Have you ever found yourself planning an event at a hotel (maybe for an investor meeting, industry conference, or company holiday party), received the hotel’s long form agreement (with accompanying rules/policies), and wonder “where do I begin and what am I missing?” You are not alone.
Unfortunately, even experienced event planners can find these documents unwieldy and miss critical items that are hidden in “all that legalese.” Attorneys who are unfamiliar with these types of agreements and counterparties won’t know what is standard, negotiable, or missing altogether. Almost every hotel will require you to work off their form of agreement, so it is important to have an attorney who is familiar with hotel agreements and negotiating with various hotels.
While not intended to address every issue in hotel agreements, we hope this article will shed some light on a few of the key (yet often overlooked) terms that can have a significant economic impact on the parties. Hopefully, this will spark some points of discussion with your counsel the next time you find yourself working on a hotel agreement.
1. Attrition: When reserving guest rooms at a hotel in connection with an event, the hotel agreement will contain some flavor of attrition terms that are related to the room block. When hotel agreements are negotiated, the event may be many months away, so the exact number of guest rooms needed is often unclear. When booking, a group will want the hotel to set aside a minimum number of rooms based on its best guess for how many will be needed, but the hotel will require the group to guarantee a portion of those rooms even if they end up going unused. That guarantee (and the buffer between how many are set aside and how many are guaranteed) is determined through the attrition terms. Sometimes the attrition terms set forth a straightforward calculation based on a % of guest rooms in the room block (ex., if the parties agree to a 15% attrition figure, the group is on the hook to pay for 85% of the rooms in the room block, regardless if less are used), but other times the calculation can be quite opaque. Make sure you work through and really understand the calculations and negotiate for clear terms and appropriate percentages.
2. Cancellation: Although the cancelation terms receive a lot of attention by event planners and lawyers alike, they have some nuances that can go overlooked if not careful. First, the cancellation fee should not be a simple percentage of the total fees expected under the contract. Instead, there should be separate percentages attributed to guest room fees and to banquet expenses, with the guest room percentage being lower than the percentage for banquet expenses. Second, the cancellation fee should be on a sliding scale based on how close to the event the cancellation occurs (and having experienced counsel can really help guide you on what percentage is standard for each milestone listed). Finally, you should request to have the cancellation fee applied as a credit towards a future event you may host at the hotel. All three items are things that are usually missing from a hotel’s initial draft agreement, so having experienced counsel to help you identify and propose these changes is critical.
3. Disruption/Renovation: One item that is almost never addressed in a hotel’s standard agreement is what happens if the hotel undergoes renovations during the scheduled event or the event is disrupted by noise caused by the hotel. Wouldn’t it be awful if you booked a hotel based on its tranquil atmosphere or scenic views, and you find out two weeks before the event that half the building is under noisy construction and the scenic views are blocked by bulldozers and cranes? It would, so don’t get caught in that situation and protect yourself by having experienced counsel address potential disruptions and renovation in the hotel agreement. Negotiate for certain protections, such as requiring the hotel to help cover any additional costs incurred by having to move the event due to their disruption.
Hosting events can be stressful enough, so make sure your hotel agreements are thoroughly reviewed and negotiated to help reduce any unwelcome surprises. At GTX Legal, we have helped clients negotiate numerous hotel agreements with most of the major hotel companies and many premier boutique hotels for events large and small. We would welcome the opportunity to discuss your upcoming event and if we can be of assistance with your contract needs.
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