How to Handle Hotel Negotiations in 2021

At long last, booking activity for meetings is on the upswing. More than 80 percent of respondents to Northstar Meetings Group’s latest PULSE Survey will hold their next in-person event sometime this year. As planners and suppliers get back to business after a year like no other, expect negotiations to be a bit different.

Covid has brought hardship and uncertainty to our business, and both sides are feeling it. There’s reason to be optimistic, but realism requires continued flexibility. Start with the premise that you both want to do business and remember that we’re all still learning as we go, sources advise.

“One of my favorite phrases right now is ‘assume good intent,’” says Tammy Routh, senior vice president of Marriott International’s global sales organization. “This is for all parties. Let’s work together to bring this industry back.” 

Following are insights and advice for negotiations in 2021.

Expect Softer Attrition Terms

The need to adjust and accommodate pertains to every facet of the process, Routh points out, from negotiation to booking and event logistics. But it’s particularly vital in contract negotiations. Planners generally want to see attrition charges reduced or even eliminated. 

The extent to which hotels will agree depends on the timing of the event and the destination market conditions — but it is happening.

“Venues have had to offer greater flexibility on cancellation and attrition terms, more than ever before,” notes Nathan Brooks, head of global hotel and supplier management at travel-management company CWT. “Customers are looking for 100 percent cost-avoidance in case Covid should impact future plans.”

And while hotels might not be willing let them off scot-free, planners are finding compromises, notes hospitality expert Bjorn Hanson, adjunct professor at the New York University Jonathan M. Tisch Center of Hospitality. Attrition clauses have returned, he says, but with some significant changes from pre­pandemic days.

“Before, it might have been 10 percent attrition where you’d start to see penalties,” Hanson says. “Now, anecdotally I’m hearing 40 percent attrition — and that’s not even being asked for, but just granted to start with. And those attrition dates, which might have previously started at three months out, then two months and one month, might now start at two months, followed by one month and two weeks.”

In some places, market pressures are driving more lenient terms. “It only takes one hotel in a market to start to offer those kinds of attractions to a meeting planner,” he adds. “And then the meeting planner says, ‘Well, we like your space better but I can’t put my organization at jeopardy by signing your attrition clause when I can get a more favorable one across the street.’ So competition seems to be driving this.”

Act Fast; Flexibility Won’t Last

Right now, while demand is low, hotels can be pretty flexible with attrition, rates and dates. But planners who expect flexible terms should book sooner rather than later, cautions Michael Dominguez, CEO of Associated Luxury Hotels International.

“It’s really important that meeting planners understand this: The environment is still extremely flexible in the early part of 2021 — and later in the year it will become a little more challenging,” he says. “Rising demand and meeting space compression are quite evident in the last half of 2021 and into 2022.”

Consider Covid Concerns

What happens if Covid-19 gathering restrictions ramp up? According to Lisa Messina, vice president of sales for Caesars Entertainment, there shouldn’t be a need to rewrite contracts or add clauses to address these clear-cut cases.

“Most hotel contracts have been written through the years to ensure both legal and business terms are fair and balanced,” Messina says. “The standard force majeure clause in most hotel contracts provided customers no-fee cancellation situations over the past year, since in many markets around the U.S. it was illegal, impossible or commercially impracticable to meet.”

That said, the situation wasn’t always so clear, points out hospitality attorney Jonathan T. Howe, founding partner of Howe & Hutton in Chicago and M&C’s longtime legal expert. For example, some planners cancelled just before gathering restrictions were mandated, which complicated matters. For that reason, some are adding clauses that address pandemic-related concerns in situations when regulations don’t expressly forbid gathering.

Revisit Cancellation Deadlines

Howe’s firm is advising clients to ask for a later cancellation deadline in their contracts, rather than adding those specific reasons for cancellation. “Why qualify exactly what it is that has to happen?” asks Howe. “Why limit yourself? The pandemic can affect so many related issues, such as whether or not a product is ready. Instead, 
be realistic about the date. When is the latest date by which you’ll need to make a decision about having your meeting?” Ask the hotel to waive the cancellation penalty before that date, he suggests.

Offer Deposits With Caveats

Last year, many hoteliers relaxed the need for planners to put money down to hold meeting space. “For a while it looked like deposits were going to be reduced or not required at all until much closer to the date of the event,” says Bjorn Hanson. “Now, deposits are back to being required as a normal practice — but with added date flexibility.”

It’s increasingly common, he says, for hotels to allow a deposit to be applied to a new date — just once — with no penalty. Some hotels are allowing planners to pick alternate dates at the time of booking, and offering to hold both dates. “Before the hotel commits to any other events at those times, they will come back and discuss with the planner how the first date is looking,” he adds.

Expect Reasonable Room Rates

In his September 2020 forecast, while he acknowledged the challenge in making predictions, Hanson projected a decrease of 20 to 25 percent in corporate and meeting hotel rates for 2021. Anecdotally, he’s now seeing rates that are all over the place — and that many planners are content with simply getting a good deal, vs. fighting for the best one.

“I’d say the meeting planners understand the business, they’re professionals and they know hotels are having a tough time,” says Hanson. “So I think room rates may not be quite as much discounted as I had forecasted back in September.” Overall, he added, planners have been getting favorable deals.

Review Safety Protocols 

Hotels are eager to tout Covid-specific health and safety plans, but planners shouldn’t hesitate to ask for more details from the properties they’re considering.

“Our customers want to have a clear understanding of the protocols in place,” says CWT’s Brooks. “They want to be reassured with the visibility of measures and be walked through the measures put in place for their specific meeting or event.”

Venues are happy to work with groups to satisfy their needs. “We hosted dedicated customer feedback sessions at the end of our events,” says Marriott’s Routh, referring to two large hybrid meetings the company hosted for planners. “We wanted to gather specific information to make sure we were on the right track, identify gaps and solicit ideas on how we can better support their needs. Based on their input, we launched optional health protocols, including Covid-19 testing for meeting professionals, earlier this year."

”Most hotel-brand safety and sanitation standards are quite thorough, says Hanson of NYU. “But I think it’s gotten out that many hotels weren’t compliant with the brand standards,” he adds, “and the brands weren’t very rigorous with enforcement. So a common provision planners have just started writing into their agreements is that the hotel will comply with brand standards, or a local standard, whichever is more rigorous.”

On the plus side, Hanson points out, many hotels are going beyond their basic standard requirements, such as the ubiquitous hand-sanitizer stations, to offer various kinds of personal protection equipment, like multiple types of face masks and even face shields. “If it’s a health conference, for example, they might want to appeal to the group by making these items available,” he says. “Plus, people may travel with one or two masks, but if it’s a three- or four-day event, not everyone may have brought a full supply with them.”

Reconsider Location Needs

When it comes to site selection, the pandemic is factoring into planner choice of destinations as well as the venues themselves, says Brooks of CWT, who confirms some trends. “We’ve seen an increase in the demand for secondary cities with venues that have great accessibility, so that delegates can travel by train or car to the less-busy locations,” he notes.

There’s more demand for buyouts, too. “Exclusive use of a venue is something most of our clients hardly ever considered or budgeted for pre-Covid,” Brooks says. “Now they have to consider it as a result of the regulations.”

Share Program Changes

Hoteliers want to know how planners’ needs and priorities have changed, and they want to ensure that’s reflected in the RFPs they're sending.

“We’re ready to accommodate any type of request,” says Agathe Fabron, Accor’s vice president of business travel, and meetings and events. “What we’re looking for from the client is any information they have regarding changes in their travel policy, and how their current budget forecast will impact their hospitality spending.”

Hoteliers will be flexible but they need to know your priorities. “Flexibility doesn’t mean that we accept any conditions requested by our clients,” she adds. “We take into account what they’re facing and we try to find those win-win solutions.”

Don’t Harp on History

Caesars’ Messina asks that planners be realistic in their expectations and frame their business accordingly. “It is highly unlikely in most industries that what the customer consumed in actual room nights, and food and beverage in 2019 will be the same for the next one to two years of events,” she says. “Customers sending out new RFPs for future dates should be more focused on accurate forecasting and contracting to avoid issues with fees tied to attrition and/or missing food-and-beverage minimums for future meetings.”

As always, the better a planner understands their audience, the more enticing a business case they’ll be able to make to the venue. This is especially true now, when presenting past meetings data simply won’t mean as much as understanding the needs of potential attendees in the current climate.

“Hotels really want to see that an event planner has had a thorough conversation around the purpose and probability of the event taking place,” adds CWT’s Brooks. “Information such as the delegate demographic and their expectations around pricing and the key priorities such as location, flexibility and price does help greatly,” he adds. More than ever, venues want to know that you’ve done your homework.

Maintain the Collaborative Spirit

An unprecedented amount of cooperation has occurred throughout the meetings industry over the past year, as competitors have become collaborators for the greater good. Now, as business starts to get back on the books and demand begins to form for later in 2021, it’s important we maintain that mutually supportive spirit, says Dominguez of ALHI. “There needs to be a very collaborative discussion around needs, challenges and observations with hotel partners,” he explains, “so that they can serve as the solution provider they always have in the past.”

So far, says Hanson, that spirit has continued in negotiations. These aren’t the typical “give me your dates, budget and references” dealings. “There’s much more of a team discussion happening now,” he says. “It’s about working together and following up frequently. I’m hearing that these are the best working relationships ever.”

Watch Out for Cost Creep

Room rates are favorable, but keep a lookout for higher prices creeping into other areas. Based on preliminary analyses by Bjorn Hanson, costs have been trending upward in the following areas.

Audiovisual services 
A/V commissions have risen at many hotels, sometimes doubling the cost of packages. “For planners who are putting together events right now, what may have previously been a $3,000 A/V package is now a $5,000 A/V package,” he reports.

Food and beverage 
Pricing has increased as much as 25 to 50 percent. While these hikes aren’t universal across suppliers, Hanson says they’ve become common. Hotels point to the need for more handling, packaging and staffing around food service, given new sanitation requirements. At the same time, group menus have become more limited in choices to address safety and weaker demand.

Water stations 
Covid-related safety measures require that hotels provide staff for these stations, invest in touchless water dispensers or both.

Other line items
Often negotiated as concessions in the past, some services might no longer exist, such as valet parking or coat check. Meanwhile, substitute services, such as self-parking or unmanned coat racks, might have different pricing models now. You might even see a charge for the space that has to be set aside for distanced coat racks, says Hanson. Planners should expect to see new pricing models emerge, and make sure they are part of the discussion.