In for the Win/Win: How to Negotiate Facility Contracts
26 Aug, 2014By: Kathleen A. DeMarco
Executing sports events includes the important task of negotiating facilities contracts. Although these contracts are integral to the overall success of an event, many event managers don’t enter contract negotiations with enthusiasm, much less with confidence.
A planned approach can lead to confident negotiations. You’ll better understand, communicate and ultimately meet your event’s logistical and financial goals, and you’ll establish a positive working relationship with the facility, which will be crucial as your event moves from contract to competition.
Think of facilities contract negotiations not just as the back-and-forth of getting the contract language right but as a multi-step process that begins well before you sit down to hash out the deal. You have the opportunity to establish your value as a customer—and thus, your negotiating power—at the outset of the process, and some planning and preparation will help you start off strong.
Start by Understanding the Facility’s Goals
All facilities, public and private, need to earn a profit, and they have operating, maintenance, staffing, financing and other fixed and variable costs that impact profits. Recruiting, booking and retaining event accounts is the lifeblood of a facility’s profitability heartbeat. Facilities booking managers, when presented with a potential piece of business, will start their evaluation by examining the revenue streams that an event represents. Publicly-owned facilities will also be looking at the economic benefits an event will bring to its wider community.
Understanding that your request to use a facility will be considered based in large part on how your business can help the facility meet profitability goals will help you present your case as an attractive piece of business. Learn as much as you can about your target facility’s ownership structure, occupancy rates, square footage costs, and other factors that impact its profitability, and consider how your event can support the facility’s profitability goals. By doing this, you’ll gain an understanding of potential areas for negotiations.
Do Your Homework
Next, assemble data from your past events on all revenue streams it produced, both for the facilities and for its local communities (attendance fees, facility fees, concessions, parking, hotel room nights, meals and incidentals, sponsorships and the like). You’ll also need a detailed event history, going back five years or five events ideally, tracking consistent year-to-year data on your dates, locations, facilities and square footage used, rates/fees paid, attendance, participation, and concessions revenue numbers. Include contact information for past facilities used. This intelligence will become integral in developing your Request for Proposal (RFP) and presenting your event in a manner that communicates its potential value.
Reach out to event producers who’ve held events in your target host facility, especially those who have produced events similar to yours in terms of sport, space needs, attendance and seasonal dates. Talk to them about facility performance–where did the facility shine? Did it underperform anywhere? Would the event return to that facility? Also, ask about any special or extraordinary concessions they were able to negotiate with the facility for their event. If they got something good, they’ll be sure to share it.
Contact the local CVB, Chamber of Commerce or sports commission for information about your target facility’s occupancy and performance. Don’t forget to ask what value these organizations can add to the equation; they exist to bring in sports business, and building a relationship early could be beneficial in the negotiations process.
Showcase Your Value in Your RFP
Facilities booking managers will seek all kinds of events across all markets to fill their calendar, and the RFP is the tool they’ll use to evaluate each potential piece of business. Your RFP will likely compete with others, so make it count as a tool to get your business noticed, and to set the stage for sound negotiations.
A strong RFP is one that provides a booking manager all the data needed to evaluate your potential business. Like your résumé, the RFP should paint a picture of your event in terms of what it brings to the table – its value stream, its past experience and its references. This is not the time to play your cards close to the vest; rather, put your best ‘hand’ on the table and let it speak for itself.
Your RFP should include:
· A detailed Event Summary: an overview of your event, its history of dates and locations (for a first time event, disclose this fact), basic demographics on competitors and attendees and ownership, rights holder and sponsor structure. Is your event sanctioned by an international, national or regional organization? Be sure to mention that; it adds credibility. Any trends toward stable or growing participation, or past successes in revenue sharing opportunities? Spell them out and back them up with the history you’ve developed.
You also need to list any existing exclusive contracts you have (equipment rental vendors, for example), or financial commitments with any Local Organizing Committees (LOCs) which may help support the fiscal viability of your event.
Since insurance coverage is a must, consider providing your liability insurance coverage information, or even a copy of your current insurance certificate, with your RFP. Again, it is one less thing for the booking manager to have to ask for when evaluating your potential business.
Don’t forget to identify who will be involved in discussing contract terms, and include complete contact Information (physical/mailing addresses, phone, fax and e-mail).
· Event Data: information needed by the facility to check availability for your event. If you did your homework, the data will be at your fingertips: dates (load-in to load-out), hours, square footage and type of set-up or layout for all space needed, participation, attendance, sleeping rooms, ancillary space, etc. Facilities managers (FMs) will appreciate this information being laid out day-by-day, since they’ll be checking dates and space in a calendar-based system. Provide contact information for past facilities used, because rest assured, a good FM will check your numbers.
If you are flexible with your event dates, or your arrival/departure pattern, your RFP will be more attractive to a facility. If you have a lot of flexibility, ask for a proposal based on “value dates” (off-peak, or whenever a facility has a hole to fill in its calendar). Also, multi-year contract RFPs will also get you more attention from a facility, and more negotiating power.
· Requested Contract Items: Know your must-haves, and list them from highest priority to lowest. In creating this list, you’ll gain an understanding ahead of negotiations about where you might have some flexibility when the talks start. Don’t be afraid to list things that you’ve never had in your contract before, like revenue sharing on ancillary items, a graduated deposit schedule that coincides with the event’s revenue stream or billing arrangements that enable the largest payment post-event. Just prioritize them appropriately.
Crafting a detailed RFP that showcases opportunities for a win-win partnership and prioritizes your must-haves will win you proposals and set the stage for getting what you need—and want—in your contract.
It Takes Two: A Win-Win Deal Should be Your Goal
When the offer comes in, use your RFP as a checklist to ensure that all required items are met. Make sure you understand all contract clauses and how they may impact your event. Work on getting agreement on your highest-priority items first. Since you’ve prioritized your wish list, you have a framework to follow: if any of your high-priority items are not met, but a lower-priority item is offered, you already know where to suggest a trade-off.
Remember, while everything is negotiable, the facility is a for-profit business and simply may not be able to agree to everything you want. Seek creative solutions and be flexible should negotiations reach an impasse. In some cases, it may be necessary to walk away if your high-priority items just can’t be met.
Be ethical and negotiate in good faith with the goal of a win-win deal. Present your needs and your historical data honestly and reliably. Your goal is to be viewed as a fair negotiator and as a trustworthy potential user of the facility, and to establish a relationship that will remain mutually beneficial as your event unfolds.