Contracting 102: Modernizing Hotel Contract Terminology
Most event professionals will tell you they spend countless hours reading and negotiating hotel contracts. As a result, we have accumulated a library of “standard” clauses we lean on to protect our clients and events. These clauses are rock-solid, but are they changing with the times? Here are five important tweaks you can make to your tried and true terms to keep up with the ever-changing landscape of hotel contracts.
1. Force Majeure:
Seemingly the most obvious, and at times, most important of clauses. Yours certainly covers acts of God, war and disaster, but does it specifically call out cancellation without liability due to transportation curtailment, threats of terrorism, travel advisories and CDC warnings? If not, it should. Work with your legal counsel and hotel partners to come up with a mutually agreeable clause should you face one of these circumstances.
Multi-year and distant future dated contracts can be a necessity, albeit liability. Protect yourself by including a Review clause that allows you to reassess the state of the business or event potential after a specified date. As a show of value for your long-term partnership, the hotel may allow full cancellation, reduction of your obligations or rebook without liability under this clause.
3. Labor Disputes:
Labor union strikes canceled a staggering number of events and resulted in a huge drop in attendance in 2018. Mitigate your liability upfront by making sure your contract covers how the hotel will handle expired labor union contracts, picketing, strikes or lockouts. In these situations, the client should be able to cancel their commitment without liability to the hotel regardless if they are able to operate and perform the terms of the agreement.
4. Best Rate Guarantee:
In the age of flash sales and corporate resellers, it is increasingly difficult to offer your attendees the lowest rate for booking within the group block. Ask the hotel to contractually guarantee the lowest rate in-house over the peak event dates. This guarantee should apply to rates made available to the general public through the hotel (they will not likely agree to discounted rates through corporate resellers). Should a lower rate be discovered, the hotel may agree to honor the lower rate or have the lower rate removed from all distribution channels. An audit clause should also be used to ensure you get credit for attendees booking outside the block.
Commissions are an important method to off-set costs for many clients. With “brand standards” dropping from 10% to 7% at dominant hotel chains, reduced commissions not only take a toll on the bottom line but are also forcing change in how companies charge for services and events. If hotels are not able to offer the benchmark 10% commission at the property-level, it may be time to amp up your concession requirements to off-set lost revenue. Push for rebates, complimentary WiFi (pending infrastructure & management), and deeper discounts on big-ticket items such as F&B, employee sleeping rooms, comp room ratios, etc. It is still a sellers’ market, but most hotels will work to retain your business.