Crafting the right attrition and cancellation clauses in event contracts is more important than ever. Despite continued uncertainty, planners can no longer count on the low rates and flexibility hotels offered at the height of the pandemic. Contract experts share their advice on how best to negotiate in the current climate.
Being a smart negotiator and understanding how contract clauses can make or break a meeting have always been important, but perhaps are even more so now. While many meeting destinations have reopened and travel restrictions have eased, concerns with Covid have not completely gone away and neither has uncertainty about its impact on attendance and attrition.
In determining what the best strategies are going forward, EventMB spoke to several experts on contracts and negotiation.
Hotels Are Playing Hardball
How much clout do planners have in hotel negotiations these days? A lot less in 2022 than they did last year, according to Mark Dallman, regional vice president of sales for HPN Global and a meetings contract consultant. He notes that while hotels were once eager for business and ready to make concessions, occupancies are bouncing back and availability for meetings is much harder to come by.
“Hotels are playing hardball and are much less flexible,” Dallman said. “Hotel corporations don’t want to give in to Covid anymore. Just finding dates for meetings is very hard right now because of all the conferences that were postponed and are now going forward.”
Gianna Gaudini, head of events for Airtable, educator and author of The Art of Event Planning, said that her recent negotiation experiences with hotels have been extremely inconsistent.
In some cases, she has seen a trend similar to what Dallman is reporting. “I’m seeing different policies in different regions and with different hotel chains,” she said. “I was helping a company negotiate a contract for a conference planned long-term in Las Vegas. I expected the hotel to be generous, but they weren’t amenable to negotiating.”
On the other hand, another venue that might be expected to play hardball was surprisingly accommodating: “In another instance, I was surprised when a high-end hotel in Napa gave me a very flexible attrition policy for a meeting planned short-term.”
So-Called “Fear” Majeure Won’t Safeguard Contracts
How have contract negotiations changed since the pandemic began? Unsurprisingly — the force majeure clause, the one that addresses cancellations due to unforeseen disasters or “Acts of God” — has received much more scrutiny with the pandemic.
“People who had never read force majeure clauses before suddenly put their hope in the ‘Act of God’ language,” said meetings industry attorney Steven Adelman of the Adelman Law Group.
While useful in the case of hurricanes and other natural disasters, both Adelman and Dallman say the force majeure clause has been of limited use in helping planners avoid attrition fees due to Covid. In the current stage of the pandemic, it doesn’t apply at all.
“Force majeure applies when people can’t get to a place, but now they can,” Dallman said. “Hotels are open, planes are flying. Some people are still afraid to travel, which is why a lot of people are now calling it the ‘fear majeure’ clause. But we’re in a new era where the clause doesn’t apply. The fear factor is no longer an excuse.”
Hospitality attorney Lisa Sommer Devlin of the Devlin Law Firm has a similar take.
“Hotels are not going to agree to clauses that relate to the pandemic,” she said. “Covid-19 is here to stay and is not preventing events. It is the government regulations, like meeting size limits or travel bans that prevent events.” In most regions, government restrictions are no longer an obstacle to hosting in-person events, and hotels are looking to avoid losing money simply because of attendee reluctance. “Hotels are being much more careful, as in the past several months they have suffered losses from groups claiming that they can cancel due to the pandemic when the meeting could have happened,” added Devlin.
While travel restrictions are not the barrier they were only recently, anxiety about traveling to conferences is still a factor. What if a new, highly contagious variant comes along? What about a catastrophic world event or sudden economic decline? How can contracts protect meetings planned a year or several years out from unforeseen pitfalls that impact attendance?
Dallman, whose clients are primarily associations planning events several years in advance, recommends two clauses that address future conditions affecting room blocks or cancellation. One is an economic conditions clause that allows groups to make adjustments to the room block if something happens that affects the economy. The other is a room and space block review clause that allows the room block to be reviewed at certain intervals, usually annually, and then adjusted up or down prior to the meeting.
Rates and More
No matter how precarious the world situation may be, knowing the basics of smart negotiation will achieve the best possible outcome.
Gaudini, who addresses best practices for contracts in her online course Million Dollar Event Career, said the first priority is to secure the best possible room rate. Equally important is to ensure that the group will be paying the lowest possible rate once the meeting actually starts.
“You need to make sure the hotel will guarantee the rate originally quoted – this needs to be in writing,” she said. “It’s also important that no published rates will be lower than your group rate. Check every week to make sure you are still getting the best price. If you see a cheaper rate on the hotel website, make sure you get that. You will if your contract clause includes it.”
As important as it is to negotiate a favorable room rate, Gaudini said it’s a mistake to make this the sole focus. Getting other concessions from the hotel in lieu of a lower rate can more than make up for it.
Gaudini has a “cheat sheet” list that she uses when asking hotels for concessions, which can include myriad items such as suite upgrades, guest transfers, package storage, welcome amenities, valet parking, furniture removal, and much more.
“What’s important is to lower the overall cost of the meeting and you can do this in so many ways,” she said. “I was surprised by a planner who was happy to get free coffee from the hotel. I later learned that this saved her large group thousands of dollars. You can be creative in what you ask for. For example, if you can get some rooms upgraded to suites at no extra charge that can be a huge saving. Some suites cost thousands a night.”
There are many ways to minimize or completely avoid the attrition penalty costs that occur when room blocks are not fulfilled, according to Gaudini.
One strategy she recommends is to negotiate that all rooms booked are counted toward the room block, including those booked by attendees for stays before or after the conference.
“Attrition can be cumulative, even though hotels like to calculate per night,” she said. “Even if some of the rooms are used for pre- or post-conference stays, they can make up for rooms not booked during the conference itself.”
In the case of an event needing to be canceled or rescheduled, Gaudini recommends asking for a sliding scale in determining how much the hotel is entitled to in compensation for rooms they cannot resell.
“For example, if I cancel six months prior to the meeting, the hotel gets 10 percent of lost revenue, 25 percent if it’s three months, and 75 percent if it’s within a month,’ she said.
Dallman maintains there is usually no need to pay attrition or cancellation fees to hotels.
“There are so many ways around it,” he said. “If you come in with a lower block, send them more food and beverage. If you’re short one way, find other revenue to give them.”
Resell and Rebooking Clauses
Contracts should include a resell clause that pertains to rooms in the block that were not used by attendees but were later resold by the hotel.
“If you pay for 100 rooms and only fill 20, it’s not fair for the hotel to sell the unused rooms to the public and still charge you for attrition,” Gaudini said. “Add a clause that the hotel shall use best efforts to resell rooms affected by attrition and that the resold rooms will be refunded. Request an occupancy report from the hotel and do the math. The hotel can’t end up in a better position than they would if you had not underperformed.”
When it comes to clauses that address rebooking a canceled meeting, negotiate for flexibility in applying the cancellation fees to the future program, Gaudini advises.
“I ask for the ability to rebook a program for one year from the date of cancellation, not from the date the contract was signed,” she said. “The rebooking clause should be flexible enough to allow you to use the cancellation deposit for any new type of event, one that doesn’t have to be the exact size as the original one.”
Also important is to make sure the hotel is not charging full cancellation penalties on food and beverage. “The hotel shouldn’t be charging for what is not used – if food is not ordered, you shouldn’t pay for it,” Gaudini said.
Ask, Not Demand
Gaudini advises meeting planners to allow at least a month in the negotiation process and to approach it in much the same way they would if buying a house.
“I always ask for the maximum, knowing there will be back and forth,” she said. “If you know your top priority and get it, you can concede on other things. It’s a bit of a dance.”
Being candid with a hotel partner can go a long way, according to Sommer Devlin.
“As in any business relationship, you will do better if you ask for partnership rather than demand things,” she said. “You will have a much better outcome if you tell your hotel partner that you are facing reduced attendance and would like to discuss how that can be addressed, instead of saying that you are excused due to Covid-19.” In other words, it doesn’t always have to be an all-or-nothing equation: “Hotels are trying to build back business. They would rather have a smaller meeting than no meeting.”
“Remember, everybody is tired of dealing with Covid. Hotels have suffered incredible losses. If you come to your partner recognizing that your situation impacts both sides, it will be easier to negotiate a resolution,” said Devlin.
Hotels have less need to be flexible now and Covid is no longer an excuse for cancellation or failure to fulfill room blocks. However, knowing the basics of good negotiation and contract clauses can help meeting planners surmount challenges even in an era of uncertainty. Planners can often avoid attrition and cancellation penalties by knowing what to ask for and what to concede.