Tips for Navigating the Hotel Contract Negotiation Process
January 24, 2019
In a previous post titled “The Hotel Contract Review Process,” I provided the:
Definition of a contract.
Basic information to look for in a contract.
Key clauses to be aware of in a contract.
Typical steps or flow of the contract review/approval process.
While I am not an expert on contracts, I do have a few tips I'd like to share to help you navigate the negotiation process.
First and foremost, the negotiation process has to be a WIN-WIN proposition for everyone. You can ask for the moon and the stars, but you need to be realistic and understand both sides of the equation. Profit margins being what they are, if you push too much on rates or concessions, you may just suffer the consequences in areas that matter more – like quality of product, service or staffing levels -- and it's just not worth it.
If you don’t understand a term or clause, ASK. Believe it or not, some hotel sales managers may also not fully understand their own contract language. It is imperative that everyone fully understand and grasp the contract language they are agreeing to by signing the agreement. When you hear something like “what this actually means is…,” either rewrite the sentence or statement yourself or ask your sales person to do it for you.
As silly as this may sound, pay attention to dates (month, date and year) as noted in the contract to make sure they agree with your meeting agenda as identified in your RFP. Mistakes happen; typos happen and once a contract is signed and changes need to be made, the space you thought you had may just not be available. Some hotels will honor and be flexible but if at high occupancy or with limited meeting space, they may no longer be able to accommodate your group.
Be sure function times/attendee counts are properly spelled out in the meeting space area of the contract. For instance, if the contract reads that hotel is holding say breakout space for half a day for a single day of a multiple day program and it turns out you need the space all day, every day of the program, you may have a problem.
Obviously one of the goals to negotiating a room block and/or estimated meal function counts is to minimize losses due to not meeting agreed upon guarantees. Finding a good balance between your projected (hoped for) numbers and your attrition (or slippage) is the key. Keep in mind also that if you release space and your numbers grow, you may not be able to get rooms back after your cut-off date (nor at the same rate) and you may have to find additional rooms elsewhere.
Corporate meetings are a little easier to project simply because attendance is usually more controlled. If anything here, you may find yourself in need of more rooms as meeting plans progress. When attendance is fee-based, or in the case of client appreciation events, this is where coming up with a reasonable number gets a little dicey. And, if it’s a first-time event, this can be even more so. All you really can do is try to get your numbers as close as you can, explain the situation to your sales person and see what the current and/or projected room situation looks like for the hotel, and go from there. If this is a repeat program for you, maintaining good history reports should help as well.
Confirm and calculate dates for attrition, rooming list cut off, cancellation, penalties, advance deposits rather than using a number. For example, say "rooming list is due June 15 rather than 21 days prior to arrival.
Pay attention to taxes and service fees on food and beverage and room rates as these can vary from city to city and state to state and can impact your budget. Confirm also whether services fees are taxed because if they are, your budget may just take another hit.
Resort Fees and applicable taxes need to also be taken into consideration. If non-negotiable to wave, make sure to include this line item in your budget projections. Some locations charge a Destination Fee. These additional fees can greatly impact your lodging budget in a major metropolitan area.
Be mindful of contract statements that require a minimum attendee per function/room + food and beverage minimum.
Be aware of Certificates of Insurance requirements by the organizer, hotel or exhibitors. Working for an insurance company as I did, this piece was easy because I knew who to go to for clarification. Others may need to look to your insurance provider for confirmation of compliance. Example. A friend of mine experienced an unfortunate situation when the hotel’s electric power supply box was incorrect and damaged a vendor’s very expensive motor he was set to demo. Who was responsible? This may depend on the insurance in place.
Do not sign a contract BEFORE conducting a site visit or at the very least return the contract stipulating contract is approved pending completion of a successful site visit to be completed by an agreed upon deadline. If site visit proves unacceptable, contract is null and void. One caveat to a site visit stipulation would be a small meeting. Small meetings may not warrant the cost of a site visit and/or company policy may not allow (unless,, of course, you're talking a very high profile small group meeting). If a site visit visit isn't an option, consider asking a local colleague to visit the hotel, provide them with a check list of what they should look at/ask.
Once a contract is signed by the company, in order for it to be fully enforced and in effect, the contract must be countersigned and dated, and a copy of which should be kept on file. Without signatures of both parties, a hotel could opt NOT to hold up its side of the agreement and you could find yourself without the space you thought you had – not a good situation to be in for sure. I know, because it happened to me – just once.
I hope you find these tips helpful. I’m always looking for ways to add value to what I am sharing through my writing, and welcome your feedback, so do let me know what you’re thinking. If you have additional tips you’d like to share that you feel would be helpful to others, please let me know and I will definitely give them consideration in the next update.
Mary Jo Wiseman, CMP
Author | The Meeting Planning Process: A Guide to Planning Successful Meetings