What's the secret of their success? Here are seven strategies to help you negotiate a contract that will have you kicking up your heels.
- Balance Risk
Convention center contracts are written to be entirely one-sided. The reason? Facility ownership believes it should not hold any risk. “The deck is stacked against you before you start [negotiating],” says John Foster, Esq., Foster, Jensen & Gulley LLC, based in Atlanta. “Meeting sponsors have a duty not to subject attendees to unreasonable harm and not to accept unreasonable risk for the association,” he says. “But most planners give up asking for different terms after their first try. That's their biggest mistake.”
Planners understand that liability will be pushed onto their events. However, “while we expect the facility rights to be protected, we are very much trying to balance that out,” says David Weil, senior director of convention and trade show services, SmithBucklin Corp.
It's a very valid risk management technique for the convention center to require the meeting sponsor to be responsible for damage caused to the building, Foster explains. The sponsor, however, should ask that its liability be limited to the amount of insurance that it is required to have. Since most losses are for under that amount of insurance, Foster says, the sponsor's response should be, “Don't ask for any more money.”
Local or state regulations sometimes work in the planner's favor. Texas law protects governmental entities — the self-insured city of Houston and the George R. Brown Convention Center — by limiting liability to $600,000. That exposure is then picked up through the show producer's certificate of insurance. “The sponsor is responsible for virtually everything that goes on during the event,” acknowledges Dawn Ullrich, director of Houston's Convention and Entertainment Facilities Department, which oversees the center. “But this works to limit the sponsor's exposure.”
- Divide and Conquer
Just agreeing what gets into a contract can be cause for contention. Certain operational information about the event must make it into the contract: access dates (move-in and move-out), event dates and times, space designations and rates, and deposit and payment schedule. Sometimes included are special services (electrical, room setup), use of ancillary space (public or common areas to which licensee has access), and rental waived for food and beverage.
Because these are the items most likely to be amended, centers such as the San Diego Convention Center Corp. summarize them within the first two pages of a contract. The SMG — Greater Columbus Convention Center also outlines ancillary charges, such as parking, rigging, electrical, telephone, and Internet, that are not included.
Beyond that, Deidre Irwin Ross, CMP, director, conference services for the American Library Association, much prefers a bare-bones contract. “Give us the space, without the restrictions,” she says. “Don't tell us we can't have our own post office on the show floor because the business center has the contract.”
However, ALA contracts do require some specifics, such as room changeover charges. These can be hefty, with 2,500 functions (280 concurrent meeting rooms within a 12-block radius of, and including, the convention center) during the annual meeting, which can draw as many as 25,000 attendees. And if ALA is going to pick up the costs of electricity, garbage collection, and cleaning, Ross wants rates and year-by-year escalation addressed. “Contracts are very vague about these types of charges,” she says.
Use of exclusive services needs to be outlined for Timothy Moses, director, meetings and conventions for the American Academy of Dermatology, but not every facility concurs. The 2004 contract for the Washington Convention Center includes these services, while New Orleans' Ernest N. Morial Convention Center typically puts this information in an event document, he notes.
Ultimately, “the contract shouldn't be cluttered with details that change hour to hour,” states Beatrice Kemp, vice president/general counsel, San Diego CCC.
- Use Counsel Wisely
Experienced planners who have worked hand-in-hand with their show attorney often address the operational issues — most likely to be open for negotiation — in preliminary drafts, deferring the boilerplate legal issues to counsel, who generally consult behind the scenes.
In his review of a contract draft, Moses reconfirms space, dates, and rates, and items related to logistics for the AAD. He'll also pick out anything that seems out of the ordinary with regard to liability, indemnity, or insurance. Then the group's in-house counsel will review the draft, particularly cancellation clauses, force majeure, and overall indemnity.
Ross, who follows a similar process for ALA, says that if the convention center “doesn't want to make the changes our attorney requested, I let the attorneys duke it out.”
Contract analysts produce drafts at the San Diego CCC, which circulate to staff professionals for review. When the issues elevate to indemnification, insurance, or breach, the contract hits Kemp's desk. Likewise, when the stakes rise to negotiation of terms, “I'm the contact person in the building,” explains general manager Dittie Guise of SMG-Greater Columbus Convention Center.
- Propose Specific Language
Boilerplate language, covering such items as liability, indemnification, and insurance, is nearly impossible to change, particularly for convention centers under municipal authority. Show producers can sidestep this by getting in writing that convention centers will be responsible for acts and omissions of their employees and for defects in the premises and equipment they provide, says Foster.
That's what ALA does, and when a major rainstorm during one annual meeting resulted in a leaking roof and a few ruined exhibit booths, the convention center picked up the costs.
Orange County Convention Center has incorporated more user-friendly language into its contract, along with a simple indemnification clause. “Each party is responsible for its own negligence or activities,” explains Elizabeth Forsythe, lease administration supervisor. And the events of 9/11 prompted the center to revise force majeure to include interruptions caused by national emergencies and government directives.
Kemp at San Diego CCC admits to “very little wriggle room” on “untouchable” areas: the amount and type of insurance and indemnification. “Most licensees would like to have mutual indemnification, and that's why our language accommodates the building being responsible for its own actions,” she says. “Everything else can be discussed and possibly changed.” Even boilerplate will change if new safety, licensing, or governmental requirements are put into effect.
It may be impossible for centers to explain every single item in the contract, Guise noted, because certain boilerplate is regulated and thus varies from facility to facility. Still, SMG — Greater Columbus CC approaches a number of contract terms — such as mutual liability — on a case-by-case basis, she says, with attorneys coming together to figure out language that works for both parties.
Another thorny item is cancellation damages. Orange County Convention Center in Orlando requires 100 percent of the rental to be paid if an event cancels within 24 months. “If we resell, credit is given to the canceled group. But it's tough to resell within a two-year period,” notes Kathie Canning, deputy general manager, Orange County CC. “Think about all the revenue, beyond rental, that's lost.”
An important clause to add for Kelly Fox, director of meetings and exhibits for the American Health Information Management Association, is “if the convention center is open, but contracted hotels can't perform due to some disaster, the center contract is null and void.” She revises this clause for hotel contracts. “Convention centers have no problems accepting this,” she says, for her 3,500-attendee, 1,500-exhibitor personnel meeting.
Deposit policy is another item that Fox targets for change, so that AHIMA initially pays a small deposit to hold the space, then about 25 percent the year before and 75 percent the year of the meeting. Centers such as the SMG-managed Columbus Convention Center will move on deposits as well, working out a sliding scale to make a deal. However, deposit provisions for many city-owned/managed facilities are set by city ordinance and are not readily changeable.
- Pick Your Battles
Planners tend to focus first on the specific and flexible “dates, space, rates” items in the contract draft, then take on the boilerplate items. Instead, they should determine what terms within the entire draft are most important to the event's viability, and make those terms central to the contract negotiation process. “Figure out the value on your ‘got to have’ scale,” advises legal expert Foster. “Then proceed from there.”
The Produce Marketing Association, for example, requires round-the-clock air conditioning, instead of just during show hours. This is a specific contract issue that PMA seeks to change and looks to negotiate reduced charges, explains Jamie Romano, CMP, meeting and events planner for the association. PMA also has succeeded in cutting food and beverage minimums for center ballrooms.
A real frustration for Fox is when additional charges are buried in a 50-page addendum of services. Garbage removal may be part of the licensing agreement, but “you must really dig through the material to find those extra charges,” she says. “It would be easier to evaluate a contract if items that will cost more are identified upfront.”
Fox also keeps a close eye on the contracted square footage minimum in the hall. “If there isn't agreement on the number on site, I don't want to dispute later what was saleable space, comp space to the association, or aisle space,” she notes. “Even if this is really time-consuming, even if we [Fox and center staff] have to do this at nine o'clock at night, we will walk the hall together and figure this out.”
Planners who want no surprises routinely request during the bidding process the shell of a convention center's standard contract. Is it in legalese or layman's terms? Sales staff at San Diego Convention Center Corp., for example, rarely is asked, “What does this mean?” Kemp says. “We more often get, ‘Why do you include that?’”
And just who reads the contract before it's zipped out to clients? “I have found that the sales force does not understand what's in their own contracts, and I'm amazed that contracts don't look like they've been reviewed,” says Moses, AAD's planner. “I've seen a wrong association's name included, or the space totally off.”
- Challenge Open-Ended Statements
Ripe for controversy are clauses in which show producers agree to pay for any additional services ordered on site. Too often, no one remembers authorizing such services when the costs show up on invoices that arrive weeks after the event is over.
Some planners and attorneys are revising that clause, or amending the license, to the effect that the show sponsor must receive an estimate of the additional charge in a work order on site, and that work order must be signed by an authorized representative of the show for the sponsor to be responsible for these costs. Such an approach will work for some, but is untenable for a meeting the size of ALA's, Ross explains.
“We look at broad-based statements, such as future operating rules that we would be bound by,” notes David Weil, senior director of convention and trade show services, SmithBucklin. Since these are unknowns, he advises including in a contract that “if a new rule happens, we can agree on an addendum.” He also cites the catchall clause that any decision affecting the convention center is decided by the center. “If things are ambiguous,” he adds, “we want them changed to be ‘mutually agreed upon.’ We really need to define the grey areas.”
There's another, simpler reason to be exact with rights, limitations, responsibilities, and liabilities, as well as operational policies and use of exclusives. “It's always possible that the people signing the contract may not be with the organization when the event takes place,” says Forsythe of the Orange County Convention Center.
- Start the Contract Process Immediately
Planners fault convention centers on how long it takes for contracts to be drafted, reviewed, redrafted, reviewed … and finally signed. This is especially frustrating if municipal rules limit when a convention center can issue a license by contract — often 18 months (at the earliest) prior to the event. On the other hand, some centers are ready to go to contract long before show producers want to pay the first deposit. And they appear more forthcoming with contracts for multiple-year (rotational or consecutive) events.
“If an association commits to bring a meeting for a number of years, we will make contracts multiple-year,” contends Canning of the Orange County CC. “Meeting planners will benefit from different timelines for deposits and locked-in space, which can be re-evaluated after the first meeting.”
“Some facilities are giving us a choice when we want a contract,” according to Fox of AHIMA, which has commitments through 2012. She definitely sees contracts further out and signs them two to three years before the meeting — although the contract for AHIMA's 2004 convention is still unsigned as space has yet to be agreed upon.
ALA rules constrain the association from paying more than a $1,000 deposit for an event outside that fiscal year. At the same time, ALA cannot get an insurance certificate until it has a signed contract. So it tends to sign convention center contracts later than other association meetings of its size.
AAD generally finalizes its convention center contracts between a year and nine months out, although it starts drafts at 18 months prior to the annual meeting. That's when it will know of any program changes to meeting rooms and space required. And despite not yet finalizing a 2005 lease, PMA signed a lease agreement for the 2006 site when another group wanted the facility and dates.
Early-bird San Diego Convention Center Corp. will sign contracts five years out, even though some clients balk at that, reports Carol Wallace, president and CEO. “We have the summary of basic terms, agree to boilerplate, and get those issues out of the way,” adds Kemp, “and everyone understands we are open to amendments as space and times change.”
Maxine Golding is a freelance editor and writer who has been covering the meetings and convention industry for more than 20 years. She is the former editor of Convene.
How Binding Is the Letter of Intent?
Planners routinely sign a “letter of intent” that holds dates and space years in advance of its event. Is this a legally binding document?
Legal experts like John Foster, Esq., CHME, Foster, Jensen & Gulley LLC, Atlanta, say a commitment by the planner and the convention center's acceptance of it meet the definition of a contract. “Granted, all the terms are not included, but the implication is that the association accepts any terms the center sends to it in the ‘real” license agreement,” he argues. “A court will enforce future rates and prices set by the center as long as they are based on fair market value.”
Not so, counter others. According to Beatrice Kemp, vice president/general counsel, San Diego Convention Center Corp.: “The commitment letter doesn't bind us until we have a signed contract.” To skirt this touchy issue, Orange County Convention Center phrases the letter of intent as a “space and date hold on a tentative or definite basis pending a signed contract,” says Kathie Canning, deputy general manager.
Planners are often perplexed. “The letter of intent does not contractually guarantee that you're using a center, yet they are giving you terms,” notes Jamie Romano, CMP, meeting and events planner, Produce Marketing Association. “Who says the offer is firm, if we don't sign an agreement?”
A letter of intent without additional stipulations, some planners assert, leaves the center wide open to accept more lucrative business down the road. Convention centers maintain that show producers can pull out of the letter of intent if they find better terms elsewhere, even though planners promote their conventions far in advance, leaving them unlikely to pull up stakes.
The best way for a planner to rebut the presumption that the letter of intent is a contract, Foster says, “is to make the letter contingent upon the parties later executing a license with mutually agreeable rates, prices, and terms,” and upon successful negotiation of hotel contracts to accommodate attendees.
The Lowdown on Labor
Budgeting for labor costs at convention centers can be a nightmare, what with the array of rate schedules, minimums, and jurisdictions, along with issues of facility labor versus contract labor or union versus right to work. Assessing the maximum impact of convention center inclusions on labor usage is equally crucial to the revenue picture.
Varied rate structures city to city are “very hard to monitor,” notes Timothy Moses, director, meetings and conventions, American Academy of Dermatology. Typically, AAD staff use the rates to approximate labor costs as closely as possible, based on the move-in/move-out schedule. “Our decorator and our audiovisual company are a big help,” he adds. “We travel with these same companies every year. They work with labor on a daily basis, so if red flags come up, they'll let us know.”
Deidre Irwin Ross, CMP, rarely sees labor outlined in convention center contracts, and what's there tends to be “very vague,” referencing attachments or procedural books. She looked for help from “our GSC, who told us that things we might purchase, such as tables, were already built into the cost,” says the director, conference services, American Library Association.
The site inspection is the planner's best tool. “Question the event coordinator about how you will be charged for all services,” suggests Richard Lewis, national sales manager, The Freeman Cos. “Every building has different revenue sources; you don't pay for chairs in some, but you will pay for labor to set up the chairs. Set the room to maximum capacity, rather than change it constantly and be charged accordingly. More importantly, use all the included contractual obligations first, then come to your vendors for supplemental needs.”
Caterers, audiovisual companies, decorators, and general service contractors know the minimums for each of the trades in a convention center, he added. For example, it may not make financial sense, if a session breaks at 6 p.m., to transition the room overnight. To minimize hitting customers with a four-hour minimum, Freeman might suggest setup at 5 a.m. Conversely, changes may need to be done at night, tying in with a shift change, because of sheer volume of sessions.
“Ask the building the cost of transition — and if there's a cheaper way to do it,” Lewis advises.
A convention center that is a union house knows the built-in cost increases over today's rates for future years, remarks John Foster, Esq., CHME, Foster, Jensen & Gulley LLC, Atlanta. “The contract between the center and show producer can limit future labor increases at x percent per year, preferably pegged to an independent scale like the consumer price index, although centers will try to tie labor to market rate.”
San Diego CCC attaches existing labor rate schedules to contracts. Escalations are not included, notes Beatrice Kemp, vice president/general counsel. These are discussed case-by-case, and a cap or “not to exceed” percentage per year may be set. “A facility has an obligation to provide cost estimates if a client uses a service,” adds Psuik.
