March 01, 1998
Meetings & Conventions: Planner's Portfolio March 1998 Current Issue
March 1998 Jonathan HowePLANNER'S PORTFOLIO:

The Law & the Planner


How to Survive Hotel Consolidation

Contracts should protect planners against the pitfalls of flag changes

It's a challenge just keeping up with who's who and what's what in the rapidly changing hotel industry. Names few of us really knew before -- Starwood, Patriot American, Promus -- will soon be slipping off our tongues as easily as Hilton, Marriott and Hyatt.

What does consolidation mean for meeting professionals? Most anticipate dwindling negotiating opportunities and even harder times ahead. I beg to differ.

Having started my legal career addressing antitrust issues, my opinions are not based solely on optimism. Consolidation gives meeting professionals -- both buyers and sellers -- opportunities in terms of greater product variety, consistency in contract issues and better deals due to the ability to direct more meetings to a chain or even multiple brands under the same ownership (for example, Starwood controls both Westin and Sheraton).

True, with behemoths controlling the marketplace, competitive options may be limited and prices may increase accordingly. However, this could be offset by cost economies generated by reduced expenses in marketing, operations, overhead and the like.

The thing to remember is that this beat of acquisition will go on. For meeting professionals, that means taking some precautions so that if the hotel you've contracted with is snatched up by another chain before the event takes place, you're not starting from scratch with your contract -- or looking for a new venue altogether.


In today's market, the following basics should be in every hotel deal.

  • Know your rate. If you haven't been able to lock in a specific rate well in advance, your contract should specify a formula for calculating that rate, such as $100 multiplied by cost of living increases. Better yet, include a maximum rate (i.e., $100 multiplied by cost of living increases, but not to exceed $110).
  • Don't be outdone. Always try to negotiate what I call a "most-favored nation" clause. This guarantees that you have secured the most favorable rate given to any group meeting within the same time period. Even after a contract is signed based on a $100 rate, for instance, if another group contracts six months later for $95 a night during the same dates, your rate drops to $95.
  • Beware of rehabs.With new ownership, many hotels will be scheduled for a facelift. While that's great, it isn't so good if the jackhammers are at work during your conference. Include a contract provision requiring the property to give you notice of any remodeling that may occur in the hotel, even if it's not scheduled to happen during your meeting dates. Also require that the hotel keep you informed of how the work is progressing relative to the proposed completion schedule.

    These projects often run late; you want to have the right to get out of the contract if the construction may adversely impact your meeting. This would include the closing down of any hotel facilities, such as restaurants, swimming pools, spas or health clubs, since such amenities might be important to the success of your meeting. Also, you may want to require the hotel to assist in the relocation of the program to another facility, if that becomes necessary.

  • Have an out. Because of the changes in the industry today, the meeting professional should also insist upon a provision that allows cancellation without cost in the event of the sale of the property, a change in the management or the flag of the property, or any other activity that might interfere with the ability -- real or perceived -- to conduct the meeting. It may be that your CEO only stays at Ritz-Carltons, and if the property is no longer a Ritz, he'll simply insist on going elsewhere; under this clause, the reason doesn't matter.
  • Lock yourself in. You'll want the right to back out, but do you want the hotel to be able to kill your contract if there's an ownership change? Unless there is an "assumption of liabilities" in the deal, the new owner may not have any obligation to go forward with the meeting. Thus, be sure to include a provision in the contract that in the event of a sale, the new owner will be required, as a term and condition of the sale, to honor your contract. Without it, your only recourse will be to go after the original owner to recover damages -- but that won't give you a place to hold your meeting. *
  • Jonathan T. Howe, Esq., is a senior partner in the Chicago and Washington, D.C., law firm of Howe & Hutton, Ltd., which specializes in meetings, travel and hospitality law.

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