The session "Contracting in Today's Economy" at last year's SGMP National Convention in Kansas City, MO, was presented by James Goldberg, an attorney with Goldberg & Associates, PLLC.
We are aware that all industries are facing challenges during the recent economic downturn. We have to become more creative in negotiating the best possible contract for our group, while providing the best services and accommodations. The lodging industry is now receptive to government meetings that in the past were not even considered. This is good news for government planners, but, we must be cautious.
2009 was the worst year in history for hotels. The industry reacted by aggressively reducing expenses, reducing food and beverage operating hours, closing floors or towers, eliminating free newspapers, and cutting rates. The upscale markets were hit the hardest.
Since the nature of the hotel industry has changed, many properties have owners that do not manage the hotels. Many have changed flags, or changed names. $40 billion in hotel mortgages are coming due in 2 years, and they have to sell their services in order to meet their obligations.
Needless to say, it is a good time to be a government meeting planner. Government meetings normally have better attendance and flexible dates. Therefore, there is a whole new world of upscale properties available to government planners.
While we all know a contract is an agreement between two or more parties that creates obligations for the parties, it does not have to be a formal written contract. Letters of agreement or a letter of intent is still a binding contract. Even an oral contract is binding, however, often parties have different recollections which can lead to disputes. The majority of the time standard contracts are used as a starting point. However, it is important to remember that everything in a contract is negotiable.
One of the most important aspects of the contract is to make sure you know who you are dealing with, i.e., owner or management company. Many hotels are owned by one party and managed by another. Ultimately you want to know who to sue if there is a problem. 95% of all hotel contracts are presented under the "flag" name of the hotel, not the true responsible party.
When reviewing a contract, there are clauses that should always be changed or stricken. Remember, hotel contracts are written by hotels, in favor of the hotel. Some important examples are mentioned below.
Many times contract clauses are so hard to understand you must have an attorney to interpret. Some of the clauses can just be stricken to avoid any confusion or misunderstandings should anything happen.
Force Majeure (Act of God) - if you cannot change it to include every possible emergency, then it should be stricken. It is an understanding and is not necessary to be in the contract.
Indemnification Clause - Indemnification clauses basically state that the hotel is not liable for anything and the group is liable for everything including incidents that may not even have anything to do with your group. You should either have a double indemnification/two separate clauses, one for the hotel and one for the group, or strike it all together. However, this may not be an issue if you are a government group.
Guest Data Clause should always be stricken.
"You will comply with all hotel rules and policies" statement should always be stricken from the contract.
Always review the contract for "hidden" fees. Watch out for surcharges, resort fees, master folio billing fees, automatic gratuity for housekeeping, fee for room audits, patch fee. These are just a sample of some "hidden" fees added by hotels. If you do not agree to them in the contract then you should not be liable.
And, last, always make sure the hotel sends back a signed copy of the contract for your files. You MUST have a contract signed by both parties to be a binding contract.