meeting, your hotel commission should not be affected by any outstanding amount due the hotel. Commission due 30 days after completion of the meeting needs to be outlined in the contract.”
Justen says attentively reviewing all documents associated with your meeting or event goes beyond the contract.
“The banquet event order [BEO] is an extension of the contract and I carefully review my BEOs just as I do the contract to make sure our group is getting everything we worked diligently to obtain in negotiations.”
Edward Schmidt Jr. is a longtime contributor to Meetings Focus who has covered everything from hybrid events to group golfing getaways.
