Hotels and conference centers will go to great lengths in their contracts to lock organizations into a particular commitment, with harsh damages in the event of cancellation by the group. Recently, however, there has been a small but alarming trend in the opposite direction: hotels that cancel some or all of an event against the wishes of an organization. Most often, this arises in one of two ways; in both cases, planners who include relevant contract language can protect themselves and their organizations.
Because hoteliers cannot foresee the future and do not know who may want what meeting space when, they may be overly generous in offering space to the first group to come along, on the theory that it is better to lock in one happy client than it is to drive too hard of a bargain and possibly end up with no clients at all.
The trouble arises when a very small group books first and a much larger group comes along later wanting some or all of the same space for the same period of time. In some instances, hotels have been known to have their conference managers call the smaller group and tell them that some of their meeting space is no longer available "due to an overbooking problem." What many smaller groups never realize is that what really happened was intentional overbooking by the hotel so that it could give preference to a larger and more lucrative client at the smaller group's expense.
The standard hotel contract is usually silent on the liability of the hotel for failing to give you all of your promised space. It is your responsibility to ensure that the contract protects you as well as it does the hotel in the event of any party's cancellation.
Work in Progress
Another problem that can arise, especially for events booked far in advance, is a subsequent decision by a hotelier to undertake a major renovation during the time of your conference. In such cases, the hotel manager will call you and politely explain that your space will not be accessible on the date of your event. Of course, the hotel's manger will promise to "work with you" to find a compromise, but if the conference is close on the horizon, the only feasible solution may be to change the date of the event.
Even if you were savvy enough to think about construction issues when you negotiated the contract, the standard construction clause covers only what happens if your organization wants to cancel the event due to construction, but not vice versa. In this situation again, it is your responsibility to write in relevant contract language.
Solving the Problem
Planners must be proactive and insist on cancellation language that ensures that damages from hotel cancellation are reasonably measured and easily collected. One option is to add a "liquidated damages clause" to the contract that includes a set dollar amount that reasonably approximates the total damages the organization would suffer in the case of unauthorized complete cancellation by the hotel. Alternatively, most meeting contracts already have a sliding-scale cancellation penalty that the hotel will impose if the organization cancels at certain points in time, and that same clause could be made reciprocal to cover cancellation by the hotel as well. A much harder clause to draft is one to cover "partial cancellation" by the hotel, such as the hotel's last-minute failure to provide a key ballroom for an event, while still providing everything else in the contract.
With the help of a contracting expert and creative negotiations, you can resolve all these situations fairly and without resorting to costly arbitration or litigation.
Ben Tesdahl, Esq., is an attorney concentrating in nonprofit, corporate, tax, and contract 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 [email protected]
Originally published Jan. 01, 2007
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