When negotiating, the collective wisdom always has been that the more of something you need, the better the price will be. This concept often lures meeting professionals into attempting to negotiate multiyear contracts, with the hopes they'll get a price break or some other advantage. Does it work? That depends on your objectives.
The Written Word
A multiyear contract is not much different than a single event agreement. What differs is that the term of the agreement is extended, and the basic terms can vary.
When negotiating multiyear contracts, some factors come into play that are not present when doing a one-time program. For instance, it is important to protect the integrity of both your performance and that of the other party. It is important to know what the terms will be for the first event and how they will change from the time the contract is negotiated to the future date when the second (or third or fourth) event takes place.
Rooms and Space
Too often in multiyear contracts, issues are left open that should have been settled at the start. This puts both sides at a distinct disadvantage.
Some things that really need to be firmed up include room block. Do you really know how many rooms you will need in 2013? It is better to build in some flexibility, establishing what the lower and upper limits would be for purposes of achieving a price parity against those rooms.
Similarly, what about meeting space? Do you really know how many breakout sessions you are going to need in two years? Probably not. Thus, again, a degree of flexibility needs to be incorporated into the negotiations and final agreement. Also, at the time you signed the deal the venue could easily meet your needs, but how drastically might your needs change?
Next comes performance on the venue's part. Let's say suddenly some things go wrong. What rights do you have to cancel or to modify the terms and conditions for your next event at the property if service is unsatisfactory during the first event or your needs become far more complicated? How do you find an adequate solution?
Handling food and beverage is a bit easier. Establish a spend minimum, with a discount off all catering prices. For most events, you don't get menu prices until about six months out anyway, so a multiyear contract could state: "We will guarantee $50,000 of food and beverage, with at least X percent off the then best available catering prices." You might even be able to negotiate "$50,000 with X percent off; $75,000 with X-plus percent off."
The Out Clause
Needs change; the plug gets pulled on events; attendance grows or shrinks. There are several ways to write in a way to escape the multiyear deal.
1. While it might be multiyear, write that one or both parties must exercise an option for future events to go forward within a certain time frame, or the option expires. Alternately, you can say that unless the agreement is canceled, it will automatically go into effect the next year.
2. Include a clause saying that minimums and maximums concerning logistics, quality and quantity should be set forth with precision; e.g., the rate shall not be less than the minimum rate charged for a similar program to another party, but not to exceed $X.
Of course, there are other approaches that will work depending on the negotiation. The key is to make sure the agreement fits the needs of the parties and can be adjusted to meet the changes that inevitably will occur.
Jonathan T. Howe, Esq., is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at email@example.com.