Negotiating Agreements and Contracts
It is common practice to have a formal agreement between the hotel and the client; these are known as letters of agreement or hotel contracts.
It is important to know which individuals in your organization have the authority to enter into a contract with a hotel or meeting facility. Once an agreement is signed, it may be binding even if a client's representative does not have authority to sign a contract.
Negotiations frequently involve a series of inquiries and conversations between the hotel and the client before an agreement can be reached. This process may take several days or weeks. The bottom line in negotiating is that the hotel needs to make a profit on your business and, at the same time, you need to pay a reasonable price for the services you are buying. Comparative shopping will help.
What is negotiable? Everything-you will be in a stronger place however if you negotiate from a position of knowledge.
Also keep in mind that negotiations should be viewed as a collaborative effort among professionals. Neither party should regard their relationship with the other as adversarial.
- Know what you want to buy.
- Know what is a competitive price for what you want.
- Know what your budget is.
Some commonly used terms you should know are:
- Room block. The number and type of rooms the hotel will hold in reserve for a client.
- Room pickup. The number of rooms actually used by the client
- Breakouts. Commonly used to refer to the number of rooms used for concurrent meeting sessions.
- Rack rates. The hotel's official posted rates for sleeping rooms.
- Group rates. Also known as net rates, refers to discounted room prices given to clients responsible for bringing in large pieces of business.
- Flat rate. Refers to a single group rate for sleeping rooms for all of your business. This rate may not include suites.
- Sliding scale of group rates. Discounted sleeping rooms based on the type of guest rooms (single, double, twin, etc.) that will be used.
- Full American Plan. Room rate includes three full meals.
- Modified American Plan. Room rate includes breakfast and dinner.
- European Plan. No meals are included in the room rate.
- Food and Beverage. Includes breakfast, refreshments (includes coffee, tea, hot chocolate, juices, soft drinks, Danish and pastries, yogurt, pudding, snacks, etc.), lunch, receptions and buffets, banquets, cash bars, and generally anything ordered from a menu.
Conference planners use a checklist to tally the points that make a potential site attractive. Hotels make the same type of list for potential clients. Be aware of the points that make your conference attractive business.
Location. Some cities have a reputation as major convention sites. The attractions of the city are so great that hotels and meeting facilities command higher rates. Smaller cities, known as second-tier or third-tier cities are often attractive sites and offer lower rates.
Meeting months. For many sites, April, May, September, and October are popular meeting months. For some resort sites, the summer months are most popular. Meeting around, rather than during, a site's peak season often means a lower available rate.
Arrival/departure days. Your arrival and departure pattern can mean a lower rate. Most properties welcome a group arriving on Friday and departing on Sunday; this is usually a slower period for hotels unless a city is hosting a special event. Sunday-Wednesday and Wednesday-Friday are also arrival/departure patterns preferred by most hotels.
Holiday meetings. Many groups do not like meeting during or around holidays, but those that do find advantages. A lower rate is one advantage!
Conference clients. Some groups are more attractive than others. A group whose members represent potential business is well-positioned to negotiate. Groups that require "low maintenance" and groups that bring high notoriety and good publicity are also attractive.
Food and beverage use. Groups that use a hotel's food and beverage service are much more attractive than those that do not. The more services you use, the more attractive your group is.
Sleeping rooms/meeting rooms ratio. A group that uses all of the hotel's sleeping rooms usually will be offered all of a hotel's meeting rooms. Using fifty percent of a hotel's sleeping rooms may mean that all of the hotel's meeting space may not be available to you. The reason for this is that if you were to use all of the hotel's meeting space and not all of its sleeping rooms, your use of all of the meeting space would hamper the hotel's ability to sell the other sleeping rooms. But be aware of hotels that have a disproportionate number of sleeping rooms to meeting space; they can present a lose-lose situation for you. If you use all the sleeping rooms in this type of hotel, there may not be enough breakouts or meeting space for your group. If you don't use a high percentage of the sleeping rooms, all the meeting rooms won't be available to you.
Special events. Entertainment and guest speakers open to the public in addition to conferees means additional revenue and publicity for the hotel.
Low cancellation history. Conferences with a history of few no-shows and cancellations make points with hotels.
A review of these points will help you determine the value of your conference, which is the key factor in negotiating an agreement.
Elements of an Agreement
Each hotel or meeting facility has its own contract requirements, and clients have certain requirements too. Most elements of the contract are standard. Following is a list of items commonly used in hotel contracts and agreements:
- Identification of Hotel and Group
- Name of hotel and address.
- Name of client and address.
- Client's contact person and title.
- Name of function or conference title.
- Official dates of meeting, arrival and departure dates plus early and late requirements.
- Anticipated number in attendance.
- Guest Room Commitment
Room block specifies the number and types of guest rooms reserved for your group by the hotel.
Sample Block Form
DAY SUNDAY MONDAY TUESDAY
DATES MAY 5 MAY 6 MAY 7
ROOMS SINGLES 100 200 200
DOUBLES 75 100 100
SUITES 3 5 3
TOTAL 178 305 303
- The cutoff date indicates the date up to which the hotel will hold the room block at the group rate. Usually, the hotel will continue to accept reservations at the group rate after the cutoff date on a space available basis; however, it is a negotiable point and it should be clarified in the contract.
- The reservation procedure contains all the details on how the hotel will handle reservations. The group may direct all attendees to make reservations with the hotel, the group may submit a rooming list, or the group may use printed reservation cards.
- Check-in and check-out times.
- Incidental and personal charges commonly are the responsibility of each guest except as otherwise directed in writing by the group. Be sure to identify key personnel such as speakers, staff, and VIPs whose charges may go on the master account.
- Complimentary rooms usually are offered by the hotel on a "one for 50" basis, that is, the 51st room is free. Be specific on how this will be calculated. It is to your group's advantage to have complimentary rooms calculated on a cumulative basis. That is, you should receive each complimentary room as the room pickup increases, calculated by adding all rooms booked by attendees for pre-conference, conference, and post-conference dates. Complimentary rooms should not be calculated based on only those nights with a pickup of 50 or more rooms. Additionally, hotels may offer complimentary or discounted staff and VIP rooms. Suites, room upgrades, complimentary cocktail receptions or coffee breaks, etc., can also be negotiated.
- A walking provision refers to the hotel's responsibility in the event that it fails to honor the reservation of any confirmed guest. It is not unreasonable for a group to demand free lodging at an equivalent or better hotel plus transportation for "bumped" attendees at the expense of the hotel. Other arrangements may be acceptable, such as free lodging one night and a return to the hotel on the second night.
- A room guarantee provision indicates the party responsible for room guarantees, the cancellation policy, and any special requests, such as holding rooms for late arrival beyond the hotel's normal cancellation time.
Rates, Fees, and Charges
Billing and Credit Arrangements
- Guest room rates are usually confirmed one year in advance. Agreements made further in advance may include a room rate of a certain percentage below the hotel's rack rates at the time of the conference.
- Rate caps provisions are important. They ensure that the conference room rates offered to you by the hotel will not be greater than the lowest rate offered through any other promotional packages during the conference dates, and they ensure the rates will not increase.
- The staff rooms provision indicates what has been negotiated for staff rooms, such as discounted rates or complimentary services. Be specific in stating the number of staff rooms required each night.
- A family plan indicates the hotel's policy on charges for children staying with parents. Many hotels offer no charge for children under 18 years of age when they stay in their parent's room.
- Pre-conference and post-conference rates indicate how many days before and after the conference the group rate applies.
- The gratuities provision indicates any special arrangements for gratuities for hotel services. Gratuities may be at the discretion of the guest, or agreements may indicate that the guest shall not provide gratuities for valet parking, bell persons, etc.
- Incidental charges indicates charges and fees for services such as parking, shuttles, and recreational facilities. Be sure that these charges do not exceed the "norm." The contract should specify current charges for fees that are paid by guests.
- Hotels usually establish a master account for a group subject to a review of creditworthiness. Should credit not be approved, other arrangements for advance payment will be made.
- Direct billing for the master account is usually established by completing a form that indicates the entity, address, and name and title of the contact person who will be responsible for payment.
- Master account authority indicates specific individuals authorized to make charges to the master account.
- Smart planners also include a daily review provision in which the group and the hotel each designate a representative to review charges to the master account at the end of each day or on the following day.
- The payment date provision indicates the timeframe, usually 30 days after receipt of invoice, in which the client shall pay for undisputed charges to the master account. When discrepancies or errors occur, the hotel usually re-bills the client and payment is made within another 30-day period.
- Payment of master account at check-out can provide discounts off your final bill. Inquire about this option.
- Credit cards are commonly requested at check-in for guests who will be responsible for their own incidentals or room charges. The agreement should indicate which credit cards will be accepted by the hotel.
- A function information sheet or function space assignment sheet will indicate a hotel's understanding of your meeting requirements. Hotels can only guarantee space for what you agree to, so be sure all your meeting requirements are addressed.
- Meeting room rental charges are negotiable. Charges, if any, should be spelled out in the original agreement. Specify room setup charges, if any, or charges to reset meeting rooms.
- Complimentary space and setup details are important to specify in the agreement to avoid any unexpected charges for room use or setups requested by the group. Complimentary pads, pencils, water, candy dishes, microphones, easels, blackboards, etc., should be included here. Any complimentary items should be noted in the contract.
- The agreement should specify all conference services provided by the hotel for which there is a cost to the group, i.e., electricians, security, exhibit table setups, resetting rooms, faxes, etc.
- The hotel's sign policy specifies what is and is not permitted and should be noted in the agreement. Usually hotels permit an easel or a special sign holder outside each function room and directional signs at stairways, elevators, and in the lobby.
- A reassignment of function space provision should state that the hotel shall not reassign any function space committed to the group without the group's prior approval.
- Final programs reflecting expected attendance figures and functions are required by hotels, usually two to six months in advance of the meeting date. Thereafter, hotels may release space not committed to use by the group after a notice of intent to release space is provided to the group.
Not all conferences require exhibit space. If your meeting includes an exposition, the following items should be included in your agreement:
- Assigned exhibit space. Include location and any limits on size, weight, types, or number of exhibits. It's an advantage to have an exhibit area in which food is served or sold, and to have open space between your exhibit and registration area and that of other hotel patrons.
- Charges for exhibit space. Exhibit space may be complimentary; it's negotiable.
- Setup and dismantle dates. Indicate the times your group will have access to the space for setup and the date and time for dismantling exhibits. Clearly state the times the exhibit areas may be open and when the area needs to be cleared.
- Utilities available. Include what's available (electricity, lighting, gas, compressed air, water, drains, etc.) and any charges or limitations.
- Storage and security. Include arrangements for storage, storage limitations, access to storage area, and security arrangements.
- Materials. Include specifications for who is responsible for getting materials to the exhibit space.
Frequently it is necessary to ship materials to the conference site in advance of the meeting. Your agreement should specify how materials should be packed and marked, to whom materials should be sent, and that such materials will be stored in a secured location.
The hotel should designate a specific person or persons who will handle meeting room setups, menu selections, audiovisual needs, sleeping room requirements, and all other aspects of the group's program. The agreement should have a date by which the designated person(s) will contact the group to review all the program needs.
Food and Beverage
- Specific functions should be listed, such as the number of breakfasts, lunches, dinners, coffee breaks, cocktail receptions, etc., that you plan to hold; the day and date for each function; and the estimated attendance for each function. Hotel policies will determine how many days in advance the group must give a minimum guarantee of the number of people who will attend each function. Hotels usually set for up to five percent over the guaranteed minimum; the specific percentage as directed by the group should be included in the agreement.
- Confirmed prices for all catered meals should be listed. At the minimum, a cap could be put on all food and beverage prices and exact charges could be provided to the group at an acceptable time in advance of the conference (three to nine months).
- State the date by which the group must specify choice of menus, beverages, etc., and confirmed prices.
- Gratuities or service charges required for all food and beverage should be stated.
- Federal, State, and local taxes should be clearly stated.
Americans With Disabilities Act Compliance
Hotels in the United States and its territories are required under the Americans With Disabilities Act (ADA) to make their facilities and services accessible to persons with disabilities. The agreement should state that the hotel shall comply with all public accommodations of the ADA, including TTY for hotel reservations.
The facility and the sponsor's group should agree that each will carry adequate liability and other insurance to protect against any claims arising from any activities conducted in the facility during the conference.
Post Conference Report
The hotel should agree to provide the group with a conference report before a certain date after the conference. The report should include room pickup; the number of singles/doubles, no shows, and cancellations; and food and beverage activity, including room service, restaurant usage, banquet functions, and other food and beverage functions.
All agreements should carry a cancellation policy for the protection of both parties. The following are suggested elements of a cancellation policy:
- Rights to Cancellation.
The agreement will bind each party, and there shall be no right of termination or right to cancel obligations under this agreement except as otherwise provided herein.
- Uncontrollable events.
The performance of this agreement by either party is subject to acts of God, war, government regulation, disaster, strikes, civil disorder, curtailment of transportation facilities, or other emergency making it inadvisable, illegal, or impossible to perform their obligations under this agreement. Either party may cancel this agreement for any one or more of such reasons upon written notice to the other party.
- One-year advance notice.
The group may cancel this agreement without liability provided written notice of cancellation is given to the hotel on or before (date one year in advance of conference).
In the event that the hotel will be undergoing any construction or renovation during the conference, the hotel shall promptly notify the group, and the group shall have the right to cancel this agreement without liability upon written notice to the hotel if, in the group's reasonable judgment, such construction or renovation may unreasonably affect the use of the facilities or the quality of service to be provided under this agreement.
- Management changes.
- Option 1: The hotel shall promptly notify the group if there is a change in hotel management prior to the conference, and the group shall have the right to cancel this agreement without liability upon written notice to the hotel.
- Option 2: Neither change of ownership of the hotel nor change of leadership of the group relieves either party of the responsibilities or obligations of this agreement.
- Without liability.
The phrase "without liability" wherever used in this agreement shall be deemed to include a refund by the hotel of all deposits and prepayments made by the group.
- Cancellation Fee.
Assessment and calculation.
In the event of any cancellation of this agreement by the group not otherwise permitted under this agreement, the group shall pay a cancellation fee, not a penalty, to the hotel. This fee shall be a percentage of the peak night's guest room revenue (peak night's room revenue equals the single rack rate less the group's discount multiplied by the number of rooms blocked for the peak night), according to the following schedule:
Notification of Cancellation Percentage of Peak Night's
Prior to Arrival Guest Room Revenue
090 days 100 percent
91180 days 75 percent
181270 days 50 percent
271364 days 25 percent
(The actual schedule you use may vary. Factors such as the size of the group may be taken into consideration.)
If the hotel is able to replace this canceled business, the collected amount will be reimbursed to the group, without interest. If only a percentage of the lost revenue is recovered, the difference between this figure and the fee will be reimbursed to the group. In determining whether or not the lost revenue is recouped, all peak night rooms sold after notice of cancellation is given shall be credited to the group. The terms of this section represent the exclusive remedy for unauthorized cancellation of this agreement by the group.
- Failure by the hotel.
Failure by the hotel to provide the space and/or services as agreed shall render the hotel liable to the group for all direct, indirect, and consequential damages, expenses, attorney fees, and costs incurred by the group on account of such failure. Exercise by the group of any of its rights of cancellation of this agreement shall not waive or otherwise affect this provision.
- Standard arbitration clause.
Any controversy or claim arising out of or relating to this agreement, or the breach thereof, that cannot be acceptably negotiated by both parties shall be settled by arbitration in accordance with the rules of the American Arbitration Association. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
By Hotel By Group
(signature required) (signature required)
Name of representative Name of representative