How to Evolve Hotel Contracts in the Era of Coronavirus

Meeting planners and hoteliers, both eager to get back to work, are desperately looking for the right way to do so. To paraphrase a former secretary of defense, what we know is there are many known unknowns. Somehow, we have to plan for them.

Meetings organizers are hoping for more flexible hotel contracts to help facilitate that process, according to the latest Pulse Survey results from Northstar Meetings Group. More than half (51 percent) think cancellation terms will be more flexible, while 29 percent expect no cancellation penalties at all. Hoteliers are acknowledging and responding to the sentiment. 

"We have been revising and reimagining various touch points of the meeting experience, from planning to execution, in an effort to address planners' current and future needs," says Asad Ahmed, Hyatt's senior vice president of commercial services for the Americas. "As such, we have taken steps to incorporate additional flexibility into our contractual terms to give planners more confidence... We are continuing to explore additional opportunities as the situation evolves, including adding language about pandemics into standard agreements."

Hilton and Accor, too, are considering more lenient terms. "We are fully committed to addressing the flexibility that customers need to navigate the current situation and to safely restore in-person meetings and events," says Frank Passanante, senior vice president of Hilton Worldwide Sales for the Americas. "With that in mind, it is incredibly important that we work with our event planner partners to understand and agree on shared objectives and then work together to achieve them," he adds. "Many of our hotels are positioned to utilize simplified meeting agreements and have introduced flexible contract language that addresses the issues of the day." 

Sweetening Contract Deals

Planners who are ready to book meetings for this year are likely to find favorable terms, as a growing number of hotel companies and destinations are offering limited-time promotions that promise flexibility, particularly with respect to attrition and cancellation penalties. 

But larger companies won't necessarily issue blanket deals that ease the terms. "As always, we aim to work with customers individually to create customized, innovative solutions to meet their specific needs," says Hilton's Passanante. 

Still, planners should be aware of these deals, even as reference points as negotiations begin. A few examples:

• Meet with Confidence from participating properties in the InterContinental Hotels Group is a zero-attrition, zero-cancellation penalty offer, which includes up to 5 percent off the master bill. The deal pertains to groups with 10 to 50 rooms on peak, and applies to meetings booked by Aug. 31 and held by Dec. 31, 2020. The offer must be mentioned at the time of the request for proposal directly on the IHG website, through an account manager or on an electronic-
  sourcing platform.
• Mandarin Oriental Hotel Group's Booking with Confidence deal, valid until Jan. 31, 2021, waives cancellation fees should government and travel guidelines cause the parties to cancel. (That clause could become more common. See "Massaging Force Majeure") Groups must have a minimum of 10 rooms for two nights or more, and the cancellation notice must be given at least 30 days in advance of the meeting date. 

Citywide Relief

In some cases, convention and visitor bureaus are establishing citywide deals. In Pittsburgh, the David L. Lawrence Convention Center and major hotels are offering incentives for meetings that will take place this year. Hotels won't levy attrition fees and the convention center won't charge additional rental fees for the extra space needed due to social-distancing guidelines. The facility will waive food-and-beverage minimums, as well.

"Since the onset of the COVID-19 pandemic, we have touted Pittsburgh's strength when our community works together," says Jerad Bachar, president and CEO of VisitPittsburgh. "Our job is to find ways to facilitate meetings and events safely and within global health standards." 

In Indianapolis, Visit Indy has partnered with 13 convention hotels to offer a zero-attrition deal for the remainder of this year for new meetings taking place in 2020. "There is obviously great uncertainty about how to conduct events this year, and our city, convention center and hotel partners wanted to help mitigate financial risks for our customers," says Leonard Hoops, president and CEO of Visit Indy. "Providing zero attrition for room blocks helps event professionals book with some peace of mind."

Raising Commissions

Global hospitality company Benchmark is offering flexible booking terms through a promotion that will extend through March 2021. Dubbed the Meeting Accelerator Program, the initiative addresses both monetary and safety concerns around meetings. The program's Zero Risk Clause stipulates that planners can make changes to guest-room counts and F&B until 60 days before the event without attrition or cancellation fees.

A full, one-time rebooking credit will be granted for any new meeting taking place between April 1 and Dec. 31, 2021, as long as the rebooked event is of equal or greater contracted revenue and takes place by the end of 2021.

Benchmark is also sweetening the deal for independent planners by bumping up commissions — from the company's standard 10 percent to 12 percent, with 7 percent distributed immediately upon booking.

Putting Concerns in the Contract

Whether or not planners are taking advantage of specific promotions, they should be assessing new contracts to reflect the changed world we are living in. 

"It's quite obvious now" that contract terms need to be revisited, says Jonathan Howe, Esq., founding partner of the law firm Howe & Hutton, who has been busy these past few months helping clients sort out rescheduled events and revised contracts. "It is necessary to add some new clauses for everybody's benefit — both the supplier and the buyer," he points out. "You need to outline how the game is going to be played." 

The first step toward an agreement, he says, is too often skipped: "Pick up the bloody phone and see what can be done," Howe says. Planners and hoteliers alike are in uncharted waters, and should join up to find solutions.

"You're in a partnership," he points out. "And a partnership is based upon the concept of sharing risk and reward. Right now, both sides are sharing a heck of a lot of risks. I want to try to minimize the extent to which that risk assumption is going to cause damage to either party or both parties."

Jordan D. Clark, CEO and managing partner of Face2Face Meetings & Incentives, chose to be proactive by developing a clause about new guidelines for gatherings, as well as modifying the force majeure clause (see sidebar, right) to cover pandemics, civil unrest and other concerns that could make it impossible to achieve a meeting's objectives. 

Anticipating challenges in future negotiations, Clark collaborated with Jennafer Ross, CEO of JR Global Events, and an industry attorney to develop new contract language. "Our experience told us we would be better leading the conversation about what we needed as opposed to being passive," he says. 

One result is a new clause, called "Gathering Laws, Guidelines and Regulations" (see "New Clause"), that addresses the shared responsibilities of complying with new safety and sanitation guidelines, restrictions on meeting size and other concerns. Clark has already signed several contracts that incorporate the new clauses.

"We knew that the scope of that shared responsibility is huge, and we needed to gain commitment from future partners that they would do their part to help everyone be successful," says Clark. "We also know that we are unable to see the future and what ordinances would change and how. Our responsibility is twofold: to protect our clients and to be a good partner to our vendors."