Hardly ten years ago, the typical supplier/meeting organization agreement was articulated in an informal letter. Terms were vague and legal jargon had no place in what was considered a gentleman's agreement between two parties.
Thoughclauses gradually began to make their way into hotel in the years of the buyer's market, we could refuse to accept such terms or take our business elsewhere. In the past two years, as the seller's market has taken hold, those of us not already conversant in legal nomenclature have been forced to either enlist a lawyer's expertise or, by our own signatures, risk the financial future of our organizations.
To help in your contract negotiations, I suggest the following tactics:
Conditional Cancellation Clauses Negotiate cancellation clauses to release you from the obligation to pay liquidated damages if the hotel rebooks another meeting during your confirmed dates. A sliding scale example might include:
The following cancellation policy will apply for the meeting proposed herein:
90 Days or more prior to start of conference: no cancellation fee, or obligation will be required by Group.
60 - 89 Days prior to start of conference (Monday): 25 percent of one night's revenue for night of highest room block.
If your group has a strong group history, try the following clause:
If Group should cancel the above meeting at this hotel, there will be no cancellation fee due from Group if it agrees to book another, similar meeting at this hotel, such meeting to commence no more than two years from the date of the canceled meeting.
Hyatt Hotels and Resorts has created a cancellation option that applies equally to either party:
Should either party decide to cancel this meeting anytime after the contract, liquidated damages equal to $_______ shall be paid by the canceling party to the non-canceling party at the time of the cancellation. This amount is agreed not to constitute a penalty.
This last sentence is inserted because the courts do not allow a penalty for a cancellation.
Audiovisual If you opt against the in-house AV company, expect the hotel to tack approximately a ten percent commission over and above based on the in-house company's prices. Eliminate this clause in the initialstages.
Performance Clauses Contracts used to specify guest, meeting room blocks, and food and beverage functions in general terms. Not anymore; hotels now hold you responsible for specific expenditures in actual dollar amounts. Typically, a ten percent reduction in anticipated figures is allowed 30 days prior to arrival. Should actual revenues fall below these figures, the difference will be posted to your master account.
Contract law entitles a hotel to recoup lost profit, but not necessarily lost revenue. This means that you may be required to compensate the expenses (guest room, F&B) even if the hotel can resell the same services to another party. Negotiate the removal of this performance clause, or have it revised so that any compensatory damages entitle a hotel to lost profit, not lost revenues.
Renovation Clause The termination of any contract has long been subject to acts of God, war, civil disorder, etc. What about the disruption renovations can cause? With the improved economy, more hotels are allocating funds to refurbish existing properties.
Include a clear statement stipulating no renovations within a reasonable time frame (allowing for inevitable delays). Without it, you will have no recourse from construction and the disruption it causes during your meeting.
Early Departure/Late Arrivals Be on the lookout for clauses that stipulate that early departures and/or late arrivals will be charged the contracted nightly rate for the entire stay.
Hoteliers are coming up with new, creative, and costly clauses as I write this column. I'll have more in the March issue.
Judy Williams has ten years of experience planning meetings. Her firm, Conferences & Communications, is based in Salt Spring Island, British Columbia.
Everything is negotiable-including contract clauses. The hotel that really wants your business will be more than willing to word your clauses in terms acceptable to your legal department.
It might to be worthwhile to have an industry attorney help you create your own boiler-plate contract to use as a starting point before negotiation.
A duty of good faith is always implied, whether or not it is written into the terms of the contract.
Despite the most concise cancellation or termination clauses, you will still be required to pay damages if you fail to live up to the terms as cited in the contract.
It is most cost-effective to address each and every contract clause at the bargaining table-not months, or years, later in a courtroom.