strategic hotel contracts – plan and think before you ink
TRANSCRIPT
Strategic Hotel Contracts – Plan and Think
Before You Ink
Presented By:
Terri Woodin Meeting Sites Resources
Breckenridge, CO
Presented at: ACLEA 55th Annual Meeting
July 27, 2019 Chicago, Illinois
Terri Woodin Meeting Sites Resources
Breckenridge, CO
Terri Woodin, CMP, is Vice President of Marketing and Global Meeting Services at Meeting Sites Resource (MSR). She has been with MSR since 2012 and is responsible for strategically partnering with MSR customers on all facets of global site research, custom hotel contract negotiations, meeting support services, and Strategic Meetings Management (SMM) solutions. Terri is an industry veteran with 35 years in the hospitality industry with extensive experience in hotel operations, hotel sales, and as a meeting planner. Committed and passionate about the industry she is engaged and contributes by presenting workshops and webinars on topics such as Strategic Meeting Management, Hotel Contracts Negotiation Strategies and How to Demonstrate Real Meeting Value to Senior Management. Additionally, and she authors articles for many industry publications. Terri leads by example and continues to give back through her many volunteer positions. She currently serves globally on The Meeting Professional Advisory Board for MPI and with her alma mater on The School of Hospitality Business at Michigan State University Board of Directors. Terri continues to make a difference by engaging in the community with Project Angel Heart, Ronald McDonald House, and Children’s Hospital. Most recently, Terri was awarded one of the Top 25 Women Industry Leaders by SMART Meetings Magazine, awarded the (MIC) Meetings Industry Council Leadership Award and earned the SPIN 40 over 40 Leadership Award. Received BA in 1988 from Michigan State University, The School of Hospitality Business, Eli Broad College of Business and obtained via MSU’s Study Abroad Program her Culinary Certificate from Ecole Hotelier, Lausanne, Switzerland. She obtained the Certified Meeting Professional (CMP) designation in 1997. Professional memberships include Meeting Professionals International (MPI) since 1996.
Strategic Hotel Contracts -Plan & Think Before You Ink
Terri Woodin, CMPVice President, Marketing & Global Meeting Services
Meeting Sites Resource970-771-3386
Goals For Today• Discuss industry issues & trends
• Review variables that influence hotel availability & pricing
• Understand how hotels value your meetings
• Know how to create a Cost Savings / Risk Reduction Report
• Learn five steps to value based negotiations
• Room inventory/supply forecasted to increase by 1.9%
• Hotel occupancy forecasted to flatten or even decline
• Hotel average daily rate (ADR) forecasted to increase by 2.5%
• Demand Forecasted to Increase 2%
Sources: STR, PWC, and CBRE Research
2019 Forecasted Industry Trends
• Increased demand for non-traditional meeting facilities
• Focus on unique attendee experiences is top of mind
• Greater Focus on Corporate Social Responsibility (CSR)
• Focus on Personalization to Engage Attendees
• Event Menu Choices are more Varies, more Sustainable, and Healthier
2019 Forecasted Industry Trends
How Hotels Value Your MeetingsVariables 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
Industry Profit Margins
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%
(Average Hotel Chain & Independent)
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
Hotel fees and surcharges
Performance clauses
Legal department liability language
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 and rebook clause
• 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 history
• Benchmark estimated F&B spend
• Hotel F&B Min, plus service charge and sales tax
• Contracted guarantee includes 20% attrition
• 45 days out, assess attendance and F&B spend
Published Rate Clause
• Protects your company if meeting attendees make reservations around group room block
• 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.
(No lower rates offered after contract is signed)
Performance ClausesFees/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)
Breach By Hotel
• Hotel is responsible to pay damages in the event of non-performance
• Hotel to pay all direct and indirect costs to relocate your meeting
• Hotel to pay expenses and costs relating to marketing materials and attendee communications
• Hotel liable for any legal or arbitration fees
No Walk / Relocation“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
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
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
• Anything that makes it illegal or impossible to perform
• If customer still elects to conduct meeting, no attrition, food and beverage guarantees apply
Liquidated DamagesLiquidated 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 formula or date(s) due
• Hotel is not obligated to resell rooms and credit the group
Mitigated DamagesMitigated 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
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 obligation• Capture any pre or post room nights
Key Risk Reduction /Cost Containment Components Recap
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
Attrition• Guarantee percentage of room block / no sliding scale fees / damages based on profit not
revenueCancellation
• Sliding scale damages on profit not revenue / resell / if damages, apply to future meetingsF&B Guarantee
• Allowable attritionHotel Fees & Surcharges
• Eliminate or reduceNo 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.
Key Risk Reduction /Cost Containment Components Recap
Sample Cost Savings
Cost Savings Example(continued)
Consolidated Meeting Spend Grid
Plan and Think Before You Ink• All hotel contracts are negotiable • A well designed contract is essential for a successful meeting• Avoid vague phrases such as ample, reasonable, to be assigned, etc.• All meeting and event space to be assigned by day• 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• In the event of changes, create a hotel contract addendum
THANK YOU!Complimentary Resource:
Strategic Hotel Contracts: Top 10 Tips
Terri Woodin, CMPVice President, Marketing & Global Meeting Services
Meeting Sites Resource970-771-3386