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Tuesday, November 8, 2011

Associations and Contracts for Meetings and Events

(Here are some of the highlights from a presentation we did recently on hotel contracts for SmartMeetings Magazine)

Over the course of the next 18 to 24 months we believe meetings and events will continue to be impacted by the state of the economy, changing attendee expectations and what appears to be a permanent trend of booking outside the block.

General Factors

The economy will continue to drive what hotels and convention centers are willing to provide in the way of service and the extent to which they will choose to engage in negotiations.  Attendee expectations are increasing and crescent rounds versus hollow square aren't really the issues anymore.  We need to be looking at space utilization issues and being more creative with the spaces we decide to interact in.  Also, booking outside of the block is the new normal and we don’t see it going back any time soon.  So using historical data to create contracts can be risky.

The New 990

Although it hasn’t been tested yet in the courts to our knowledge, we believe there may be implications for meeting planners in the new IRS Form 990 that 501(c)(3) and 501(c)(6) organizations file.  It could be argued that meeting planner points and other booking incentives do not belong to the planner, but to the association, and that the planner’s acceptance of those things could amount to either a conflict of interest or a private inurement.  Consult counsel if you have questions regarding a specific situation.

Starting a Negotiation

Here are some quick tips to keep in mind before you start any negotiation:

  • Know the value of your meeting
  • Know the going rates
  • Know your terminology
  • Know the economic landscape of the area
  • Know your members/attendees
  • Know your history
  • Know what your reputation is

Helpful Keys

Here are some quick factors that may influence your ability to find better rates and contract conditions:

  • Location
  • Meeting month
  • Holidays
  • Arrival/Departure Days
  • Sleeping room/meeting room ratios

Contract Basics

Remember, just because something looks like a “standard contract” does not mean it is.  Virtually every hotel has a different contract, and every term of every contract is subject to negotiation.  Carefully reading each section is critical.  If you are unclear on terms, make sure you have definitions that are spelled out or use examples as a way of demonstrating meaning. Having your own addendum can be very helpful as many times hotel representatives can’t change the terms on the “boilerplate” without a tremendous amount of hassle, but they can and often do, sign addendums that change the terms of the boilerplate with a certain amount of ease.  (See below for more on the addendum ideas.)

Here are some major clauses with some quick hints about each one:

  1. Attrition – Consider using a “best efforts” clause, arrange for multiple cut-off dates so you can revise the block, negotiate "minimum pickup" between 75% and 90% of the total room block, negotiate on hotel’s profit margin on unused rooms (not room rate), make sure you are credited for all rooms booked (even those outside the block) and never pay taxes on unused rooms or meals.  (Sometimes attrition clauses are so egregious, they actually end up being penalties and penalties are rarely enforced in court.  If you want to not point it out, and deal with attrition penalties if that happens, you could conceivably do that.)
  2. Cancellations–Limit to hotels lost profits versus lost revenues, don’t pay cancellation fees immediately, build in a provision that if the hotel achieves average occupancy rate over the dates in question that you don’t owe them anything, provide for the possibility of moving the event (or an event with a similar foot print) to a new date with the property in lieu of cancellation fee, consider putting renovations and pest infestations as reasons to cancel.
  3. Force Majeure – Beyond what we normally think of as “acts of God” such as natural disasters or war or civil disturbances you should also include the following as reasons for Force Majeure: terrorism/threat of terrorism, union activity and picket lines, government action, outbreak of disease/illness/pandemic, transportation disruptions, pest infestation or any other reason making it inadvisable to hold a meeting. (Note:  It is critical to thoroughly consider the issue of strikes and picket lines when negotiating a hotel contract.  Some groups will NOT cross a picket line, regardless of whether that particular hotel or convention center is actually on strike or not.  If your group, or even portions of it, will not cross a picket line, then this is a serious concern.)
  4. Indemnification – Be careful with indemnification clauses. You are not an insurance company and you aren’t responsible for the acts, omissions, negligence or willful misconduct of your attendees or their guests. Also, any indemnification clause should be fair to both the facility and the group; most hotel indemnification clauses are unilateral and unreasonable (the group pays for any claim that the hotel did not purposely cause). In most cases, NO indemnification clause is better than the clause included in the hotel’s form.
  5. Non-Disclosure Agreement – Consider including a non-disclosure agreement that states the facility cannot share information about rates or other contract specifics with other properties. It is unethical (and possibly illegal) for hotels and convention centers to share such information, but that doesn’t mean it doesn’t happen. We know of cases where it did happen.


Here are some suggestions for you to consider when preparing your own custom addendum to add to facility contracts:

Walking Provisions – If the host hotel overbooks and ends up walking one of your attendees the hotel should arrange and pay for both housing and transportation costs between the host hotel and another comparable facility in the area.

Function Review – Reserve the right to review and adjust room block, meeting space and function details periodically and at least six months prior to the event.

Rates and Fees – Hotel should not advertise promotional fees lower than your contracted room rate at their facility over the dates you are onsite.  If they do, a discount should be given to your attendees.  (Watch Orbitz and other travel sites and grab a screen shot if you see a lower rate publicized.)

Complimentary Space and Set Up – Make sure there aren’t any hidden fees or charges with space and room set-up for meeting space you are using.  Also check for energy surcharges and AV “access fees” that suddenly show up when you choose to use an outside AV vendor.

Other Groups/Quiet Enjoyment – The hotel should be able to provide a quiet atmosphere for your attendees and disruptions due to other meetings, events or renovations should be kept to a minimum.  Competing or adversarial groups should not be booked at the same facility on the same day without your being apprised of and agreeing to such a booking.

Food and Beverage – There should be an understanding that the F&B pricing quoted during negotiation of the contract should not be raised.

Alcoholic Beverages – Consider including a provision that states all alcoholic beverages should be dispensed by hotel employees, those employees should be properly trained on mixing, should not serve to underage individuals and should not serve to attendees who appear inebriated or intoxicated.

Change in Management – Reserve the right to modify or cancel the agreement based on changes in management or ownership of the property.

Deterioration – Reserve the right to modify or cancel the agreement based on deterioration of hotel or facility upkeep and maintenance.

Construction and Remodeling – Require the hotel to advise the group of any construction or remodeling that might take place during the group’s event, and reserve the right to modify or cancel the agreement based on interference with the groups enjoyment of the property.  This is a common occurrence, and should be considered in every meeting plan.

Fiscal Challenges – Reserve the right to modify or cancel the agreement should the hotel or facility or the association itself find itself in severe financial distress and is unable to make or keep their commitment.


Every hotel and convention contract should be carefully reviewed by a qualified person representing the group.  This could be an experienced meeting planner, or an attorney.  Contract terms change all the time, and virtually every hotel contract is different.  A strong relationship with a reputable hotel, and a careful drafting of the agreement will help prevent misunderstandings and conflicts.  The use of an addendum is sometimes very efficient, and a checklist like the one provided above is also helpful.  As always, in cases of doubt, the group should contact legal counsel for input concerning contracts.

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