There is no doubt the recent COVID-19 pandemic has changed the world. The future of commerce is still unknown as we begin to open back up while staying safe.
However, as life often demonstrates, there are also benefits that come out of the crisis as well. One of these is that negotiations with hotel properties hosting meetings and events will be stronger. Krystal Gonzales is the VP of Sourcing and Supply Chain Management for leading global meeting strategists, American Meetings, Inc. She recently pulled back the veil on what this really means to those looking to plan live events in the next year.
AMI Digest: Tell me a bit about how hotel negotiations happened before the COVID pandemic.
KG: Previously, the main goal when negotiating with a hotel or venue revolved around the rate, availability, and terms and conditions that represented a financial liability for the client. Those clauses were actively challenged by hotels. Prior to this pandemic, we were in a market where hotels had increased demand that allowed them to be more conservative with their negotiations. It gave them the power to call the shots. Now, the switch has been flipped and hotels are being forced to be much more aggressive with concessions and flexible in their negotiations.
AMI Digest: Kind of like the switch between a seller’s and buyer’s market in real estate?
KG: Exactly. It makes it even more important for clients, those who want to host an event, to use a third-party agency that is familiar with negotiation and changing laws to protect their rights when booking. My first tip is to use an agency like American Meetings, Inc. Globally, we’ve worked with all major hotel chains and independent hotels and have spent millions in revenue dollars. This allows us to leverage our relationships and buying power for better rates and terms for our clients.
AMI Digest: Have any clauses been updated or adjusted due to COVID?
KG: Absolutely. One of them being Force Majeure. It allows a client or venue to cancel a contract with no penalty, due to acts of god/natural disasters. This clause is now likely to include the outbreak of disease, quarantine restrictions, epidemic, etc. amongst other verbiage that now exists because of the pandemic. Several hotel brands have already implemented these changes as they understand the concerns that their clients and travelers feel as we navigate this pandemic. Including these specific terms as part of the fundamental negotiations will become standard practice
AMI Digest: What other clauses or terms should clients be aware of?
KG: Another tip is to ask for No Attrition. This clause allows for the client to block a certain number of rooms without being held financially liable for the ones that were not booked/used during their event/program. This is especially important during these times as we face more travel restrictions and new quarantine orders that can affect the event’s attendance.
AMI Digest: That makes a lot of sense. What else should we know?
KG: Well, another clause that is recommended, and was critical for all customers who canceled major events in the last (and next) few months is a Rebook Clause. This allows the client to cancel their event regardless of the reason. and utilize the cancellation fees towards a future event within a specific period of time. Cancellation fees will still be owed to the hotel, but will not be lost. Those funds are applied towards the future meeting as a deposit or final balance.
AMI Digest: How are cancellation fees calculated?
KG: It is calculated based on a percentage of the total dollar value of the event. Cancellation Clauses will have several tiers with each tier representing a time frame and a percentage. The closer in time that the event cancellation is given to the hotel, the higher the percentage and penalty. For example, if you have an event where the combined contract value of the guestrooms and food and beverage minimum is $100,000, canceling 6 months out could have a 50% cancellation fee. At one month out, it could be as high as 90-100%. That means clients would have to pay $50k-$100k at the time of cancellation in fees. Without a Rebooking Clause, that full amount is paid for and lost. With a rebook clause they can apply all or a percentage of that cancellation towards a future meeting.
AMI Digest: Wow, ok, yes, that is high!
KG: Third-party providers know the verbiage and what to look for in these clauses to make sure these fees are avoided or minimized. Now with our COVID experience, it is more important than ever to have an agency negotiate contracts. The extra experience and knowledge are really invaluable. In our industry, hotels, and agencies understand the importance of partnership and both will put forth their best efforts into achieving a favorable outcome for our clients.
AMI Digest: You also mentioned new clauses that could be beneficial to add to contracts. Can you say more about that?
KG: There are several clauses that have emerged to ensure that hotels are following local laws and regulations and protect the client if they fail to do so. With these clauses, hotels and their brands are showing their commitment to the safety of the guests. An example is the Gathering Laws. These relate to the hotel venue being fully aware of what is happening with local/national laws, social distancing restrictions, and being able to comply with those. If they can’t accommodate, or won’t, the client can cancel the agreement without penalty.
AMI Digest: It’s clear to see that this is directly related to this pandemic.
KG: Yes, and it has been wonderful to see the way hotel chains have proactively adapted to the new expectation of the guest’s experience as we live through a time that prioritizes sanitation and cleanliness over a buffet display.
AMI Digest: Time will tell just how and what will be changing in the face of global recovery, health, and safety. Thank you for sharing your knowledge with us today!
If you are looking for a third-party negotiator for your next multi-day event, whether ten participants or thousands, AMI is here to negotiate the best terms for your success!