Meetings & Conventions - Signature Deals - March
Tony PastorSignature Deals
Well beyond scrutinizing hotel contracts, these planners are
designing templates and addenda that put agreements in their own
By Cheryl-Anne Sturken
hen Tony Pastor, CMP, left law for meeting
planning, he had no idea how little his job would change. Pastor,
who worked as a public defender in Boston’s court system and in
private practice, joined New York City-based McKinsey & Co. in
1991. Now, as site and contract specialist for the consulting
powerhouse, he is responsible for reviewing and negotiating more
than 200 meeting contracts annually, representing hundreds of
thousands of dollars in meetings business.
For every hotel contract that crosses his desk, Pastor attaches
a standard seven-page addendum he compiled that outlines McKinsey’s
meeting needs. The document begins with strict must-haves, such as
a promise that the hotel will not book a McKinsey competitor during
the firm’s in-house dates and a 24-hour hold on all meeting space.
It goes on to present an all-out wish list of minor requests.
“It is not a slam-dunk approach for me,” says Pastor. “But I
won’t talk business without the addendum.” While there’s bound to
be some give and take, he adds, “No one has ever said to me, ‘We
won’t sign your addendum.’”
While a law degree is hardly a prerequisite for meeting
planning, it certainly helps. In fact, a number of firms designate
contract gurus like Pastor, who have a knack for translating
legalese and finessing a deal, to analyze every meeting contract
that comes through their offices.
These specialists are not just poring over the language; they’re
writing their own contract templates and addenda that spell out, in
their own words, exactly what the agreement entails.
And, they’re asking for a lot more than just a commitment to
deliver space, dates and rates. Heading up the list of concerns are
attrition, walked attendees, renovations, indemnification,
competitors and a host of other issues ranging from billing
deadlines to phone charges.
The trick to laying out a contract template or addendum, says
Pastor, is understanding one’s meeting needs so thoroughly that the
group’s priorities are part of the planner’s demands. All other
points become negotiable “wish list” items.
Of course, what works for one group will not necessarily work
for another. For example, while room pickup and concessions might
be critically important to an association, particularly a
nonprofit, a corporate group might be hung up on meeting room
security and room amenities. Still, says Pastor, “Think as broadly
as possible, because you don’t want to have to go back to the hotel
and ask to add a clause after you’ve submitted your contract.”
Don’t even think of compiling demands unless you know your
group’s history, stresses Lisa Despres, a purchasing manager for
Atlanta-based WorldTravel Meetings & Incentives, who handles
contract review for pharmaceutical giant Schering-Plough, based in
Kennilworth, N.J. Despres, who pores over more than 200 contracts a
year for her client, uses a two-page addendum developed with
Schering-Plough’s internal legal counsel.
“It is really important to know your group’s history, or you
won’t be able to really protect them,” says Despres. “I use the
addendum every time we review a hotel contract. And we will not
sign any contract on Schering-Plough’s behalf unless the addendum
A top concern of both planners and hoteliers and therefore
a key component to any contract template or addendum is attrition.
A good attrition clause should have all of the following
" Precise wording. Much can hinge on a word,
warns meetings lawyer James Goldberg of Washington, D.C.-based
Goldberg & Associates, who says the number of planners seeking
advice on drafting contract templates and addenda has increased as
hotels’ demands have skyrocketed. “Hotels are starting to use words
like ‘commitment’ and ‘guarantee’ in their attrition clauses,” says
Goldberg. “Planners need to be careful. Ask yourself, ‘Am I really
guaranteeing these rooms, or am I just promising my best effort to
" Review dates. Remember, room block is
directly tied to attrition. The tighter the room block pickup, the
less exposure to attrition. Include specific dates that allow for
review and adjustment of the room block, along with a final review
date. But be sure the dates are practical.
“Do not ask for the ability to reduce the room block by 50
percent six months out, when you won’t know how many people are
coming until three months out, because your brochure or marketing
for your meeting only goes out three months before the meeting,”
says Pastor. He suggests tying room block review dates to marketing
dates, when brochures, e-mails and faxes announcing the event go
out. These dates typically draw registrant responses. Says Pastor,
“Only after reviewing these dates can you put together an attrition
clause that makes sense for both parties.”
Peggy Pryor, CMP, director of meetings and conventions for the
Tulsa, Okla.-based Sweet Adelines International, a choral singing
group, insists on three review dates three years, 18 months and
nine months out for her citywide annuals that are booked five years
“The review dates allow me to respond to changing attendance
patterns based on the last three post-convention reports,” says
Pryor. “If attendance is waning, I can adjust the block with zero
penalty.” SAI’s contract template, which was created in 1998, is 20
" Margin of error. Deciding what percentage of
room block attrition to settle on means first determining what you
can live with and then being prepared to negotiate. “If you can’t
live with the 10 percent the hotel asks for, you must negotiate for
something better,” says John Foster, a meetings industry lawyer
with Atlanta-based Foster, Jensen & Gulley LLC.
Keep in mind, though, that what a hotel asks for is usually
reflective of its local market. The margin of error hotels will
allow in cities like San Francisco, New York and Las Vegas will be
relatively small during peak times.
After studying 10 years of Pi Sigma Epsilon’s meeting history,
Angelle Bujol, director of meetings for the Milwaukee-based
fraternity of sales and marketing professionals, determined the
group consistently met 85 percent of its room block. She decided to
play it smart and build in a buffer of protection. “My clause says
we will meet 80 percent,” she says. In other words, the contact
allows a 20 percent margin of error. “Hotels have been agreeable to
it,” adds Bujol.
" The formula. Spell out how attrition should
be calculated, advises Sherry DeLaGarza, meetings and conventions
manager for the Dallas-based International Nortel Networks Meridian
Users Group. DeLaGarza helped develop INNMUG’s two contract
templates (one for headquarters hotels and one for secondary
hotels), which the group rolled out in 1999. She goes for 20
“We say the 80 percent room pickup we agree to is to be
calculated on total meeting performance, not a per-night
performance,” adds DeLaGarza. “It seems to be working.”
DeLaGarza recently devised specific wording to protect INNMUG
after a vaguely worded clause left the association holding the bag
on attrition liability. “There was a lot of room for
interpretation,” she says. “Not in this one. Now everything is
Foster recommends planners include an in-depth formula asking
the hotel to separate total room inventory into sold rooms
(including rooms under repair, those being billed to other in-house
groups for no-shows, complimentary rooms and rooms held for
preferred customers) and unsold rooms. The group should be
responsible for either the number of unsold rooms in the hotel, at
a specified rate, or the number of unsold rooms in their block,
whichever is less.
" Tax trap. Many hotels ask planners to pay
taxes on attrition or cancellation fees. “Call the state’s
comptroller or your own chief financial officer to figure out
whether attrition is legally taxable in the hotel’s locale,” says
Pastor. “Don’t pay such taxes unless they are required by local
With cancellation clauses, the planner has to make a choice between
“actual damages” and “liquidated damages.” The decision depends on
the level of risk the group is willing to take, says Pastor.
“Don’t offer up any clause until you know where the hotel is
coming from,” he suggests. “Ask for a copy of the hotel’s standard
contract before you assess your cancellation strategy. They might
have a clause more lenient than you expected. Not likely these
days, but possible.”
" Actual damages. This includes unsold meals,
unsold rooms less resold rooms, food and beverage, as well as
projected lost revenue for the hotel on every ancillary outlet from
the gift shop to the golf shop. The main difficulty with actual
damages is, while the group’s liability is reduced if rooms are
resold, actual damages are hard to ascertain.
“If you want to take the risk, go for actual damages and hope
they resell,” says Pastor. “Just remember, if they don’t, you’re on
the hook for everything.” Pastor says he prefers liquidated
" Liquidated damages. The planner and supplier
mutually agree to a reasonable sliding scale of set dates and
dollar damages. For example, for a meeting scheduled for Dec. 1, if
the planner cancels by Jan. 1 of the same year, he pays $10,000; by
May 1, he pays $20,000; by Aug. 1, it’s $40,000, and so on.
“Liquidated damages gives planners a ceiling of what they can be
held liable for at certain points in time,” explains Pastor. “Most
planners tend to go for liquidated damages, because it takes the
guesswork out of liability.”
" Sensitive issues. Hoteliers generally are not
sympathetic to groups that cancel meetings citing moral or
political objections. Groups that feel strongly about particular
issues need to state so in the contract.
Last year, the Bloomington, Ind.-based Organization of American
Historians was slapped with a lawsuit by Adam’s Mark Hotels, which
claimed the group did not fulfill its meeting requirements. OAH
countersued, claiming a racial discrimination suit filed by the
Department of Justice against the chain (later dropped) made it
impossible for the group to meet at the chain’s St. Louis property.
That case is set to be tried this month.
The Adam’s Mark lawsuit, says OAH’s executive director Lee
Formwalt, was a wake-up call. “For the first time, we are making
certain there is a provision in our contract that allows us to
cancel, without penalty, for certain things such as discrimination
by a property,” he says. So far, according to Formwalt, supplier
response has been encouraging. Both the Memphis Marriott in
Tennessee and the Boston Marriott Copley Place have accepted the
group’s new clause for future meetings.
More hot buttons
Other concerns planners are addressing in contracts include walking
clauses, construction and indemnification.
" You walk, you pay. In 1998, Peggy Pryor of
Sweet Adelines got a hysterical call at 11:00 p.m. on the first
night of her group’s annual convention. The headquarters hotel had
taken 85 rooms out of her block, walking more than 100
While the hotel “did the right thing,” says Pryor, by
compensating the association and the walked attendees, there was
nothing in the contract binding it to do so. Pryor learned a
valuable lesson. “I want something that says what the hotel will
have to do for us if they cannot honor the room block they
committed to,” she says. “My contract now spells out exactly what I
For SAI, that includes a free first night, a room at the
original hotel on the second night, transportation between
properties, breakfast and even a phone call home for each person
walked. Bujol’s walk clause also specifies that only the meeting
planner can decide who in the group gets walked, if it comes to
that. “We have corporate sponsors we have to protect,” says
" Hold the construction. Sherry DeLaGarza has a
clause specifying zero construction while her group is in house.
And it has come in handy. In 1999, DeLaGarza arrived at her
headquarters hotel to find the lobby in the midst of a massive
“The entire place was torn up. It was horrible,” recounts
DeLaGarza, who immediately whipped out her contract. The result?
The entire stay for the group’s 16 board members had to be
“Visible construction has always been a big deal for us, because
we don’t want it to detract from our delegates’ experience,” says
DeLaGarza. “If we did not have that clause in our contract, they
probably would have said, ‘Have a coffee break on us.’ But we
immediately brought it to their attention, and they couldn’t back
Anne Carey, meetings manager for the Chicago-based Illinois
Podiatric Medical Association, wasn’t so lucky. A recent brush with
heavy construction at her meeting hotel has forced her to rework
her addendum. “I did not get any restitution, because we did not
have a construction clause in our contract,” says Carey. “I am
putting it in now.”
" Harmless for whom? For Eric McNulty, managing
director of conferences for Watertown, Mass.-based Harvard Business
School Publishing, a fair indemnification (a.k.a. “hold harmless”)
clause is a top concern. Too many hotels, he says, want him to
agree to a clause that protects only the property.
“They cannot ask me to indemnify them if they won’t do the same
for me,” says McNulty, who, with the help of Harvard’s legal
counsel, has begun to assemble an addendum. “If you want equal
protection, you have to demand it,” he says.
Lisa Despres plays hardball. “Our indemnification clause always
supercedes the one in the hotel contract,” she says.
“Schering-Plough requires it.”
" Check, please. Hotels are holding planners to
tighter deadlines in paying their bills. “We used to ask for 60
days to pay our bill,” says Despres. “Now they want it all in 30
days. I adjusted the addendum to say we must receive the final bill
in 5 to 10 business days, which gives me time to review it.”
GOTTA HAVE ITPlanners who proudly
would never sign an attrition clause, consider this: The only thing
worse than a badly worded attrition clause is a contract without
one, say industry lawyers.
Don’t be misled by the outcome of the 1997
lawsuit filed by Hyatt Hotels Corp. against the Women’s
International Bowling Congress of Milwaukee. The group failed to
pick up 100 percent of its 4,735-room block for a two-month-long
bowling tournament the previous year. The contract did not have an
attrition clause, and Hyatt sued.
“A simple clause stating the group was not
responsible for room pickup, and therefore could not guarantee
pickup, could have avoided that lawsuit,” says John Foster, a
meetings industry lawyer with Atlanta-based Foster, Jensen &
Gulley LLC, who successfully represented the WIBC. The
association’s win in no way suggests that the absence of an
attrition clause means planners are free and clear, Foster insists.
Other factors came into play in the WIBC case, he says.
When Angelle Bujol, director of meetings for Pi
Sigma Epsilon, a nonprofit fraternity for sales and marketing
professionals in Milwaukee, inherited a contract template from a
previous planner, it had no attrition clause. “I was getting
contracts from hotels asking me to agree to their attrition
clause.” Bujol immediately set to work writing one the group could
BEFORE YOU SIGN&Remember, a contract template
or addendum should
not be considered a rigid document. It is something to work from
during the negotiation process.
One size does not fit all. What might be an
absolute necessity for an annual meeting might not be an issue for
the board meeting. Be prepared to modify your list of “must haves”
Cross check. If using an addendum, be sure the
hotel’s contract does not contain any conflicting clauses. Cross
out those clauses the addendum supercedes, and write “see
addendum.” To avoid possible misunderstanding as to which clause
rules, both parties should initial anything that has been crossed
out in the contract.
Try again. If a hotel balks at a clause,
produce a fallback clause you can live with. But don’t offer up the
Plan B position until the hotel formally nixes your preferred
Say everything. Shorter does not mean better.
What you leave out can become a future lawsuit. Some issues that
tend to fall through the cracks include insurance, alcohol
liability, arbitration and changes in meeting space.
Hire a lawyer. It doesn’t pay to skimp on legal
fees. Have an attorney review the addendum or contract for correct
language, conflicting wording and liability loopholes.
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