contract negotiations ... unauthorized changes ... • there is no contract until both parties have...
TRANSCRIPT
Negotiation:
Getting to Yes
Robyn Mietkiewicz, CMP, CMM
Sr. Director, Global Meeting Services
Meeting Sites Resource
Twitter:
@RMietkiewicz
Goals For Today
• Understand Industry trends that impact hotel
and contract negotiations
• Review how hotels manage for profitability
and key revenue management criteria
• Evaluate how tracking & leveraging meeting
spend drives value based negotiations
• Learn the key clauses that must be included
to provide the utmost protection for your
organization.
Industry Trends• Overall spend on meetings, events and incentive travel is
expected to remain flat, but activity may drop slightly for larger meetings
• Supply of hotel inventory to pull ahead of demand in 2017 and place further pressure on hoteliers’ pricing power
• Hotel occupancy remains at historic highs and healthy growth in average daily rate (ADR)
• Hotels refocus on revenue management to maximize profitability
• Planners focus on adoption of meetings managementprograms with increase of technology use to improvedata collected to make strategic decisions
Industry TrendsContinued
• More mergers and acquisitions are expected in the hotel industry
• Given the expected stagnation in domestic business travel, continued growth in domestic leisure travel will remain the key to fueling the U.S. travel industry
• Food & beverage prices expected to rise globally due to increased production prices, changes in imports and exports, and growth of special dietary requests from attendees
• More than 40% of business trips are extended for leisure purposes known as bleisure travelers
• Top budget request for 2017: Safety and Security
• Predictions for booking second-tier cities increased from 20% in 2016 to 27 percent in 2017 with ease of air travel and near a customer or a training facility influencing selection
Meeting Planner Survey Challenges
• Increased Hotel And Meeting Support Costs
• Hotel Contract Terms / Added Hotel Fees & Surcharges
• Increased Expectations By Senior Management For Cost Savings And ROI
Industry Trends And UpdatesContinued
Additionally
• 49% of planners feel pressure to enhance meeting results,
measurable metrics and ROI
• 73% of corporate and association planners are tasked to
demonstrate cost savings
Variables That Influence Pricing & Availability
• Transient demand
• Arrival / departure pattern
• Rooms to space ratio
• Group food & beverage revenue
• Lead time
• Season
• History
• Potential incremental revenue
• Value of total account
• Risk
# of rooms held vs. ability to pick-up block
Cancellation/attrition clauses in contract
• Other groups contracted over same dates / revenue contribution
How Hotels Value Your Meetings
Industry Profit Margins (Average Hotel Chain & Independent)
0
10
20
30
40
50
60
70
80
Sleeping Rooms Group F&B F&B Outlets Recreation/Spa Retail/Misc Depts
ROOMS - 77%
GROUP F&B - 38%
F&B OUTLETS - 19%
RECREATION/SPA - 15%
RETAIL/MISC DEPTS - 15%
Meetings are BIG investments:
have a negotiations planfor each meeting!
Hotel and Contract Negotiation Strategy
•Assure risk reduction and cost
containment measures
•Enhance added meeting value and
measurable cost savings
•Make mutual obligations and
responsibilities perfectly clear
•Have an easy path and process for
dispute resolution
•Achieve open and honest
communications and negotiations
Create a Custom Master Hotel Contract Template /
Amend For Each Meeting
Include:
All hotel contract components and clauses
Value added concessions (must have vs. nice to have)
Hotel fees and surcharges (eliminate or reduce)
Performance clauses (do the math and calculate on profit, not
revenue)
Legal department liability language (indemnification,
insurance, successors and assigns, dispute resolution /
arbitration, etc.)
Generate a cost savings / risk reduction report for each
meeting (from countersigned contract)
Hotel Spend By Chain
Sleeping room attrition
• Guarantee a percentage of total room block, with no sliding scale
• Negotiate a cut-off date that works with your group history
• Add resell clause vs. liquidated damages
• In the event of damages, calculations on profit not revenue
Meeting Cancellation
• Present performance clauses that are fair to organization and hotel
• Sliding scale damages and do the math
• Base damages calculations on profit, not revenue
• Include a mitigated damages / resell clause
• In the event of damages, apply percentage to a future meeting
• Advanced deposits / refundable or applied to damages
Food & Beverage Guarantee
• Verify F&B spend from last year’s meeting
• Benchmark estimated F&B projection
based on meeting agenda, number of
attendees and average menu prices
• Hotel F&B guarantee does not include
service charge and sales tax
• Contracted guarantee to include 20%
allowable attrition
• 45 days out, assess your attendance and
actual F&B spend
Published Rate Clause (No lower rates offered after contract is signed)
Protects your company if meeting attendees make reservations
around group room block (via Internet/discount web
sites/telephone call in)
No lower rates offered once the contract is signed (excluding
airline and wholesale travel rates)
If the individual is an attendee of the Group’s meeting and has
a documented reservation in-house at the hotel, regardless of
the room rate, the Group will receive credit for attrition
purposes.
Fees / Surcharges
Negotiate: eliminate or reduce hotel fees and surcharges
Resort fee F&B Surcharges
Early departure fee Maid / Bellman
Parking Telephone / Internet access
Health Club Meeting room rental / set-up charges
(complimentary based on guaranteed room
block / minimum F&B / no sliding scale)
Surcharges
Ensure the hotel cannot add any surcharges to the Group
Rates and will not attempt to impose any surcharges to your
attendees.
Unauthorized Changes
ALWAYS include verbiage in your contract that nothing can be
changed or altered without prior WRITTEN approval by Group.
Breach By Hotel
• Hotel is responsible to pay damages to
your organization if they cancel or do not
perform
• Hotel to pay all direct and indirect costs to
relocate your meeting to another hotel and
or city
• If the room rate is higher than your existing
contracted rate, the hotel is to pay the
difference.
• Hotel to pay expenses and costs relating
to marketing materials and attendee
communications
• Hotel liable for any legal or arbitration fees
• Planning organization to document all
costs
“Walking” confirmed reservations occur
when hotel is oversold
Relocation clause/financial
responsibility if your guests are
“walked” when hotel oversold
Guest relocated to hotel of
similar/better quality at hotel’s
expense
Hotel to provide transportation /
priority wait list to return / suite
upgrade based on availability
No Walk/Relocation
Construction and Remodeling
Does not allow hotel to conduct
renovations that impact your meetings
Hotel to notify group if any construction,
maintenance, remodeling, repairs that
may be in effect over your meeting/room
block dates
Group has right to cancel without penalty and/or receive compensation if
construction, maintenance, appearance or noise affects meeting
Group reserves right to request construction, maintenance, repairs to be
stopped during their meeting dates (state specific meeting dates in contract)
If group does cancel due to construction, maintenance and repairs, all
deposits will be returned to group in full within 30 days
Force Majeure
Allows company to cancel meeting based
on factors out of your control
Specific terms and conditions which either
group or the hotel can cancel the meeting
without financial responsibilities
Events out of control of parties including
but not limited to flood, earthquake, fire,
war, terrorist attacks, World Health
Organization (WHO) alerts, curtailment of
transportation, labor strikes and
government regulations
Anything that makes it impracticable, illegal
or impossible to perform
Key Outside Vendor Support
• Audio Visual
• Production
• Technology
• Security
• DMC
Excluding F&B, no cost or fee to utilize your own preferred suppliers
Master Account Options
• Sleeping Rooms
• Food & Beverage
• A/V & Production
• Internet / Technology
• Spa / Golf / Activities
• Business Center
• Miscellaneous Charges
Group rate honored 3 days prior & post meeting
dates
Complimentary / discounted food & beverage
functions
Discount on staff rooms Complimentary / discounted parking
Complimentary rooms ratio / cumulative (start 1
per 40)
Discount off printed banquet menus
Daily complimentary continental breakfast / AM &
PM breaks in staff room
Complimentary suites Discount off printed AV prices
Suite upgrades by category Waive / discount resort fee
Club floor upgrades at group rate Complimentary entry to health / fitness club
Complimentary/discounted hospitality suites
VIP Transportation
Complimentary signage outside each meeting
room / meal function / speaker ready room
VIP in-room amenities
Late check-out for VIPs / staff
No charge for signage, easels, tables, podiums,
risers, lecterns, wastebaskets, recycle baskets
Discount off Master Account (for larger meetings
or payment at departure)
Complimentary acceptance & storage of boxes /
product / materials 3 days prior to meeting
No early departure fees Complimentary / discount Internet fees
Value Added Concessions
Prioritize for each meeting based on specific needs and meeting value
Liquidated Damages
Liquidated Damages calls for a specific dollar amount or formula to
calculate a specific dollar amount to be paid to the hotel in the event of
non performance
• Cannot be excessive or could be deemed a penalty
• Must clearly state the damages formula and date(s) due
• Hotel is not obligated to resell rooms and credit the group
Mitigated Damages
Mitigated Damages are the hotels responsibility to resell sleeping rooms,
meeting space and contracted services to reduce or eliminate damages
• In the event of attrition or cancellation notify the hotel in writing
• Check contract performance dates to calculate damages amount
• After meeting dates, conduct a hotel audit to verify occupancy and number
of rooms and services resold.
• Assure all resold rooms and services, regardless of rates are credit to your
account
Damages vs. Penalties
• By law, the hotel is entitled to revenues and profits as
defined in the countersigned contract
• Always have a dollar amount or formula in the contract
to define compensation to the hotel in the event of non
performance
• The hotel is not entitled to a “windfall” or compensation
beyond the contract value
• Excessive compensation is deemed a penalty, not
damages and not allowable by hospitality law
Hotel Audit
In the event of performance damages, audit process includes:
Request a hotel room inventory / occupancy report by night
Verify how many rooms were resold (individual or group, regardless of room
rate)
Verify how many rooms by night were out of service due to renovation or
repair
If attendees made their own hotel reservations (versus rooms on master),
provide hotel with an electronic registration list to cross reference against all
in-house guests over the meeting dates
Assess other groups in-house and their room block obligations
Capture any pre or post room nights
Hotel Contract Negotiations
• Hotel contract risk mitigation has become an
important metric in SMM landscape
• Focus on cost containment measures in the event of non-performance
Plan and Think Before You Ink
• All hotel contracts are negotiable (plan and prioritize before you negotiate)
• A thorough and well designed contract is essential for a successful meeting
• Stay away from vague phrases such as ample, reasonable, to be assigned,
appropriate, etc.
• All meeting and event space to be assigned by day (if a hotel will not assign
specific space, they are not considered a candidate)
• There is no contract until both parties have signed the document
• Written changes on the contract with date and initials represent a
counteroffer
• Discuss areas of dispute and counter offers in an open and honest manner
• Negotiate an option date to sign and return the contract
• In the event of changes to the meeting dates, room block, suites, meeting
space or hotel services, create a hotel contract addendum, detailing changes
and secure mutual signatures.
Six Steps To Value-Based Negotiations
1. Utilize a strategic RFP / Assess your leverage for each meeting
2. Evaluate all revenue contributions by category
3. Create a custom hotel contract / modify for each meeting
4. Focus on negotiating added meeting value / cost savings and contract risk reduction
5. Track meeting history & spend, by category / individual hotel & chain
6. From your countersigned contract, create a cost savings / risk reduction report
Complimentary Planning Resource
• Plan & Think Before You Ink
Robyn Mietkiewicz, CMP, CMM
Sr. Director, Global Meeting Services
Meeting Sites Resource
Twitter:
@RMietkiewicz
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