Negotiating with Hotels: A Game Plan for Negotiating Event Contracts
31 Oct, 2011By: Laura Nakoneczny
Planners of athletic events are charged with providing a smooth and rewarding experience for both athletes and attendees. Call it irony, but negotiating hotel contracts is anything but.
Contracts are time-consuming, frustrating, and confusing. However, there’s no reason you can’t negotiate like a pro. For most of us, event planning boils down to signing a contract for the desired dates that features affordable rooms and 'plate' (meaning food) rates.
“Smart negotiators start by knowing they have to prioritize their attendees’ needs, wants and interests first,” says Jonathan Howe, a contract attorney and partner in Chicago-based Howe & Hutton, Ltd.. “Prioritizing provides you a much better chance of getting what attendees really need, and clarifies what you might be willing to sacrifice.”
So make a list of your attendee’s priorities, grab your budget and let’s look at how you can negotiate dates, room rates and plates – and get all the best returns for your next event.
Whenever possible, remaining flexible with event dates can result in planners' ability to save money and get lower room rates. Not surprisingly, hotel room inventories are more readily available on certain days of the week, in certain seasons, and when large events are absent from town.
The general rule: provide hotels several date options and see what fits best with your other priorities. Lynn Peeler, a convention planner with the Turfgrass Council of NC in Raleigh, says her association saved 40 percent overall on conference and convention costs by moving their conference from the third week in January to the second week in December, when the hotel was more anxious to get business because of the impending holidays.
According to the American Hotel & Lodging Association, U.S. hotels had a 57 percent occupancy rate in 2010. While that percentage is up from previous years, it is still low enough to provide planners an opening to bargain.
Although easy to negotiate, lower room rates may not always pay off. After a certain point, property managers may begin to sacrifice other services to support their losses.
“We have seen hotels shorten their restaurant hours, shorten room service hours, things like that,” says Robert Mandelbaum, director of hospitality research for PKF Consulting in Atlanta. “If those things are important to the group, planners need to ensure they are covered in the contract.”
An absence of expected amenities can come as an unwelcome surprise. Denise McGinn, CAE, president of Association Guidance in East Lansing, MI, found that two of the hotels she regularly does business with had removed their in-room coffee makers without warning, and “our attendees did not react very well.”
Do your homework and recheck available rates at your hotel using websites like Orbitz, Priceline, or Expedia, say planners. It's embarrassing if attendees discover a lower rate online, and it's a sure thing they'll use the computer, and their reservation won't be counted toward your room block. (Note: Encourage your attendees to book directly with the hotel rather than with an online service, and assure them you have the best rates).
At a minimum your contract should specify how rooms break down by rates, by type of room/suite, single/double, deluxe, or government rate. You should also request the percentages blocked in each category for your group, and ask the property to detail any applicable taxes, charges for additional people in the room, or early departure penalties.
Finally, negotiate a cumulative room pickup rather than per-night totals. It’s a strategy that will help you avoid attrition clauses, or the payment of fees for unfilled rooms the hotel has set aside for your group.
Meals are a planner’s worst nightmare. No event attendee (to my knowledge) has ever considered a $30 plate of banquet chicken with 30 percent tax and gratuity a delicious bargain.
However, without question, food and beverage services are profit centers for most hotels, earning profits of 30-40 percent each year. Savvy event planners control meal costs during contracting, and not during menu planning which can take place six months to a year later.
Fluctuations in food prices mean catering managers don’t like to set menu prices until six months prior to an event. Consequently, you’ll need to know your event’s value (e.g. how much your event brings to the property in terms of food and beverage sales, restaurant sales and lounge visits) when negotiating your contract.
Consider negotiating a fixed percentage off the printed menu prices in effect six months before the meeting date. Planners also can ask about getting some complimentary amenities from the hotel (centerpieces, ice sculptures, etc. -- all of which can give a banquet that upscale touch) when negotiating.
The importance of food and beverage revenues has recently given way to new contract clauses dealing with attrition and/or cancellation of meal functions. It may serve the planner to cover performance issues for food and beverage functions in a separate clause. The clause should be clear as to whether attrition or meal cancellation or both are applicable, and it should include specific time frames as well as a specific method for determining the damages due.
“Most courtrooms looking at F&B disputes would consider the hotel entitled to recover only its lost profits to be made whole,” says Robin Roth of Chicago-based Conferon. “While most hotels are willing to agree to an overall F&B profit percentage of 30 to 40 percent, define it in your contract as an actual dollar amount whenever possible.”
Roth say planners can contract for major food and beverage functions that are unlikely to change, and that “smaller meals and breaks can be added later.”
Finally, remember that lack of a performance clause for food and beverage functions doesn’t mean you’re free from liability if the hotel suffers a loss. All planners should consider adding a clause stating that the group will not be liable for meal performance charges other than those specified in the contract.
“The goal is not so much to win, but to develop a partnership with the property and share in the risk and the reward. Everything is negotiable, so both parties should be willing to piece together a contract that works to ensure everyone’s goals are met,” says Jonathan Howe. “Contract negotiation isn’t a contact sport.”