Connecting the Contractual Dots

The story of the $16 muffins that weren’t is well known, but there are other areas of meeting contracts open to misinterpretation by auditors, reporters, or politicians who may be scrutinizing those contracts for signs of waste or excessive luxury they can use against a company that held a meeting.

Contracts signed by meeting planners and hotels generally have three main areas of expenditure: hotel room costs, food and beverage, and meeting space rental. 

However, the fact that these three costs are in reality negotiated as one price—the overall cost of the meeting—is not often stated directly in the dry legal language. After all, the people who negotiated the contract know what they discussed. And thus, this is very often unclear to the uninitiated.

The area with the biggest potential for confusion is the fact that in many contracts with hotels and other venues, it is never clearly spelled out that food and beverage costs, the room rate, and the cost (or free use) of meeting and function space are directly connected. After all, they are separate clauses in the contract and separate items on the bill. 

“I suppose it's possible that the contracts could be improved a little bit to be clearer to the average Joe who's reading it as to exactly what saved you money what exactly what you got,” says D. Benson Tesdahl, an attorney with the Washington, D.C.-based firm Powers, Pyles, Sutter & Verville, P.C., whose specialties include meetings and convention law. “People who do this all the time know exactly what clauses to look for and it's not a mystery to them what kind of deal they're getting and how much they're saving. 

Here are a couple of clauses from old contracts supplied by Tesdahl that do a good job of connecting the dots. 

In this contract, the first clause clearly connects the food and beverage costs to the room rate the group is being charged. And the very next clause—not one several pages away—makes clear that the cost of F&B is not stated in the contract because prices haven’t been set yet, but that the group will not be paying more than other groups meeting at that time. 

Food and beverage prices and menu options will be established by the Hotel’s Catering & Convention Services Manager at least six months before your meeting. The prices for food and beverage (other than customized menus) will be our standard prices in effect at the time of your meeting. Food and beverage prices will be subject to a service charge and applicable sales tax. Final menus will be established by you and the Hotel’s Catering & Convention Services Manager in the signed Banquet Event Orders for each function.

This contract clause shows that the group’s meeting space is provided free or at a reduced rate based on the group filling as many rooms as it promised—although the contract it came from didn’t do as good a job connecting the food and beverage charges. 

In addition to free meeting space, hotels and planners often negotiate a number of extra incentives—generally termed “concessions”— based on the size of the overall room block and food and beverage package negotiated. Tesdahl notes that in this and most contracts, the “concessions tend to be stated as being based on filling a certain number of sleeping rooms, rather than based on buying a certain minimum of F&B, but it is really a package deal.”

It’s also worth noting that in this example the suite upgrade clause specifies that it include a reception space for at least 40 people. This makes clear to anyone auditing the contract that this is not just a luxury being provided to a bigwig, but rather an additional, free working space that will allow a top executive to entertain important clients and/or hold small meetings throughout the event.

 

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