Russell Of Hotels

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What's Wrong With Hotel Contracts?

By Joan Eisenstodt
August 4, 2016

It’s August. It’s hot and humid. It’s "vacation time" and you’ll be reading this after both major U.S. political conventions. Why am I making people think?

But here’s the thing: recent conversations made me worry (even more than usual) about the state of our industry’s interest in understanding contracts and the risks faced by not knowing or preparing enough to sign or recommend signing contracts with hotels and other vendors.  

To complement a brief article (“Seven Keys to Hotel Contract Success”) in the August print and digital edition of Meetings Today, this blog, and the interview with two industry attorneys, Kelly Franklin Bagnall and Joshua Grimes, in the August edition of Friday With Joan, will, I hope, create greater awareness of the importance of preparing to and executing contracts (You might also read the July edition of Friday With Joan and the accompanying interviews with industry practitioners and attorneys about contentious issues being faced by the passage of state laws).

Why do I care so much about contracts?

I knew little about hotel and other contracts when I first became a meeting professional. That is, I had planned meetings and events but had not dealt with complex contracts. That was until I moved to D.C. in 1978 and even more when I started my business in 1981. Ultimately, in 1983 when a client canceled a meeting (that I’d not booked or advised on the contract) and they were sued as were my company and me, individually, my interest was piqued.

I’ve told that story before and will again each time I teach about contracts. What puzzles me is that there are still too many in the industry who don’t want to know more about contracts even when questions arise that result in disputes that go to litigation or arbitration.

Having learned from some great attorneys, I offer:

  1. I’m not a lawyer. This blog, the aforementioned article and the upcoming webinar are provided with the understanding that the writer and publication are not engaged in rendering legal, accounting or professional services through their distribution. If expert assistance is required, the services of a professional should be contracted.
  2. The opinions expressed are those of the author and may not express the views of the owner or publisher of these vehicles.
  3. Disclaimer: I have testified as an expert witness for Kelly Bagnall’s clients, and she and I have presented together at ExhibitorLive and for other groups.
  4. I know that there are areas of contracts covered by law that do not have to be included in contracts. If the specific conditions are not spelled out, it’s likely someone will assume something, the originators or signers of the contract will be gone before the execution of the meeting or no one can comfortably interpret the meaning. I’d rather spell it all out.

Reading Agility

How well do you read and dissect contract language? Here’s an exercise I use in classes at UNCC and elsewhere when I teach the business case about contracts. Read the following clauses, the first taken from a corporate hotel contract template, and figure out what might be unclear or questionable.

Room rates are quoted [elsewhere the specific rates are stated] exclusive of applicable state and local taxes (which are currently 13% + $3 per room per night) or applicable service, or hotel specific fees in effect at the Hotel at the time of the meeting. 

Did you figure out what was unclear or questionable? Tune in to the August 31 Meetings Today webinar, “Contracts: Accommodations” to learn the answer.

(If you think you know the answer, email me).

In addition, check out these clauses from signed contracts I was asked to review:

Should extensive meeting room setups or elaborate staging be required, there will be a setup charge to cover Hotel costs and additional labor.

My questions about this one simple sentence included:

  • What does the hotel consider "extensive meeting room setups" or "elaborate staging"?
  • What is the setup charge and what are the charges for additional labor? Who determines and when that these fees will be applied?
  • Are these charges taxed?
  • Is there a service charge and/or administrative fee on the charge?

The following special considerations are extended by the [Hotel Name] for Group based upon 85% fulfillment of your Room Block usage. [Note that elsewhere in the contract, the rate is stated.]

  1.  25 Staff rooms at 50% off confirmed group rate of $215.00. 
  2.  1 Complimentary Presidential Suite.
  3.  Additional staff rated rooms at a reduced rate of $199.00 per room.
  4.  15 roundtrip Sedan transfers.
  5.  Complimentary coffee and soft drinks for Staff Office.

Some of the questions to ask about No. 4:

  • How many people will each transfer accommodate?
  • From what point to what point(s) may the transfers be used? (Even if you assume—which you won’t again!—that use is from an airport and to the hotel, what if it’s an area like L.A., D.C., or New York, with multiple airports? Or if you want to use the transfers between a train station and the hotel? Or around town?).
  • For what dates may we use these transfers?
  • Who owns the sedan(s) and employs the driver(s)?

Starting questions to ask about No. 5:

  • On what days will this service be available? For how many people or in what quantities?
  • Will the coffee include condiments (cream and/or milk? Sweeteners and if so what kind?) and cups and saucers? “To go” cups? Will tea and decaf be included?
  • How often will this service be refreshed?
  • What soft drinks will be available? In what way will they be kept cold? Will the containers be recyclable?

You get the idea, right? There is lack of specificity in many contracts that planners sign or recommend be signed in the interest of time. Those signatures can be costly when questions aren’t asked and clarification is missing.

During the 8/31 webinar, we’ll review numbers 1, 2 and 3 and show some of the question to ask on other areas of guest room accommodations. I bet, though, that now that you’ve begun this process, you can begin to “q-storm" questions on these and on contracts you’re reviewing.

I recommend you:

  1. Write thorough RFPs and request that hotels address each point in their proposals.
  2. Read the proposal or contract sent by the hotel.
  3. Read it again out loud. Then again. Listen to the content—note what’s there and what’s missing.
  4. Ask clarifying questions and include, in writing, as much information as reasonable. When asked how long a contract should be and told by some they think a 10 page contract is too long, I say this: Contracts should be as long as needed to include the conditions and specifications to ensure that whomever executes the meeting, you or someone else, knows the intent and agreed to conditions.
  5. Don’t rush to sign. Hotels threaten lots of things especially at year or quarter end if a contract is not signed. After a contract is signed, it will be much tougher to change any language or conditions.
  6. One document versus a contract plus addendum. Yes, I know many use their own addendum with an hotel’s contract. In talking with industry attorneys, and in my experience of seeing conflicting language between different documents and in the world where computers make it easy, create one document.

Finally, here are some relevant links related to this blog post:

As always the views expressed are my own and may not reflect those of the publisher, Stamats, and the publication, Meetings Today.

 

Russell L Edmond