From rebooking clauses to resort fees, pharma planners and hoteliers discuss contract hot buttons.
Most corporate meeting planners are contending with a strong seller's market, short lead times, and tightening budgets — but only medical planners also cope with the uncertainty of Food and Drug Administration approvals, which can wreak havoc with meeting dates. “No other industry is dependent on drug and device approvals,” said Judy Benaroche Johnson, CMP, president and CEO, Rx Worldwide Meetings, Plano, Texas, who moderated a panel on effective hotel contracting at the West Coast Medical Device and Bio/Pharmaceutical Meeting Planners Forum in Costa Mesa, Calif., last December.
The session brought planners and hoteliers together to discuss the most pressing contract negotiation issues, from rebooking and non-compete clauses to multi-meeting contracts and exorbitant resort fees. The conference was organized by Medical Meetings magazine and the Center for Business Intelligence.
Given the volatility of the pharmaceutical and medical device markets, cancellation clauses — and in particular, rebooking clauses — are a key issue for planners, said Benaroche Johnson. (A rebooking clause allows the company to use a cancellation fee toward a future meeting booked at the same hotel.)
“It is critical to have a cancellation clause in your contract,” said panelist Marybeth Roberts, CMP, senior manager, meetings and trade shows at Amgen, Thousand Oaks, Calif. “Sure, it may seem counterintuitive — like talking about divorce on the day you are getting married — but even though you don't really think you are going to cancel, you still need to prepare for it. You need to protect your company as much as possible. We try to incorporate rebooking clauses in all of our contracts.”
Added panelist Brian Henry, senior meeting planner, Allergan, Irvine, Calif. “We try to avoid spending money on cancellations by filling those holes we may have created by canceling an event, [and replacing them] with other meetings of comparable size. We ask in our contracts [for the venue] to give us a year to rebook.”
In the eyes of the hotelier, the bigger the client, the more flexible the venue can be when it comes to rebooking. “If you're a major player, [the rebooking clause] may be standard in your contract. For a smaller player, we will negotiate the contract on a case-by-case basis,” said Julie Hills, senior director of pharmaceutical sales, Hilton Sales Worldwide, Crest Hill, Ill. If a hotel won't agree to a standard rebooking clause, planners might suggest that the hotel credit them for 50 percent of the cancellation fee, or they might offer to bring in twice the amount of business that was canceled, Hills said.
Another “must have” for many pharma planners is a non-compete clause, which ensures that competing companies won't be meeting at the same time at the same property.
Hills noted that these can be a point of contention between the planner and hotelier if they are not communicated properly: “We understand that non-compete clauses are very important to you,” said Hills, addressing planners. “But keep in mind, a sales and catering staff of between five and 50 people may be booking business over the same period as your program. Sales technology has not caught up to your non-compete needs, so it is up to your hotel sales person to be your watchdog.”
Her advice: Be as clear as possible about your needs. “If there are critical companies or key competitors you are concerned about, mention them by name in the addendum. Sometimes two [seemingly competitive] companies can coexist [at the hotel over the same dates].”
Shifting the discussion to pricing trends, Benaroche Johnson addressed the hoteliers on the panel: “I am seeing fees popping up on contracts lately, such as housekeeping line item charges and resort fees. When did these fees become the norm?”
Explained Hills: “The resort fee is a catch-all fee. Each hotel includes different items, such as newspapers, beach towels, high speed Internet, or other services.”
To counter that trend, one participant observed that some major pharmaceutical companies have a “no resort fee” clause in their addendums.
“Another trend we are seeing is the hotel requiring the use of its in-house audio visual services or its destination management services,” said Tom Tolvé, CMP, manager, meeting operations at Novo Nordisk, Princeton, N.J. . “The hotel will charge a fee for not using the in-house company. We have seen this a lot within the past two years. What we do is redline through these items in the contract and start the negotiations from there.”
“We sometimes bring in our own AV company, so the [requirement to use inhouse AV] is a deal killer for us,” echoed Allergan's Henry. “It is similar to paying corkage fees. I don't like being nickeled and dimed. I am finding a lot of hidden fees [at luxury properties], while [budget hotels] are dying to give me everything for free.”
Once the terms are hammered out, the stressful and time-consuming contract approval procedure begins for planners.
“It is a huge process for us just to get the contract approved and back to [the hotel],” said Allergan's Henry. “A third party can do the negotiations on my behalf, but once the contract is back on my desk, I have to review it and make sure it goes through legal. Then my boss has to initial it, and ultimately our vice president has to sign it.”
Some pharma planners worry that the hotel will not hold the rooms during the lengthy corporate approval process. “This is where relationships and credibility are key,” said Hills. “The partnership between the planner and the supplier is critical. Keep your hotel sales rep in the loop [as to where the contract is in the approval process] so they can communicate it back to their managers.”
Another time-saving option: “Send the addendum to the national sales office during the sourcing stage [when you send out the RFP],” suggested panelist Lesly Rehaut, CMP, CMM, global director of group sales North America, Millennium Hotels & Resorts, based in Baltimore. Having the hotel review the addendum early on will save you much more time, she says.
Looking for other ways to save time, one attendee asked: “Will signing a multi-meeting contract with a hotel chain help us leverage better deals and speed up the contract approval process?”
“We're a smaller chain,” said Millennium's Rehaut. “Although we have preferred vendor status with some of the major corporations, we work on an independent basis when it comes to multi-meeting contracts. We can't put [multiple meetings] out as one contract, but we can work with you on concessions and on the addendums to create a seamless process.”
Hills added that the process is somewhat different from the perspective of a larger chain like Hilton. “What we have found is that, in the initial [negotiation] stage, we need to have a sense from the meeting planner that you can commit to a set of multiple programs simultaneously.”
In turn, added Hills, “we need to give you a compelling reason to select our chain for multiple programs. We usually can do this through concessions, but we need to know which concessions are critical to you from the beginning. If we measure the dollar value of these, it helps give you a compelling reason [to choose us] when you go to your stakeholder.”
Another approach, added Hills, is booking multiple events at a single property. “The hotel offers incentives to deliver business during certain periods throughout the year, and these benefits go up as room nights go up. If you know in advance that you are going to do five programs in a single city throughout the year, putting all five in a single RFP can help you negotiate increased benefits.”
Throughout the session, planners emphasized the importance of relationships, particularly the relationships they have with hotels' national salespeople, when negotiating contracts. As the discussion came to a close, Benaroche Johnson asked the planners on the panel to comment further on what constitutes a productive relationship between planner and hotelier.
“For me it is knowing that you understand the needs of my company and knowing that you are committed to us,” said Tolvé. “Understanding the client's needs and priorities is key when negotiating the contract.”
How can suppliers, particularly new hotel salespeople, develop relationships with pharmaceutical and medical device planners? That was one of the questions an attendee asked panelists during a session on hotel contracting at the West Coast Medical Device and Bio/Pharmaceutical Meeting Planners Forum in Costa Mesa, Calif., last December.
“I'm a big advocate of working through national sales organizations,” said speaker Tom Tolvé, CMP, manager, meeting operations at Novo Nordisk, Princeton, N.J. “Meeting planners do not want to be called 100 times a day.”
“We're very strict about who we let in the door,” agreed panelist Marybeth Roberts, CMP, senior manager, meetings and trade shows at Amgen, Thousand Oaks, Calif. “We don't allow individual hotels to come in and meet with us unless we know we will be booking business with them. What we will do is ask our NSOs to get a group of hotels together and set up a time for us to meet with them. This is usually done on our lunch hour, and we won't do more than two of these meetings a month so that our staff is not constantly going to hotel road shows.”
“I'm easier,” said speaker Brian Henry, senior meeting planner, Allergan, Irvine, Calif. “I'm happy to meet with you, but don't come in and try to sell me your new spa and golf course because I can't use it [due to compliance issues]. Make sure you've done your research and know [industry terminology like] what an advisory board panel is and what an investigator meeting is. Then, if I am available, I will see you.”
Planners and hoteliers will have more opportunities to discuss hotel contract negotiation issues at the Fourth Annual Pharmaceutical Meeting Planners Forum, scheduled for March 17 to 19 in Baltimore. Watch for conference coverage in the June issue of Medical Meetings. For more information, visit www.pharmameetingplanners.com.