Strategic Hotel Contract Negotiation: Global Leaders - High Tech Solutions - Strategic Partners
Strategic Hotel Contract Negotiation: Global Leaders - High Tech Solutions - Strategic Partners
Strategic Hotel Contract Negotiation: Global Leaders - High Tech Solutions - Strategic Partners
Contracts can be complicated, but are a “must” to protect your company and to make expectations and
responsibilities clear.
Meeting Sites Resource has a proven, methodical system that adds significant value to the site
research, hotel evaluation, negotiation and contract process.
Effective negotiations goes beyond “dates, rates and space” and all hotel contract components, value-
added concessions, hotel fees & surcharges and performance clauses should be part of the negotiation
process. Everything is negotiable; however, it is important to plan, prioritize and to have a specific
negotiations game plan for each meeting. Focus on what adds value to your meeting and the bottom
line, with an emphasis on risk reduction.
Create A Custom Master Hotel Contract Template / Amend For Each Meeting (ready for signature)
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 lost profit, not revenue)
Legal department liability language (indemnification, insurance, successors and assigns, insurance,
dispute resolution / arbitration, etc.)
Generate a cost savings / risk reduction report for each meeting (from countersigned contract)
Key Contract Components
Option Date
Specific date to execute contract by both parties
If this date cannot be met, receive extension in writing
If option date is not met, Hotel can release/resell rooms and meeting space
Sleeping Room Block
The number of guestrooms and suites by day by category
Guestroom Accommodations/Sleeping Room Categories
Outline all sleeping room requirements by day including:
Breakdown of rooms and suites by category
Meeting group rate by category Example of room categories are:
Ocean view Single (one bed)
Golf view Double/Double (two beds)
Garden view King bedded room
Pool view Suites/categories
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Strategic Hotel Contract Negotiation
Global Leaders • High Tech Solutions • Strategic Partners
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Strategic Hotel Contract Negotiation
Global Leaders • High Tech Solutions • Strategic Partners
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Strategic Hotel Contract Negotiation Strategies
Global Leaders • High Tech Solutions • Strategic Partners
Resell Clause
Plan in advance and know how damages are to be eliminated or reduced.
The issues and details of sleeping room attrition and meeting cancellation are of utmost importance
and spelling out specific compensation and responsibilities is a must.
Generally, when a hotel contract is not honored (breached), the non-breaching party is entitled to
lost profit, not lost revenue. Since lost revenue is difficult to calculate in advance, the courts allow
the two parties to agree in advance on an amount or formula to be stated in the contract. It is best
for damages to be stated on a sliding scale, with the amount increasing as the meeting dates get
closer.
A liquidated damage is a guaranteed dollar amount or specific formula to calculate a dollar amount.
Liquidated damages must not be unreasonable or it could be deemed as a penalty if the case goes
to court or arbitration (hotel not obligated to resell rooms / credit company).
Mitigated damages hold the hotel accountable to try to resell sleeping rooms, Food & Beverage and
other services. This duty to mitigate damages calls for the hotel to immediately try to replace
business and minimize (or eliminate) compensation by the customer.
Although this is the legal requirement, it is recommended placing a resell clause in the contract to
make responsibilities clear.
The other important issues are when compensation to the hotel is due and conducting an audit with
the hotel after the meeting dates to determine if there is a credit due to your account.
Provide provision that the damages due (or part of) can be applied to future meeting (include
specific timeline)
Liquidated vs. Mitigated Damages
Once an organization signs a contract with a hotel, assuming non-performance is not related to Force
Majeure (occurrences out of Organization’s and Hotel’s control), there will be damages due…the key is
the language and intent in the performance clauses and specific formula(s) to calculate damages, along
with specific dates when damages are due.
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. Damages collected by the hotel cannot be
excessive, or they could be deemed a penalty. As an example, you contract with a hotel for 100 rooms
at a $200.00 room rate ($20,000) and $5,000 group Food & Beverage ($25,000 total contract value), if
the hotel seeks $45,000 in cancellation damages, this would be considered a penalty and not allowed
by hospitality law. With liquidation damages, the hotel is not obligated to resell rooms and credit the
group.
Mitigated damages are the Hotel’s responsibility to resell sleeping rooms, meeting and event space and
contracted services, to reduce, or better yet, eliminate damages to the hotel. Back to the example of
the 100 contracted sleeping rooms, say the contract called for 15% allowable Attrition (guarantee 85
rooms) and you actually utilize 70 rooms, you must pay for the 15 room shortfall. You would then
instruct the hotel to conduct a rooms inventory audit by night, to determine total hotel occupancy (less
rooms under renovation/out of service). If the hotel sells all but four rooms, then four rooms are all you
are obligated to pay (on lost profit not lost revenue).
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Strategic Hotel Contract Negotiation
Global Leaders • High Tech Solutions • Strategic Partners
Indemnification
The agreement by Customer and Hotel to indemnify each other for own negligence
Reciprocal protection for both the group and hotel
Both parties mutually indemnify, defend and hold harmless against, claims of
negligence/misconduct
Many indemnification clauses are one-sided and it is a good idea to have your attorney review this
clause (or create one for you)
Change in Management/Termination
Allows company to terminate contract without liability if hotel changes management company,
franchise or if foreclosure occurs
Breach by Hotel/Termination
Hotel liable to company all direct and indirect costs (including attorney fees) if hotel fails to provide
sleeping rooms, meeting space and services as contracted
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Strategic Hotel Contract Negotiation
Global Leaders • High Tech Solutions • Strategic Partners
Force Majeure/Termination
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
If Customer still elects to conduct meeting, no attrition, food and beverage guarantees apply
Bankruptcy/Termination
Addresses liability issues in the event the hotel or company enters into bankruptcy or foreclosure
Compliance with Laws
Verify that the hotel will be in full compliance with all government laws and regulations
Successors and Assigns
Identifies commitments in event the company or Hotel is sold; assigns assets
Key Clauses For Your Legal Department Review
Indemnification
Insurance
Dispute resolution / arbitration
Successors and assigns
Bankruptcy
Hotel Inventory Audit (in the event of cancellation / attrition / performance damages)
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
Capture any pre or post room nights
Plan and Think Before You Ink - Contract Tips:
All hotel contracts are negotiable (plan and prioritize before you negotiate)
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Strategic Hotel Contract Negotiation
Global Leaders • High Tech Solutions • Strategic Partners
All meeting and event space to be assigned by day (if a hotel will not assign specific space, they
are not considered a candidate)
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 to the meeting dates, room block, suites, meeting space or hotel
services, create a hotel contract addendum, detailing changes and secure mutual signatures.
Planners can add significant value to their meetings and the bottom line when they have a negotiation
strategy that includes quality advance planning, a focus on meeting goals and objectives, an
understanding of their meeting value and leverage and prioritized their hotel and contract components.
Please contact me if you have questions or if you need a strategic partner for future meeting needs.
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