negotiation part 1: the art of the deal: strategic hotel ......negotiation part 1: the art of the...

Negotiation Part 1: The Art of the Deal: Strategic Hotel & Contract

Negotiations Presented by

Robyn Mietkiewicz, CMP, CMMDirector, Global Meeting Management

Meeting Sites Resource

Moderated by

Tyler DavidsonChief Content Director

Meetings Focus

Wednesday, March 11, 2015

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Today’s Speaker:

Robyn Mietkiewicz, CMP, CMMDirector, Global Meeting Management


[email protected]

www.meetingsites.net

@MSR_Global

mailto:[email protected]

http://www.meetingsites.net/

Learning Objectives

Understand industry trends that impact value-based negotiations

Know how to track and leverage meeting spend data for

measurable results

Review how hoteliers value your meetings based on revenue

management criteria

Examine essential hotel contract components and risk mitigation

measures

Strategic Hotel & Contract Negotiations, Part 1

Robyn Mietkiewicz, CMP, CMM

Director, Global Meeting Management


714.582.6133

[email protected]

Breaking Barriers

@MSR_Global Meeting Sites Resource

Industry Trends

• Continued increases in meeting demand, average daily rate & RevPAR

• Meeting budgets remain flat / more ancillary hotel fees

• Hoteliers remain focused on Hotel Revenue Management criteria to

evaluate RFPs

• Planners focus on Strategic Meetings Management (SMM) / value

reporting

• Hotel contract risk mitigation becomes an important SMM metric

ROI Trends That Reshape

Our Thinking

49% of planners feeling pressure to enhance meeting results,

measurable metrics and ROI

73% of corporate and association planners are tasked to demonstrate

cost savings

What Senior Management Thinks

Over 50% of CEO’s feel their organization is not getting maximum ROI

from their meetings and events

Over 40% of CFO’s are not satisfied with their company’s travel /

meetings spend management

Recent Surveys

Feedback from Meeting Managers

• Increased hotel and meeting support costs

• Hotel contract terms / added hotel fees &

surcharges

• Meeting value reporting to senior management and

stakeholders

Hotelier & Buyer Dynamics

Enhancing the Art of The Deal

Meeting Planner Survey Challenges

Hotelier & Buyer Dynamics

Enhancing the Art of The Deal

Hotelier Survey Challenges

• Incomplete RFPs / no history & spend data

• Understate room block and F&B revenues

• Unrealistic expectations for meeting space,

concessions and contract terms

Planner Survey – Stakeholder

Expectations

• Reduce budgets / cost savings

• Improved planner productivity

• Contract risk reduction / cost containment

• Achieve stakeholders objectives

• Enhanced attendee communications / learning

• Achieving stated stakeholder goals and objectives

• Meeting content / production delivery

• On-site meeting management / logistics

• Meeting policy / compliance

Factors that Influence Hotel Pricing &

Availability

• Sleeping Room Block / Revenue – biggest profit center at 77% gross profit

• Peak Night Pattern / Flexibility – all hotels focus on pattern selling, by

market segment

• Group Food & Beverage / Revenue – second biggest profit center at 38%

gross profit

• Room To Space Ratio – hotels use meeting space to sell total group rooms

inventory

• Ancillary Spending – projected revenue for business center, AV, production,

Internet, golf / spa, sponsored events / ICW revenue, etc.

• Meeting History – 3 to 4 years

• Season / demand over your date(s)

• Other groups in-house / their revenue contributions

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

Key Risk Reduction /

Cost Containment Components Recap

Key Performance Clauses

Sleeping Room Attrition

Sample Hotel Contract Language

The ABC Corp may release 10% of their contracted room block 45 days prior to the

meeting and 5% 30 days prior to the meeting. In the event of attrition damages due

to the hotel, this will be based on the average room rates over ABC Corp’s meeting

dates. These liquidated damages are due to the hotel 30 days after the meeting

dates.

Attrition Clause Recommendations

• Instead of “use it or lose it” sliding scale attrition, guarantee 80% of the room

block, i.e. 250 contracted rooms x 80% = 200 rooms

• Add mitigated damages / resell clause assuring audit process / credit group

• Damages due are based on profit, not revenue, i.e. $200 x 75% = $150

Meeting Cancellation


ABC Corp is contracting 250 rooms and cancellation damages will

apply as follows:

• From contract signing until 6 months out, damages are 50% on

sleeping room revenues and 25% of F&B revenues

• 3 – 6 months out, damages are 65% on sleeping room revenues and

40% F&B revenues

• Under 90 days, damages are 95% on sleeping room revenues and

70% F&B revenues

These liquidated damages are due to the hotel 30 days after the

meeting dates.







Cancellation Clause Recommendations

• All sliding scale damages based on profit, not revenue, i.e.

calculate total contracted room block x room rate x 75%

• Calculate sliding scale damages with specific dates at each

cancellation option pattern

• Add mitigated damages / resell clause to assure audit process /

credit group

• In the event of damages, apply a portion to a future meeting

Group Food & Beverage


ABC Corp’s guaranteed F&B amount is $85,000 plus applicable taxes and service

charge. For the opening reception and dinner at the hotel’s pool area, there will be a

$3,500 event set up fee. All event support services, including lighting, centerpieces

and décor, will be provided exclusively by the hotel.

F&B Clause Recommendations

• Verify F&B spend from last year’s meeting

• Calculate estimated F&B based on meeting agenda, number of attendees and

average menu prices

• All F&B guarantees to include a 20% allowable attrition

• F&B guarantee does not include tax & service charge / add to budget

• Based on both sleeping room and F&B guarantee, waive any event set up fees

• Other than food and beverage services, ABC Corp has the option to utilize their

own outside supplier with no fee to the hotel

• 45 days out, assess your attendance / budget and finalize F&B spend






Sleeping Room Rates

• Rate integrity process

Value Added Concessions

• Prioritize for each meeting

Published Rate Clause

• No lower group rates via

website after contract signing

Hotel Fees & Surcharges

• Eliminate or reduce

No Early Departure Fees

• Covered by Attrition

Resell / Audit

• Resell / credit

accountability, percentage

of damages applied to

future meeting




Relocation

• Accountability when attendees

“walked”

Construction / Remodeling

• No construction or renovations over

meeting dates that impact meeting,

image, logistics, guest experience

Unauthorized Changes

• Hotel not to change or alter

contracted room block, meeting

space, services without written

approval

Meeting & Event Space

• Complimentary / no sliding scale

fees

Force Majeure

• Termination without damages

Breach By Hotel

• Failure to provide services as

agreed render Hotel liable for direct

& indirect damages

Legal Department Language

• Indemnification, insurance, dispute

resolution / arbitration, bankruptcy,

successors & assigns, etc.

Dispute resolution

In event of non-performance, conduct detailed hotel audit

Cross-reference customer’s master attendee list against hotel's in-house

registered guests

• Remove any rooms out of service or under renovation

• Capture any pre & post attendee room nights

• Assess other groups in house and their room block obligation

• Assure resold rooms credits assigned to customer account

• Verify percentage of damages can be assigned to a future meeting / track

credits

Hotel Fees & Surcharges

The Goal Is To Eliminate Or Reduce Ancillary Fees

• In-room internet fee

• Fitness Center

• Receive or send fax / mail

• Meeting room set up / rental

• Accept / store / deliver meeting

materials

• Hotel / Resort fee

• A/V service charge

• Valet & self-parking

• Special event fees

• Early arrival & departure fees

• Additional Master Account set

up / administration fee

• Automatic bellman / maid

gratuities

• Outside vendor fees

• Room rate energy surcharge

Hotel Contract Addendum vs. Custom

Hotel Contract

• Generally, planner contract addendums include concession and

select performance clauses

• Often, planner contract addendums are attached to the hotel’s

contract and have conflicting performance clause language and

damages formulas

• When using addendums, have this included in the hotel’s contract

and approve any amendments to the specific clause language

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)

Cost Savings

Metrics to Measure Success

Cost Savings Report By Meeting

Sleeping Room Rates Internet Comp / Discounts

Concessions Hotel Fees & SurchargesEliminate or reduce

F&B Comp / Discounts Preferred Suppliers

AV Production / Hotel Support Services

Master Account Discounts (for larger meetings)

Cost Savings Report Tips

• From countersigned contract, calculate savings report, by category

• Transparent metrics & be prepared to defend your math

• Update cost savings report after meeting fulfills

• Consolidate savings reports by quarter and / or annually

• It’s not about the largest savings, but the most accurate amount

Contact Risk Mitigation Report Tips

• From countersigned contract and negotiations plan, create a report for

each meeting

• Include all performance clause highlights, including cost containment

components

• Risk mitigation includes the “what if’s” and on initial report does not

require a savings amount

• Include all company legal and liability language

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.

Strategic Meeting Management Program (SMM)

Meets

Hotel Revenue Management (HRM)

• SMM delivers measurable value to meeting stakeholders - (Planners)

• Hotel Revenue Management maximizes revenues / profitability - (Hoteliers)

• 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)

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:

Hotel Contract Negotiations Top 10 Tips




714.582.6133

[email protected]

www.meetingsites.net

One live attendee today will win a

prize!

March Prize Package• Complimentary 1 night stay in a deluxe room at the Quail

Lodge Resort & Golf Club!

• Continental breakfast buffet

• High-speed internet access

• Free parking



Services

Meeting Sites [email protected]

Tyler Davidson

Chief Content Director

Meetings [email protected]

Questions?



Our TAKE 10 feature, offered either on our website or via our Webinar Wrap

e-newsletters, provides answers to some of the key questions we just did not

have time to get to during today’s webinar. Look for an email coming soon!

Upcoming Events

• Negotiations Part 2: Leveraging Meeting Spend/Custom Hotel

Contracts - presented by: Robyn Mietkiewicz

Wednesday, March 25th at 1pm Eastern

• The Mobility Effect – presented by: Kevin Long

Wednesday, April 1st at 1pm Eastern

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Negotiation Part 1: The Art of the Deal:

Strategic Hotel & Contract Negotiations

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negotiation part 1: the art of the deal: strategic hotel ......negotiation part 1: the art of the...

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