More meeting planners are employing their own customized hotel contract templates to create efficiencies and mitigate risk. Such leading corporations as Cisco, IBM, Bank of America, Morgan Stanley, Pfizer, Honeywell and AstraZeneca are taking a vigorous approach with hotel chains on standardized contracts, as are some smaller companies as well as associations.
Typically the standardized contract templates cover critical legal issues that don't change dramatically from meeting to meeting, including attrition, indemnification, renovations and insurance. The goal is for hotel companies to agree to one set of such terms that will apply to all meetings across their brands. More negotiable items, like rates for guestrooms and meeting space, and concessions such as comp rooms, are left open for discussion with individual properties.
Besides aiding efficiencies and lessening risk, other forces behind the trend include procurement departments' increased involvement in meetings purchasing, and heightened attention to meetings spending due to the federal Sarbanes-Oxley Act, increased corporate audits, and the federal government's new voluntary pharmaceutical guidelines.
"Contracts have always been a hot topic, but now everyone has to be really accountable, and that is making people pay attention to contracts," said industry attorney Tyra Hilliard, assistant professor at George Washington University in Washington and chairwoman of the Convention Industry Council's APEX contracts panel.
Large chains report running into a lot more of the standard contracts recently. In fact, Hilton Hotels Corp. has seen so many this year that the company added a salesperson to review them, said Larry Luteran, Hilton's vice president of group sales and industry relations in Washington.
"It's really a customer-driven trend," he said.
Standardized contracts are being pursued by different kinds of groups, said Luteran.
"We're seeing the desire for umbrella contracts across industries and market segments," he said, adding that the chain is willing to work with even small meeting buyers who present such contracts.
Observed Duane Keller, regional director of group sales for the Americas at Millennium Hotels and Resorts in Washington, "I think we will start seeing more of these standardized contracts as larger corporations make them part of their best practices. Trends like these usually start with the big companies and flow downward."
One corporation that's finding new success in standard contracts is Cisco Systems, in San Jose, Calif.
"We have a contract template for hotels that we created with the help of our risk management and legal departments, and because we included those departments in the creation of the document, we don't have to run anything by them when we create new agreements with hotels," said Michele Snock, manager, global meetings services-Americas. "We are working with each of the major chains we use to create umbrella agreements. We hope to have agreements with seven different chains."
Cisco's standardized contracts will expedite contracting, but Snock noted that some negotiation will still be necessary.
"The concessions, the dates and rates are always going to change," she said. "But we do know that the legal clauses should be the same for every meeting."
The contracts will be used for both large and small meetings, she added.
Although the contracts Snock negotiates with the hotels' corporate officers won't be legally binding for franchisees, she said, "at least it's a starting point. It'll be less work than having to go through the contracting process with every venue."
Likewise, Morristown, N.J.-based Honeywell is doing well with standardized hotel contracts.
"We already had chain-wide agreements in place for every major chain, but now we have templates covering contracts with hotels for every kind of meeting we do," said Kari Knoll Kessler, the company's global manager of meetings and events, and co-chairwoman of the Groups & Meetings Committee for the National Business Travel Association.
"One advantage the templates bring is that one person can handle a larger volume of meetings, while also presenting a more unified presence to the supplier base," said Kessler. "It's a switch in how it's traditionally been done, and I'm sure it's very challenging for all the hotel companies that now have to deal with these new templates. But the standard contracts allow for more efficient processes from a corporate perspective.
"When you are working from the hotel contract, remember that it is written up to protect the hotel. It's fairly common to get fairly one-sided indemnification and performance clauses."
Stepping It Up
Other organizations that have used their own hotel contracts for a long time are now taking a more rigorous approach to standardization.
"Even though we've employed standardized contracts for 20 years, I don't think they had as wide an application for our meeting planners before," said Michael Payne, executive vice president for the association management company Smith Bucklin in Washington.
A big benefit of increased standardization is the time saved.
"There is still a lot of short-term meetings business, so you see suppliers and planners working to expedite contracting to focus on logistics and execution," said Anne Hamilton-Chehab, vice president at Disney Hotels and Resorts in Orlando.
"The contract review can be going on at the same time as looking at availability and space. Standard contracts cut the time of the negotiation process tremendously because the terms and conditions have already been agreed to."
Not For Everyone
Still, not all planners feel it's necessary to create a custom hotel contract.
"I try to make small changes in the existing contracts," said Paul Aleskovsky, director of new media special projects at the Sporting Goods Manufacturers Association, North Palm Beach, Fla. "Most of the chain hotel contracts have gotten friendlier, in my opinion."
Customized contracts can actually take more time, according to Aleskovsky. "When you try to force your own contract on the big chains," he said, "it has to go through legal departments, which jams up the whole process. I know generally what can be done at the sales manager or vice president of sales level, and I try to work within those limits to save time."
And, cautioned industry attorney Jonathan Howe, senior partner of Howe and Hutton in Chicago, "Every meeting is unique, which means that one contract will not address all meetings. Form contracts can lull people into a sense of security which may be false and misleading."