Strategic Hotel & Contract Negotiations, Part 2 Presented by Robyn Mietkiewicz, CMP, CMM Director, Global Meeting Management Services Meeting Sites Resource Moderated by Tyler Davidson Chief Content Director Meetings Focus Wednesday, March 26, 2014
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Today s Speaker: Robyn Mietkiewicz, CMP, CMM Director, Global Meeting Management Services Meeting Sites Resource rmietkiewicz@meetingsites.net www.meetingsites.net @MSR_Global
Learning Objectives Understand why hotel contract risk reduction / cost containment has become an important value metric Review key hotel contract clauses and risk mitigation tips Know how to reduce, or eliminate, hotel fees and surcharges Discuss dispute resolution methods/hotel audit process Examine how to create a risk reduction/cost containment report, from your countersigned contract
Breaking Barriers Strategic Hotel & Contract Negotiations, Part 2 Presented By Robyn Mietkiewicz, CMP, CMM Director, Global Meeting Management Meeting Sites Resource @MSR_Global Meeting Sites Resource Confidential and Proprietary Information
State of the Industry Continued hot seller s market Increase in hotel fees and surcharges Challenging to book short term meetings Negotiations plan is essential to success Pro-active hotel contract negotiations strategy is a must Increased expectations by senior management for improved planner productivity and ROI Meeting planners focus on meeting value reporting SMM technology is critical to meeting consolidation and data management
Hotels Total Focus Is On Sleeping Room Block / Revenue biggest profit center at 77% gross profit Peak Night Pattern / Flexibility all hotels focus on pattern selling, by market Group Food & Beverage / Revenue second biggest profit center at 38% gross profit Room To Space Ratio hotels use meeting space to sell total group rooms inventory Ancillary Spending projected revenue for business center, AV, production, Internet, golf/spa, sponsored events / ICW revenue, etc. Meeting History 3 to 4 years Season / demand over your date(s) Other groups in-house / their revenue contributions
Hotel and Contract Negotiation Strategy Assure risk reduction and cost containment measures Enhance added meeting value and measurable cost savings Make mutual obligations and responsibilities perfectly clear Have an easy path and process for dispute resolution Achieve open and honest communications and negotiations
Create a Custom Master Hotel Contract Template / Amend For Each Meeting Include: All hotel contract components and clauses Value added concessions (must have vs. nice to have) Hotel fees and surcharges (eliminate or reduce) Performance clauses (do the math and calculate on profit, not revenue) Legal department liability language (indemnification, insurance, successors and assigns, dispute resolution / arbitration, etc.) Generate a cost savings / risk reduction report for each meeting (from countersigned contract)
Sleeping room attrition Guarantee a percentage of total room block, with no sliding scale Negotiate a cut-off date that works with your group history Add resell clause vs. liquidated damages In the event of damages, calculations on profit not revenue
Example GUEST ROOM REVENUE COMMITMENT We are relying on, and you agree to provide, a minimum dollar amount of guest room revenue (exclusive of food and beverage charges, meeting room rentals, and other non-room charges) equal to the number of room nights set forth above in Section 2 multiplied by your $ 359.00 room rate, exclusive of taxes. From the Effective Date until 14 days prior to your arrival, you may reduce your guest room revenue commitment by 10% PER NIGHT without charge. The balance equals your Room Revenue Commitment. If your Room Revenue Commitment is not met for reasons other than cancellation of your event, you will be charged for the difference between the Room Revenue Commitment and your actual guest room revenue plus all applicable taxes. The parties agree that the amounts described above are a fair and reasonable estimate of our damages resulting from non or partial use of the Room Block and that such amounts do not constitute a penalty. Under no circumstances may you transfer or resell your rights under this Agreement to any third party room reseller or broker for purposes of reselling unused rooms.
Meeting Cancellation Present performance clauses that are fair to organization and hotel Sliding scale damages and do the math Base damages calculations on profit, not revenue Include a mitigated damages / resell clause In the event of damages, apply percentage to a future meeting Advanced deposits / refundable or applied to damages
Food & Beverage Guarantee Verify F&B spend from last year s meeting Benchmark estimated F&B projection based on meeting agenda, number of attendees and average menu prices Hotel F&B guarantee does not include service charge and sales tax Contracted guarantee to include 20% allowable attrition 45 days out, assess your attendance and actual F&B spend
Published Rate Clause (No lower rates offered after contract is signed) Protects your company if meeting attendees make reservations around group room block (via Internet/discount web sites/telephone call in) No lower rates offered once the contract is signed (excluding airline and wholesale travel rates) If the individual is an attendee of the Group s meeting and has a documented reservation in-house at the hotel, regardless of the room rate, the Group will receive credit for attrition purposes.
Performance Clauses Fees/Surcharges Negotiate: eliminate or reduce hotel fees and surcharges Resort fee F&B Surcharges Early departure fee Maid / Bellman Parking Telephone / Internet access Health Club Meeting room rental / set-up charges (complimentary based on guaranteed room block / minimum F&B / no sliding scale)
Breach By Hotel Hotel is responsible to pay damages to your organization if they cancel or do not perform Hotel to pay all direct and indirect costs to relocate your meeting to another hotel and or city If the room rate is higher than your existing contracted rate, the hotel is to pay the difference. Hotel to pay expenses and costs relating to marketing materials and attendee communications Hotel liable for any legal or arbitration fees Planning organization to document all costs
No Walk/Relocation Walking confirmed reservations occur when hotel is oversold Relocation clause/financial responsibility if your guests are walked when hotel oversold Guest relocated to hotel of similar/better quality at hotel s expense Hotel to provide transportation / priority wait list to return / suite upgrade based on availability
Construction and Remodeling Does not allow hotel to conduct renovations that impact your meetings Hotel to notify group if any construction, maintenance, remodeling, repairs that may be in effect over your meeting/room block dates Group has right to cancel without penalty and/or receive compensation if construction, maintenance, appearance or noise affects meeting Group reserves right to request construction, maintenance, repairs to be stopped during their meeting dates (state specific meeting dates in contract) If group does cancel due to construction, maintenance and repairs, all deposits will be returned to group in full within 30 days
Force Majeure Allows company to cancel meeting based on factors out of your control Specific terms and conditions which either group or the hotel can cancel the meeting without financial responsibilities Events out of control of parties including but not limited to flood, earthquake, fire, war, terrorist attacks, World Health Organization (WHO) alerts, curtailment of transportation, labor strikes and government regulations Anything that makes it impracticable, illegal or impossible to perform If customer still elects to conduct meeting, no attrition, food and beverage guarantees apply
Value Added Concessions Prioritize for each meeting based on specific needs and meeting value Group rate honored 3 days prior & post meeting dates Complimentary / discounted food & beverage functions Discount on staff rooms Complimentary / discounted parking Complimentary rooms ratio / cumulative (start 1 Discount off printed banquet menus per 40) Daily complimentary continental breakfast / AM & PM breaks in staff room Complimentary suites Discount off printed AV prices Suite upgrades by category Waive / discount resort fee Club floor upgrades at group rate Complimentary entry to health / fitness club Complimentary/discounted hospitality suites VIP Transportation VIP in-room amenities Late check-out for VIPs / staff Discount off Master Account (for larger meetings or payment at departure) Complimentary signage outside each meeting room / meal function / speaker ready room No charge for signage, easels, tables, podiums, risers, lecterns, wastebaskets, recycle baskets Complimentary acceptance & storage of boxes / product / materials 3 days prior to meeting No early departure fees Complimentary / discount Internet fees
Liquidated Damages Liquidated Damages calls for a specific dollar amount or formula to calculate a specific dollar amount to be paid to the hotel in the event of non performance Cannot be excessive or could be deemed a penalty Must clearly state the formula or date(s) due Hotel is not obligated to resell rooms and credit the group
Mitigated Damages Mitigated Damages are the hotels responsibility to resell sleeping rooms, meeting space and contracted services to reduce or eliminate damages In the event of attrition or cancellation notify the hotel in writing Check contract performance dates to calculate damages amount After meeting dates, conduct a hotel audit to verify occupancy and number of rooms and services resold. Assure all resold rooms and services, regardless of rates are credit to your account
Hotel Audit In the event of performance damages, audit process includes: Request a hotel room inventory / occupancy report by night Verify how many rooms were resold (individual or group, regardless of room rate) Verify how many rooms by night were out of service due to renovation or repair If attendees made their own hotel reservations (versus rooms on master), provide hotel with an electronic registration list to cross reference against all in-house guests over the meeting dates Capture any pre or post room nights
Cost Savings Report, By Meeting Sleeping Room Rates Concessions F&B Comp / Discounts AV / Production Discounts Hotel Support Services Meeting Space / Set Up Fees (only for space intense meetings / multiple day set up / tear down) Internet Comp Discounts Hotel Fees & Surcharges (eliminate or reduce) Preferred Suppliers / Volume Buying Master Account Discounts (for larger meetings)
Meeting Consolidation / Leveraged Spend Name of Meeting Meeting Dates Hotel ABC Company MEETING ANALYSIS (2011-2013) Rooms Contracted Rooms Picked-up % +/- Actual Rooms Spend inclusive of tax Actual F&B Spend Total Room & F&B Spend Cost Savings 2011 Auto Lending Conference May 9 14, 2011 Marriott Newport Beach Hotel & Spa 410 378 92% $61,504 57,325 $118,829 $34,928.60 2011 Strategy Meeting Aug 24-26, 2011 2011 - East Coast Annual Auto Lending Users Conference 2012 Managers Meeting 2012 Las Vegas Conference 2012 - Auto Lending Users Conference 2012 - National Sales Meeting 2012 Councils Meeting 2013 Annual Lending Conference Sep 12-17, 2011 Jan 23-27, 2012 Jan 31, 2012 - Feb 7, 2012 May 14-19, 2012 June 26-30, 2012 Sep 24-28, 2012 May 19-25, 2013 Marriott Newport Beach Hotel & Spa Renaissance Arlington Capital Embassy Suites Ontario Airport Cosmopolitan Resort & Spa Westin Chicago River North St. Louis Airport Marriott The Cosmopolitan Las Vegas The Cosmopolitan Las Vegas 22 29 131.82% $5,191 $2,658 $7,849 $502.00 240 290 120.83% $58,837 $40,859 $99,696 $22,811 174 199 114.37% $21,691 $19,452.50 $41,144 $6,898 160 147 91.88% $32,018 NA $32,018 $5,081.25 599 566 94.49% $151,543 $88,000 $239,543 $98,030.95 384 345 89.84% $33,725 $53,076 $86,801 $30,107 150 118 79% $21,942.00 $14,140.00 $36,082.00 $4,276 803 747 93% $164,764.00 $50,000.00 $214,764.00 $23,965.50 TOTALS $551,215 $ 325,510.50 $876,726 $226,599.95 Average Cost Savings Per Meeting = $25,178.00
Key Risk Reduction / Cost Containment Components Recap Sleeping Room Rates Rate integrity process Value Added Concessions Prioritize for each meeting Published Rate Clause No lower group rates via website after contract signing Attrition Guarantee percentage of room block / no sliding scale fees / damages based on profit not revenue Cancellation Sliding scale damages on profit not revenue / resell / if damages, apply to future meetings F&B Guarantee Allowable attrition Hotel Fees & Surcharges Eliminate or reduce No Early Departure Fees Covered by Attrition
Key Risk Reduction / Cost Containment Components Recap Resell / Audit Resell / credit accountability, percentage of damages applied to future meeting Relocation Accountability when attendees walked Construction / Remodeling No construction or renovations over meeting dates that impact meeting, image, logistics, guest experience Unauthorized Changes Hotel not to change or alter contracted room block, meeting space, services without written approval Meeting & Event Space Complimentary / no sliding scale fees Force Majeure Termination without damages Breach By Hotel Failure to provide services as agreed render Hotel liable for direct & indirect damages Legal Department Language Indemnification, insurance, dispute resolution / arbitration, bankruptcy, successors & assigns, etc.
Plan and Think Before You Ink All hotel contracts are negotiable (plan and prioritize before you negotiate) A thorough and well designed contract is essential for a successful meeting Stay away from vague phrases such as ample, reasonable, to be assigned, appropriate, etc. All meeting and event space to be assigned by day (if a hotel will not assign specific space, they are not considered a candidate) There is no contract until both parties have signed the document Written changes on the contract with date and initials represent a counteroffer Discuss areas of dispute and counter offers in an open and honest manner Negotiate an option date to sign and return the contract In the event of changes to the meeting dates, room block, suites, meeting space or hotel services, create a hotel contract addendum, detailing changes and secure mutual signatures.
Thank You PLANNING RESOURCE: Hotel Contract Top Ten Tips Robyn Mietkiewicz, CMP, CMM Director, Global Meeting Management rmietkiewicz@meetingsites.net Meeting Sites Resource www.meetingsites.net Twitter: @RMietkiewicz
Questions? Robyn Mietkiewicz, CMP, CMM Director, Global Meeting Management Services Meeting Sites Resource rmietkiewicz@meetingsites.net Tyler Davidson Chief Content Director Meetings Focus tyler.davidson@meetingsfocus.com
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