share
by By Jonathan T. Howe, Esq. | April 01, 2010

In last month's column, I responded to some questions we didn't get to during the recent M&C webcast on "Writing and Revising Contracts" (available for free at mcmag.com/webcasts). Here are some more.

Renegotiating Q. Is it reasonable to go back to a property with which you have an existing contract to say times have changed and this contract is no longer as favorable as it should be? Is the hotel obligated to let you renegotiate?

A. It never hurts to go back, but that doesn't mean you'll be successful in revising a contract that looked good when it was signed but is no longer right for you.

It is important to show why the other party would also benefit from renegotiating. Assuming that rates in the area and at the hotel have gone down, if your contract did not have a "most favored nation" clause guaranteeing you the best available rates, you are going to be in a difficult situation. Still, hotels want heads in beds. If your attendees are going to stay away because of the higher rate but would be enticed to book within the room block if the rate is more competitive, it is in the hotel's best interest to reduce the rate and provide other appropriate concessions. This happened a lot last year, and properties did all they could to help planners get their people to stay at the designated hotel.

Present your case in a calm and positive manner, explaining why renegotiation will help both parties.

Go InternationalQ. Does your advice regarding contracts generally apply to agreements with overseas properties as well?

A.
Offshore events and their contracts are always different from what we are used to in the United States. One of the key elements is to recognize that the negotiating stance in South America, Europe or Asia will be different. For example, we may have the misconception that mañana means "tomorrow." Years ago I was told by a sage lawyer from Costa Rica that mañana just means "not today." Thus, understanding the culture and the means by which you will be confronted in your negotiations are key to success.

In all cases when dealing with an offshore venue, consult with someone who has experience in that region.

On CancellationQ. If you cancel a contract, how can you find out if the hotel was able to resell the rooms and therefore owes money back to your group?

A.
One thing that is important, in discussing cancellation or attrition, is the requirement of mitigation and the ability to know what the "real" numbers are. Your contract should not only provide for the need to mitigate, but also the right to verify by reviewing internal hotel occupancy reports against rooms available for use.

With cancellation, mitigation would require the hotel to use its best commercial efforts to resell those rooms and to minimize the damages incurred as a result of the cancellation. In most cases, the closer you get to the date, the higher the cost to cancel will be. Obviously, you will not know the impact of the cancellation until the event's date has passed. It is wise, then, to have a provision that the cancellation fee will not be paid until after the event's date has passed and the appropriate cost has been calculated.

The hotel, on the other hand, probably will insist on full payment when you cancel, with the option to give credit back if warranted. Your contract should have a formula for calculating how rooms are credited. For instance, at a 1,000-room hotel where the planner had booked 600 rooms, the planner could get credit for six out of every 10 rooms sold, or 60 percent.