A planner conducts a rigorous hotel site inspection, hammers out a contract, and signs on the dotted line. A month later, the hotel's ownership changes hands and there's talk of the new owner hiring a different management firm.
Can the planner get out of the contract? Is that even advisable, or should that buyer assume the hotel's key officials and service level will remain the same? If the hotel is just under consideration but no contract has been signed, should it be dropped from the short list? And can a hotel that's up for sale expect to win much group business?
These questions are under consideration all over the country, with properties being sold from a number of lodging-company portfolios. "It's a good time for hotel companies to sell," says Bjorn Hanson, global hospitality industry leader at Pricewaterhouse-Coopers. "The business community believes the hotel industry is doing well and is going to get even better in the next few years, so prices are up."
It's not just individual hotels that are being sold. According to a report issued by PwC in December, in 2004 there were more mergers and acquisitions of hotel companies or brands than any year since 1998, when M&A activity peaked at 25 deals totaling almost $35 billion. Last year, a total of 10 transactions worth about $12 billion took place.
Savvy planners report that the best way to prepare for an unexpected ownership change is to include a clause in each hotel contract that allows the group to move to another property if the meeting venue is sold or if it changes management.
After Kevin Jetton signed a contract with the Adam's Mark Dallas last fall for a 2006 meeting, an announcement came that the hotel company was planning to sell several properties. Jetton made sure that—should the need arise—his group would be able to get out of its obligation. He got the hotel to agree to add a contract clause addressing his group's rights in the event of a change in the hotel's ownership, management, or flag.
"I thought about the fact that the chain was shrinking, and wondered if I was going to have issues," says Jetton, president of GeniSys Consulting Services in San Antonio. "If the property gets rebranded, maybe menu prices will increase, or there will be service changes."
Plus, he notes, "Meeting attendees have different perceptions of every chain, and if a new brand steps in and it's seen as a cheesy company, that may encourage people to look elsewhere for their housing."