Sweet and Sour Contracts

Due to the economic recession, it has been a strong buyer's market for quite some time. Of course, a buyer's market never lasts forever, and once the economy begins to turn around and organizational meetings become steadily more frequent and robust, the laws of supply and demand will take over to swing things in favor of hotels and convention centers.

Just as the economy and housing prices tend to rebound unevenly in different regions of the country after a recession, hotel prices and contract terms also tend to fluctuate differently in various regions of the country as the economy improves. Consequently, a meeting planner may find that incredibly good deals are available in one city or region of the country that is still mired in a deep recession, while incredibly harsh terms may suddenly being demanded for those same meeting dates in a different city or region where an economic rebound has begun. This presents tremendous opportunities for astute meeting planners and tremendous pitfalls for those who do not read contracts carefully.

Sharp Regional Disparity

It appears that a dramatic disparity in contract terms is starting to show up from different regions of the country. For example, I recently saw an advertisement for a resort located in the eastern half of the United States in which the resort offered meeting planners a contract with no attrition clause (meaning that there is no penalty regardless of how little of the room block gets filled with attendees). Yet, at the same time that I saw that offer, a client sent me, for review, a contract from a hotel located in the western half of the United States with some of the harshest and most aggressive meeting contract clauses I have ever seen. In particular, there was a "force majeure clause" that made it nearly impossible to cancel the contract entirely. Some emergencies that most hotels would normally accept as warranting cancellation would not have been covered by this clause.

The eastern U.S. hotel is probably still feeling the pinch of the recession and therefore willing to offer incredibly generous terms to attract any business it can, while the western U.S. hotel apparently is seeing enough increase in business to believe that an economic rebound is afoot.

Read and Plan Carefully

As portions of the country continue to languish in a recession while other regions begin to rebound, meeting planners should keep their eyes open for any dramatic disparity in contract terms between different regions, cities, and individual hotels because these can present wonderful opportunities.

Remember, also, that the most legally dangerous contract clauses are often buried deep in the contract, so read the document very carefully.

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, DC. He can be reached at (202) 466-6550 or at ben.tesdahl@ppsv.com.

Originally published Nov. 1, 2010

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