Negotiation and Contracts
Never Negotiate With Just One Property
By D. Benson Tesdahl, Esq.
June 24, 2010
I learned a long time ago that you should never buy a car from the first car dealer you visit, even if the dealer has exactly the car you want and even if the dealer swears that he or she has the best price. Instead, it always pays to shop around and get competing prices from different dealers until you eventually have dealers competing against each other for your business, with each willing to lower his or her price to beat the other. Every time I have done so, I have always saved a ton of money, even though the process does take a lot more effort.
Many people use the above technique when it comes to shopping for a $30,000 car, and yet ironically, they foolishly abandon the technique and deal with only one property when shopping for a place to hold their next $300,000 meeting. If your organization is one that tends to set its sights on one property and negotiate only with that property, then you are making a huge mistake right off the bat.
No Hotel Is Vastly Better Than Its CompetitorsDespite what many hotels would have you believe, and despite what even some consumers may think, there is not a lot of difference between similarly-priced hotels in the same regions of the country. Competition and the laws of supply and demand have helped to ensure that for every three, four or five star hotel in San Diego, Las Vegas and Miami, there are at least a handful of other hotels of equal stature within a reasonable distance of each other in those same markets. And give or take a little, they all have essentially the same beds, the same sunshine on the patio, and the same over-priced “umbrella drinks” in the lounge.
Groups often forget this basic rule and become enamored with one property, which puts them in a weak position during contract negotiations. The reason is that if a hotel knows that your group has its heart set on having a meeting at only that facility, and if the hotel also knows that you do not have bids from other competing properties, the hotel has no incentive to give you the best deal possible. After all, why should any resort give you a price break on anything when you have already admitted that you have no intentions of shopping around?
Seek Bids Often and EarlyDespite the disadvantages of dealing with just one property, I find that time and time again, organizations make the mistake of seeking a single bid from a desired property. To make matters worse, groups often engage in leisurely negotiations with that one property until they let so much time pass that they eventually have no choice but to sign whatever contract that hotel shoves in front of them. Even when the hotel’s contract terms are totally unreasonable, it is often too late to “walk away” and start the entire process over with another property.
To avoid that problem, it is always best to simultaneous seek bids from at least three properties well in advance of your event (including sometimes comparing properties in different parts of the country). It is also important to keep all of those properties in play until the very last minute and to let each property know that you are entertaining bids from others. Only in that way can you be assured of getting the best combination of room price, concessions, and other contract provisions. And if one of the properties won’t budge on an unreasonable contract term, you can threaten to “walk away” and actually back up that threat by doing so because you have bids from other properties to fall back on.
The goal of the above process is not to be mean-spirited or disingenuous. Rather, the goal is the same goal you would have when buying a car or making any other major purchase, which is to let the merchant know that you an educated consumer, that you are shopping around for the best overall price and contract terms, and that you realize that all of the parties from whom you have received bids are selling what you consider to be an identical product. Consequently, you are not going to let some sales pitch about the grandeur of the ballroom or the fame of the nearby golf course cause you to sign a bad contract with potentially disastrous attrition and cancellation terms.
Ben Tesdahl, Esq. is an attorney concentrating in nonprofit, corporate, tax and contract law, including meeting and convention law. He is with the law firm of Powers, Pyles, Sutter & Verville, P.C. in Washington, D.C. He can be reached at 202-466-6550 or at ben.tesdahl@ppsv.com.