From staffing shortages and government-induced disruptions to attrition clauses and more, Tyra Warner, Esq., PhD (MPI North Florida Chapter), department chair of hospitality, tourism and culinary arts at the College of Coastal Georgia, shares contract and negotiation insights ahead of her sessions at MPI’s World Education Congress (WEC), June 2-4 in San Antonio.
Can you share a key trend in contracting and negotiation about which event professionals need to be aware/cautious?
A recent trend in contracting and negotiating is anticipating the impacts of government actions and making sure they are addressed in the contract. Minneapolis saw many cancellations during the U.S. Immigration and Customs Enforcement (ICE) surge and protests there. The defunding of government agencies has had an impact on many meetings. Government shutdowns, both full and partial, are having an impact on travel and meetings.
Whether these things rise to a force majeure depends on (a) the language in the force majeure clause and (b) the specific facts of the situation. People are revising their force majeure clauses to make force majeure situations broader than “government regulations” and sometimes putting in separate clauses addressing government funding or travel bans.
What clauses, if any, are planners and/or suppliers increasingly adding to their contracts? What’s driving the inclusion of those?
I am seeing more and more planners adding language about staff shortages. There continue to be staff shortages at hotels because of the mass exit of workers during the pandemic but also because many hotel staff, including those who are in the country legally, are concerned about ICE actions. I see planners seeking assurances from hotels that staffing will be at reasonable levels and, if not, then management will fill in the gaps. I always encourage planners to use a neutral third-party source to define “reasonable staffing levels” like the study materials for the CMP.
What’s a contract mistake you see planners or suppliers repeatedly make that ends up costing them real money? How can they avoid that?
Not reviewing or negotiating the attrition clause fully. There are so many minor changes that can be made to an attrition clause that can cost the planner significantly, such as the following.
- Ensure attrition is based on room block pick-up on a cumulative basis instead of a nightly basis.
- Ensure damages are based on lost profits (not lost revenue).
- Ensure the room block is reasonable for current times (not just based on history) and adding in review dates for when the block can be decreased (or sometimes increased) without liability.
- Ensure the group gets credit for any resold rooms.
Tyra Warner’s education sessions at WEC
June 3
11:30 a.m.-12:15 p.m.
Mastering RFPs, Contracts & Negotiations3:15-4 p.m.
Understanding Difficult Contract Clauses - The Big 3June 4
11:15-11:45 a.m.
Handling the Unexpected: Legal Scenarios
Are planners actually negotiating contracts or mostly accepting the terms hotels put in front of them?
I think most professional planners are actually negotiating contracts. Some volunteer planners—such as some in the SMERF market—may just sign what’s put in front of them. Professional planners, I think, are aware of the importance of apportioning risk between the parties. There’s an understanding that the party that drafts the contract (usually the supplier) will draft it in their favor and the contract needs to be reviewed and negotiated to make it more balanced.
How, if at all, has the balance of risk between planners and suppliers changed in recent years?
I don’t know that the risk itself has changed, but as mentioned above, the apportioning of risk has become a significant focus of contract negotiations. Suppliers seem to be working harder to minimize their (very real) risks and negotiations have become tougher, even with good partners.
What’s one sentence every planner should say before signing a contract?
“If the worst happens, can we handle the consequences?” Planners need to be sure that their organization can handle the highest cancellation fees, highest attrition fees and worst-case liability. If not, they need to negotiate further. Long gone are the days when a group with a solid history could say, “I’ll sign this unfavorable attrition clause because we virtually never have attrition.” Times are too volatile and there are too many unanticipated effects on contracts.
