When it comes to foreign contract negotiations, being a “bull in a china shop” is a really bad idea, advises Laurie Fitzgerald, convention manager for Smith, Bucklin and Associates Inc., Northbrook, Ill. As manager of the International DB2 Users Group conferences held in Europe and the Asia-Pacific region, she's learned to take negotiations slowly and to explain in detail what she wants and why.

“I tell them up front exactly what I'm looking for, what kind of rate I'm looking for, and that I need the best deal.”

Fitzgerald opens negotiations by sending a copy of her standard contract with negotiable points highlighted. She also demonstrates the value of her event with three to four years of pick-up history, food-and-beverage expenditures, and auxiliary service usage. “Sometimes I feel like I'm the salesperson,” she says.

No matter where you're headed, expect some demands to go unmet. Act of God clauses that are standard in the United States may be unacceptable in the host country. Meeting requirements, such as housing within walking distance, may be unavailable. And payment policies may be inflexible, requiring a 100 percent advance deposit to guarantee rooms.

Knowing how motivated your counterpart is to negotiate is critical to your success. “All contract terms are market-driven,” according to John S. Foster, CHME, Esq., attorney and counselor at law, Foster, Jensen and Gulley, LLC, based in Atlanta. “That's true whether you're negotiating in the United States or with a vendor in Europe or Asia. It all depends on how badly each side wants to do business with the other side.”

Termination Clauses

A major sticking point in negotiations may be contract provisions that protect you against losses in the event of contract termination. Since September 11, the threat of a terrorist attack can scuttle travel plans to troubled destinations. You ought to be able to cancel your meeting and terminate contracts without liability, and you ought to be able to get a refund on advance deposits.

A force majeure clause spells out the circumstances — civil strife, terrorist attacks, and other occurrences beyond the control of either party — that allow you to terminate the contract without either party being liable. An Act of God clause covers hurricanes and other natural disasters. A separate clause should specify when deposits are refundable.

“One thing that I put in any international contract is the provision that I reserve the right to cancel the event, should that area be placed on the U.S. State Department Advisory List,” says Jonathan T. Howe, Esq., president and senior partner, Howe and Hutton, Ltd., Chicago. “I would be very reluctant, especially in the environment we're in now, not to have that provision in the contract.”

Should it be a deal breaker? That depends on how much risk you're willing to assume. For associations, the problem is attrition if attendees decide not to travel. They can avoid penalties by requiring attendees to pay advance deposits. For corporations, the problem is cancellation and loss of nonrefundable deposits. But because the planning time frame is shorter, the risk is less.

If a property resists changing its contract — typically all of one page — it may be open to including an addendum. Before signing, ask your insurer to review it. “In the end, it's the insurers who help you,” says Fitzgerald. “I want to know if they're comfortable with it.” Also you can explore getting extra coverage for terrorism.

“The topic of terrorism is a big issue right now — everyone is still grappling with how to deal with it. Some of the big insurance companies in this industry have decided recently to cover terrorism, but they limit the amount that they'll cover, and it's expensive,” Foster explains. “So to a certain extent it's still almost an uninsurable risk.…The cap on terrorism insurance right now — what they'll cover for losses — is $250,000. That may sound like a lot, but for an association, the hope is that its meeting will make more money than that.”

Negotiating Meeting Requirements

Meeting facilities in many countries are not comparable to what you expect in the United States. Be specific about your requirements. Provide sketches of your room setups and request room dimensions, ceiling heights, and location of windows, mirrors, columns, and other obstructions.

Items that you're accustomed to getting in the United States but have to negotiate hard to get abroad include:

  • Guarantee/minimum night stay, usually 100 percent, but negotiable
  • Comp room ratio, as many as one per 25 per night, but not cumulative
  • VIP/staff room upgrades, provided you demonstrate value
  • Meal plan options, if you have food-and-beverage events
  • Free meeting space, if the property can resell unused time blocks
  • Comp move-in/move-out days, if you're not incurring labor charges

“Just because I know that a certain property doesn't negotiate on deposits, that doesn't mean I'm not going to ask them to do it,” says Foster. “I may be able to swap something else — give them something that they want and get something that I want, which is a lower deposit.”

A good interpreter will help you understand the nuances of conversation with suppliers and help ensure that you get what you ask for, when you asked for it. “Some people think that ‘mañana’ means tomorrow,” explains Howe. “But it really means “not today.” And in Japan, if somebody says, ‘That may be difficult,’ you can take that as a no.”

Prices and Payment Policies

Foreign hotels may have limited meeting space, so it is customary to charge for rental, setup, and turnover. Ask about what is included in price quotes and what additional charges you may incur. Be aware of the value-added tax (VAT) rate — as much as 25 percent in some countries — and how to obtain a refund. (See related article on VAT, page 26.)

Foster recommends protecting cash deposits against loss in the event that a property defaults. There are three ways to do it: Send funds to the foreign hotel on the condition that the funds are deposited in an interest-bearing escrow account; send the deposit to a U.S. affiliate of the property to be held in escrow; or request a standby letter of credit for an amount equal to the deposit. For any deposit, whether it's local or overseas, try to negotiate a smaller amount that can be paid closer to the event dates to avoid sending payment so far in advance.

Dispute Resolution

No matter how favorable the contract terms that you negotiate, disputes can still arise. International arbitration is the method of choice for resolving these disputes. Stipulate where the arbitration will take place (typically a neutral country) and what rules will apply. “It's a good way to go, because you don't get tied up in the foreign country's legal system,” advises Foster.


Cathy Chatfield-Taylor covers the meetings industry as a freelance writer and editor. She co-edited the Convention Industry Council Manual, seventh edition, and Professional Meeting Management, fourth edition, available through the Professional Convention Management Association. Contact her at cathy@cctunlimited.com.

Negotiation Basics

Do:

  • Give yourself time

    If U.S. negotiations normally take four to six months, it could take a year or more for an international event.

  • Do your homework

    Research online and talk to others who have been to the destination.

  • Understand the culture

    Cultural differences can impact what you get, when you get it, and how much you pay for it.

  • Get local help

    A tourism board, travel agent, customs broker, congress organizer, or your local chapter/office can be your ally in negotiations.

  • Know with whom you're dealing

    Check references and inquire about the quality of services rendered.

  • Ask for English

    Request English as the official language for negotiations and specify the English-language contract as the prevailing document.

  • Define the terminology

    State your requirements in descriptive terms rather than industry jargon.

  • Read the small print

    Standard terms and conditions, rules and regulations may be referenced in the contract but not attached. Review all referenced documents before signing.

  • Obtain insurance

    Make sure your organization is ensured for losses outside the United States.

Don't:

  • Assume it's included

    If what you need is not spelled out in the contract, it's probably not included in the price. The same is true for taxes, gratuities and service charges.

  • Agree to something you don't understand

    Ask questions, gather information and, if you're unclear about something, ask again.

  • Sign a contract without examining a translation

    Request copies of the contract in English and the language of the host country, then compare the documents for consistency.

  • Be the ugly American

    Arrogance, disrespect for cultural differences, or a “bull-in-the-china-shop” approach will only hinder negotiations.

Web Resources

Find out about travel advisories and other threats that could impact your meeting through the following U.S. government resources. (For more resource information, see page 55.)