Daily Struggles in Advanced Contracting

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By Michelle Hilsabeck, Heartland Chapter

Advanced contracting is an issue Meeting Professionals struggle with daily. Contract language and addenda flood desks and minds. What would be acceptable for both entities? How can these clauses possibly help to protect the company? And most importantly, what exactly does this clause mean? To help answer these questions, Mr. Rudner had four main points which helped to shed some light on these and other issues surrounding some of the most commonly questioned clauses.

Clause 1 - Change of Management and/or Ownership of a Venue

When encountered with this clause, the No. 1 question a supplier would want to ask is: "What is the true concern of the planner?" Is it the brand's "Points" Program? Is it the service standards at the property? After that, key information is uncovered, which is what both parties would want to address. 

Clause 2 - Renovation Concerns

When faced with a client asking for a clause that guarantees renovations will not occur during the time of their event, one's best bet is to enlist the assistance of the general contractor performing the project. A venue cannot control the speed of a project, nor can a planner know exactly what elements of the project could be disruptive. The general contractor has the most accurate information regarding all projects and can make such a determination.

Clause 3 - Non-Compete Clause

Non-compete clauses are generally paired with clauses containing verbiage regarding confidentiality and keeping the information discussed in the meeting room, contained to the meeting room. Issues with non-compete clauses are numerous, particularly in dealing with a hotel. A properly constructed non-compete clause should be explicit in identifying the competitors of the contracting company.

Clause 4 - Liquidated Damages

Liquidated Damages are legally defined as a reasonable and prospective estimate of the hotel's loss. Based on the prospective (and not retrospective) estimate of loss, there is no legal requirement for a hotel to offer a Rooms Resold Clause, as that would be retrospective. Frequently, the hotel will be accused of double-dipping when it chooses to offer a Rooms Resold Clause. Mr. Rudner likened Rooms Resold to foreclosure. Should a default on a home loan occur, and a home be repossessed by a bank, that lender will not offer back the money paid prior to the default. Additionally, if a contract contains a cancellation clause with a sliding scale of damages due, the concept of Rooms Resold has already been considered as the hotel has offered the prospective estimate of loss.

Mr. Rudner closed, after touching on three other "Hot Spots":

1. Reciprocal Cancellation Clauses are unenforceable in the eyes of the law. Losses cannot be the same for each entity because the nuances of each entity's loss are not known.

2. Attrition Charges are based on the actualization of an event. Therefore, it is wise to have an estimation of the charges owed prior to the conclusion of an event, so that there can be early discussions around ways to help mitigate the cost. One idea to offset cost is to have the organization's CEO send an e-mail requiring attendees to register in order to help increase room nights. In addition, the organization can choose to spend more on catering revenue to offset the loss in attendees. By looking at attrition through a Dollar Sign set of glasses, as opposed to a Number of People set of glasses, more creative solutions can be obtained.

3. Finally, if asking to have cancellation/attrition charges applied to a future event, preparation should be made to do the following:

a. pay the entire amount due

b. have a completely new event that has not previously been held with the venue

c. contract that event to occur within a year

d. hold the event during a need-time for the venue

e. ensure the event is of equal or greater size to the original event

(Michelle is a Market Account Executive for Marriott Hotels and Resorts and is currently the VP of Education for the MPI Heartland Chapter. She can be reached at michelle.hilsabeck@marriott.com.)