negotiating: advanced - meetings today · • no resell clause / only rebook clause ... •...
TRANSCRIPT
Negotiating: Advanced
Presented by
Robyn Mietkiewicz Director of Accounts & Global
Meeting Management Services
Meeting Sites Resource
Moderated by
Tyler Davidson Chief Content Editor
Meetings Focus
Wednesday, March 27, 2013
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Today’s Speaker
Robyn Mietkiewicz, CMP, CMM
Director of Accounts & Global Meeting
Management Services
Meeting Sites Resource
Negotiating: Advanced
Wednesday, March 27th
at 1pm Eastern
Hotel Contract Trends
Challenges & Solutions
Breaking Barriers
Presented By
Robyn Mietkiewicz, CMP, CMM
Director, Accounts & Global Meeting
Management Services
Meeting Sites Resource
Confidential and Proprietary Information
@MSR_Global Meeting Sites Resource
Goals For Today
• Increased demand in corporate & association meetings / increased attendance
• Steady increases in hotel occupancy, average daily rate and RevPAR / Shift to
a seller’s market
• Greatly reduced new hotel inventory / sleeping rooms in all brands
• Individual meeting budgets remain flat / hotels incorporating a multitude of
fees and surcharges
• Hotels refocus on revenue management to maximize profitability
• Planners focus on Strategic Meetings Management (SMM) to assure
accountability and measurable value
• More accountability for group contract performance clauses
Meeting Industry Trends
• Not waiving or reducing resort fee
• Hotel facility rental fee (events at pool, view locations)
• Meeting & event space set-up fee
• Mandatory porterage to master account
• Energy surcharge
• Mandatory housekeeping gratuities
• Surcharge fee to bring in own AV equipment
• Eliminate early departure fee
• Fax send / receive fee, overnight mail / package fee
• Vague reference to “costs not included in contract” (omit or define costs)
Trends in Hotel Fees & Surcharges
• No guaranteed Internet / bandwidth / tech support pricing at contract signing
• Multiple suppliers working together – insures they each are informed.
• Inconsistent technology service on-site due to expanded Internet needs &
need for additional access points
• Inconsistent pricing per hardwire line & wireless costs
• Multitude of technology support fees
• Charges per access code
• Fee per computer ID for log on
• Per day cost up to certain number of users
• Fees for access points
• Set-up and tear down fees
Trends in Hotel Technology
• Assess your technology needs / guarantee Internet & tech support pricing in
contract
• Insure all suppliers are supporting the technology needs / teamwork
• Negotiate percentage of comp Internet lines / reduce or eliminate tech
support fees
• Negotiate when set up / tear down will be complete
• Sliding scale technology support discounts based on levels of billing revenue
• Get bids from outside technology services / no fees to hotel to use outside
suppliers
Negotiations Solutions
Trends in Hotel Technology (cont.)
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
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%
Industry Profit Margins (Average Hotel Chain & Independent)
Meetings are BIG investments:
have a
negotiations plan
for each meeting!
• Season / demand over your date(s)
• Peak Night Pattern / Flexibility
• Sleeping Room Block / Revenue – multiply total room nights by proposed
room rate
• Group Food & Beverage / Revenue – all functions from RFP X average
menu prices X attendees
• Room To Space Ratio – total space on heaviest use day, calculate as % of
total space in hotel
• Ancillary Spending – projected revenue for business center, AV, production,
Internet, golf/spa, sponsored events / ICW revenue, etc.
Assess Your Leverage From your strategic RFP, evaluate the following:
Key Performance
Clause Analysis
(SMM Focus)
Guestroom
Attrition
Cancellation
Published Rates
Breach By Hotel
Technology
Support
• Sliding Scale attrition / use it or lose it (10% at 45 days / 5% at 30 days)
• Guaranteed room block in contract / no allowable attrition
• No resell clause / only rebook clause
• “Vertical” attrition / damages calculated on per night basis
• Attrition damages based on average in-house room rate over meeting dates
(generally higher than contracted group rate)
Current Trends –
In Attrition Performance Clauses
• ABC Corp agrees to guarantee 80% of their contracted room block
• In the event ABC Corp fails to utilize 80% of the total room nights (200
total rooms), during the meeting, ABC Corp will pay XYZ Hotel a
“Guestroom Attrition Fee” equal to:
• Base calculations on profit, rather than revenue / less rooms
captured / credited via rooms audit
(Calculation: $189 x 75% = $141.75)
Solutions – Guestroom Attrition * Example based on 250 rooms contracted @ $189 room rate
• XYZ Hotel to honor ABC Corp group rate after the cut-off date based on
availability (group vs. prevailing)
• XYZ Hotel shall use best efforts to resell any unused or cancelled
guestrooms. All revenues derived from Hotel’s resale of such
guestrooms will be applied toward payment of any Guestroom Attrition
Fee payable hereunder. (Resell)
• ABC Corp has option to apply 75% of attrition damages to a future
meeting at the XYZ Hotel. (Rebook)
Solutions – Guestroom Attrition (cont.)
• Sole cancellation damages for group / no accountability if
hotel cancels
• Liquidated damages – no obligation to resell and credit
rooms to group
• Not applying paid cancellation fee to future meeting
• 100% damages due on sleeping rooms & guaranteed F&B
Current Trends –
In Cancellation Clauses
If Notice of Cancellation is given by ABC Corp
Cancellation will be: $35,438
Revenue: $47,250
From Signature – 120 days prior to arrival (August 6, 2011)
40% of Total Room Profit = $14,175 $18,900
119 days – 60 days prior to arrival (August 6, 2011 – October 1, 2011)
65% of Total Room Profit = $23,035 $30,713
59 days – 30 days prior to arrival (October 1, 2011 – November 5, 2011)
85% of Total Room Profit = $30,122 $40,163
29 days until arrival (November 6, 2011 – December 5, 2011)
100% of Room Profit ($35,438) + 35% of F&B ($18,200) = $53,638
$99,250
• If ABC Corp cancels the entire Meeting without cause, ABC Corp will pay XYZ
Hotel a “Cancellation Fee,” in accordance with the following schedule:
Example based on 250 rooms contracted @ $189 room rate / F&B Guarantee $52,000
Solutions – Cancellation
• XYZ Hotel shall use best efforts to resell the cancelled guestrooms and credit
ABC Corp.
• All deposits paid by ABC Corp and all revenues derived from Hotel’s resale of
such guestrooms will be applied toward payment of any Cancellation Fee
payable hereunder.
• XYZ Hotel will refund any amount due to ABC Corp within thirty (30) days
after cancellation.
• ABC Corp has option to rebook meeting and apply 75% of cancellation
damages.
Solutions – Cancellation (cont.)
If, at any time after signature of the contract, hotel publishes, issues or
promotes a group room rate, or lower guest room rate via promotional web
sites (during group peak room nights) that is less than the contracted group’s
rate, hotel shall adjust the applicable group rate to equal the lower published
rate.
Solutions – Published Rates
Failure by hotel to provide the space and/or services as agreed, or breach of
any representation or warranty by hotel, shall render Hotel liable to Group for
all direct, indirect and consequential damages, expenses, attorney’s fees, and
costs incurred by group on account of such breach. Exercise by group of any
of its cancellation or termination rights under this agreement shall not waive
or otherwise affect this provision.
Solutions – Breach By Hotel
Big picture contract negotiation goals:
• Contract integrity
• Added meeting value
• Cost savings
• Risk reduction / cost containment
Hotel Contract Negotiations
• Addendums - generally include concessions and select performance
clause language
• Addendums - often attached to hotel contract / conflicting
performance language
• Addendums – generally do not address hotel responsibilities and
accountability
Hotel Contract Addendum vs. Custom
Hotel Contract
Your custom hotel contract should address all contract components, value
added concessions, hotel fees and surcharges (eliminate or reduce), hotel
performance clauses (based on profit, not revenue) and company liability
language.
Custom Hotel Contract Process
Sleeping Room Rates Rate integrity process
F&B Guarantee Allowable attrition
Unauthorized Changes Hotel not to change or alter
contracted room block, meeting space, services without written approval
Value Added Concessions Prioritize for each meeting
Hotel Fees & Surcharges Eliminate or reduce
Meeting & Event Space Complimentary / no sliding scale
fees
Published Rate Clause No lower group rates via website
after contract signing
Resell / Audit Resell / credit accountability,
percentage of damages applied to future meeting
Force Majeure Termination without damages
Attrition Guarantee percentage of room
block / no sliding scale fees / damages based on lost profit not revenue
Relocation Accountability when attendees “walked”
Breach By Hotel Failure to provide services as
agreed render Hotel liable for direct & indirect damages
Cancellation Sliding scale damages on lost
profit not revenue / resell / if damages, apply to future meetings
Construction / Remodeling No construction or renovations
over meeting dates that impact meeting, image, logistics, guest experience
Legal Department Language Indemnification, insurance,
dispute resolution / arbitration, bankruptcy, successors & assigns, etc.
Key Risk Reduction /
Cost Containment Components
Cost Savings / Risk Reduction Report
• SMM delivers measurable value to meeting stakeholders - (Planners)
• Hotel Revenue Management maximizes revenues / profitability - (Hoteliers)
• Utilize strategic RFP process / breakdown all meeting components (Planners)
• Must assess total revenues / account value / variables over meeting dates- (Planners
& Hoteliers)
• Emphasis on overall goals and objectives and determine flexibility points - (Planners &
Hoteliers)
• Success requires open, honest communications at all stages of negotiations -
(Planners & Hoteliers)
• Determine walk away position for both sides - (Planners & Hoteliers)
Strategic Meetings Management (SMM)
Meets Hotel Revenue Management (HRM)
Thank You PLANNING TOOLS & RESOURCES:
Hotel Contract Top Ten Tips
Robyn Mietkiewicz, CMP, CMM
Director, Accounts & Global Meeting
Management Services
949.250.7483 ext. 300
Meeting Sites Resource www.meetingsites.net
Twitter: @RMietkiewicz
Questions?
Tyler Davidson
Meetings Focus
Robyn Mietkiewicz
Meeting Sites Resource
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Negotiating: Advanced (Part 2)
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