HOUSE RULES

Meetings & Conventions - Coping in a Seller’s Market - December 2000

December 2000


HOUSE RULES

Many convention centers require the use of exclusive vendors, but smart negotiators are not taking that mandate at face value

By Cheryl-Anne Sturken

  If there is one subject that rankles Jody Zeman, it is exclusivity contracts. Too many convention centers require planners to use their designated in-house vendors, complains the director of meetings and conventions for the Denver-based Association of Operating Room Nurses. “Most of the time it is more expensive, and the service isn’t there,” insists Zeman. “I don’t mind an electrician or even the caterer. But security?”

It is not that she expects carte-blanche rights at convention centers. What Zeman does want is for centers to acknowledge when their in-house vendors cannot meet her needs, and to let her bring in her own experts or put those services out for bid in such instances

Zeman speaks from experience. At AORN’s 1998 annual convention, held at the Orange County Convention Center in Orlando, the center’s exclusive mail-service provider did not live up to the job. “They disregarded everything I stipulated, and my board had to jump in and help out,” says Zeman.

Exclusivity contracts deals convention centers establish with specific vendors to service the facility on an exclusive basis always have been an integral part of convention center operations. While all centers have exclusivity contracts for back-of-the house operations such as electrical, plumbing, rigging, and load-in and load-out services, many also hold such agreements for a slew of meeting and exhibit services. These can include security, business center operations, Internet service, audiovisual, and food and beverage.

What concerns planners like Deborah Richardt, CMP, is the probable motive behind these deals. “They are looking for ways to make money, and that is not right,” says the director of meeting services for the American Lung Association in New York City. Adds Richardt, “You cannot be looking for other ways to make money when we are trying to keep our costs down.”

Even more disturbing to Windy Christner, CMP, is the lack of control over vendor selection. “I don’t want to feel like I’m being ripped off,” says Christner, director of meetings and expositions for the Washington, D.C.-based American Pharmaceutical Association. “If I feel I’m getting a good price and excellent service, and they deliver what they say they can, I can live with that,” says Christner. “But, there is no reason why a good company, in the same city as the center, who can get to know the center, can’t do the job.

However, even when faced with a list of exclusives, planners’ hands are not completely tied. A get-tough approach to negotiating around in-house services that are not up to par, ferreting out hidden exclusivities before getting locked into a contract, and fighting back when service falls short can go a long way to making such arrangements workable, sources advise.

Centers strike back
In their defense, convention center managers claim exclusivity contracts make good, practical business sense because they allow a center to maintain a consistent level of service and quality. And that, they say, benefits the very planners who gripe they are being locked into using them.

“I think meeting planners don’t like dealing with exclusive contracts because of the fact that they don’t have flexibility,” says Richard Heller, president of the Sands Expo and Convention Center in Las Vegas. “What they have to remember is that we do this every day of the year, not just the four days they are in town. We are consistent in how we negotiate our contracts because we have to maintain a high level of service.”

Rae Scott-Jones, executive vice president and general counsel for Philadelphia’s Pennsylvania Convention Center, says planners need to see convention centers as partners, not adversaries. “We have always been very sensitive to the exclusivity issue,” she says. “I understand clients’ concerns, but I think from the center’s perspective, it is a balancing of needs. We have to make decisions that are mutually beneficial, and I would hope planners trust us to make these decisions.” The Pennsylvania Convention Center’s exclusives include utilities, food service and building security. Planners considering that center can negotiate to bring in their own security vendors to police their events, but the center requires proof of adequate insurance, and in-house security retains control over common areas and the building itself.

Are centers profiting from such deals? “Of course,” says the Sands’ Heller, who makes no apologies for capitalizing on that revenue stream. “Most convention centers are publicly funded facilities with a debt to pay off and high costs to maintain the building.”

And, adds Heller, the Sands Expo Center, unlike city convention centers, is a privately held facility beholden to an owner and required to pay taxes. “We have to operate our center as a business. We have to make sure our owner gets a return on his investment, and we have to pay hundreds of thousands of dollars in taxes a year.”

At the Sands, in-house exclusives run to all utilities, food and beverage, and the business center, but not security. “I don’t care who planners bring in to handle their security, as long as they are licensed contractors in this state,” says Heller.

Playing the game
Even when dealing with a center that has exclusive vendors, planners can assert some measure of control. Some tactics:

Ask before you ink. The center might not advertise every exclusive contract it has. Ask for a detailed list, then ask again. “Many times convention centers are not forward with what their exclusives are. Sometimes it is like pulling teeth to find out,” says Zeman. “They will list what they are, but they don’t tell you everything. Then when we start planning, it is, ‘Sorry, you can’t do that because...’”

Meet with vendors. The vendor’s portfolio is impressive, and the convention center spouts accolades about the firm’s accomplishments. Don’t let that be enough. Ask for a face-to-face encounter.

“We meet with the vendors on our first planning trip, go over our requirements and start asking questions,” says Sondra Biggs, CMP, convention manager for the Leewood, Mo.-based American Academy of Family Physicians. “This way, by the next trip in, we have our plans in place and are pulling our budget together.”

Zeman of the Association of Operating Room Nurses agrees. In hindsight, she says, the mail-service debacle might have been avoided if she had met with her contact in person. “I did not meet with the vendor face to face, but I had sent written requirements, and we had talked extensively. I make a point of meeting all vendors now.”

After the initial face-to-face meeting, advises Christner, keep the lines of communication open. “You can meet with someone and they can blow you away, but then they bring in someone who doesn’t meet your standards to do the job,” warns Christner. “I think it is more important to establish a strong working relationship.”

" Ask to team up. When an exclusive service, such as security, threatens the success of the event, and the center will not bend the rules, then negotiate to bring in consultants to work alongside the in-house force.

For Deidre Ross, CMP, director of conferences for the Chicago-based American Library Association, an exclusive contractor can be a deal breaker. Because the ALA’s security demands are a top priority, Ross relies heavily on the association’s longtime security consultants for advice.

“Our people have worked in many centers and cities with us many times,” says Ross. “They know our needs. A convention center might not have the same security goals as we have. They might have strictly badge checkers. I need to know my show will be safe, so I negotiate to have the center let us bring in our own advisers.” The ALA’s security advisers do not circumvent a center’s security service, but rather work with them.

" Check service and prices. Make the center prove it is competitive on pricing and quality. And don’t be afraid to ask around. “To make sure a center’s vendors are competitive, we talk to other people,” says Ross. “We call and ask the convention and visitors bureau for figures.”

Biggs of the American Academy of Family Physicians has learned not to accept a center’s word as gospel. “Internet access,” she says, “is such a detailed issue as far as requirements, that we now put one person from our computer division to work on that with the convention center.” That change, says Biggs, came about because “one center told us they had the best Internet service and access, and later our computer division people said it wasn’t even as fast as ours.”

" Ask for a service guarantee. When the center fails to deliver the service it was contracted for, it is that much easier to go after some form of restitution.

“I would get a guarantee of service at the time of signing the contract,” says Christner. “That way if they don’t perform [according to the contract], you can negotiate, and you are not paying for a lousy performance.”

And to make sure you have room to negotiate, advises Christner, never pay more than 75 percent of the bill up front. “I will not pay the full bill in advance. I have to have leverage for what might go wrong,” she says.

" Stand firm. If a planner has service-specific needs that cannot be met by a center’s in-house vendor, try to negotiate around the exclusivity, recommends Zeman. Determined to avoid another mail-service debacle, Zeman now sends a written letter explaining in great detail her past experiences and outlining her association’s specific service needs.

“Our group is not like most associations,” Zeman says. “We don’t wrap up and ship out at the end of a show we have daily needs. Thanks to a detailed letter, New Orleans, San Francisco and Dallas all allowed me to bring in my own people.”

" When vendors change.Committing to a center years in advance, often as far out as 10 or 15 years, leaves open the real possibility of being vulnerable to changes in the vendor list. Even meeting planners returning to a familiar center from year to year can find a drastic change in vendors and pricing.

This year, Patricia Quinlan, CMP, director of conventions and meetings, of the Newark, Del.-based Produce Marketing Association, saw her telecommunications costs increase by 50 percent due to the center’s new exclusive vendor. She had been at the same center just three years earlier. “To balance the budget, we’ll have to make up the difference in something a bit more flexible, like signage,” says Quinlan.

However, protecting against changing vendors can prove difficult. Some planners, like Zeman, keep trying. “I tried putting a clause in my contract with the center that said if vendors changed, I wasn’t obligated to use them,” she says. “So far, no one has let me leave it in. But I am getting ready to sign with San Diego and Anaheim, Calif., and I will try again.”

On second thought&
While many convention centers might be holding the line on exclusives, others, like Orlando’s Orange County Convention Center and the San Diego Convention Center, are rethinking their operational wisdom. “I think there is a trend by convention centers to back away from the ‘take it or leave it’ approach,” says Carol Wallace, president and CEO of the San Diego Convention Center Corp.

According to Wallace, San Diego has worked hard to address planners’ concerns regarding exclusivity issues, while maintaining the integrity of the day-to-day operation of the center. Planners can choose from all five of the city’s electrical contractors, and the center allows planners to bring in their own security vendors in leased space, while reserving the right to monitor public spaces.

“We are trying to see how we can coexist,” says Wallace. “We want to make sure the convention planner has a good experience, but we also want to make sure we don’t have a contractor come in who can damage the building or negatively impact another show.”

The key to coexisting, insists Wallace, is early and open communication. “Planners need to bring up their questions and concerns on exclusives very early in the communication process,” she says. “The sooner we are in the loop on issues, the better.”

On Oct. 1, in response to repeated client concerns, the Orange County Convention Center decided to pull the plug on its requirement that groups use in-house security an in-house exclusive since the center’s opening in 1983. “Many of our clients are opposed to exclusives. They feel they don’t have a choice,” says Kathie Canning, the center’s marketing manager, who says the center will now provide clients with a list of eligible security consultants from which to choose. “We definitely see our new security policy as a benefit for the future.”

COMING TO TERMS
Convention centers might claim planners have no choice when it comes to exclusives, but attorney John Foster of Atlanta-based Foster, Jensen & Gulley says otherwise. His advice:

Are exclusivity contracts negotiable? “Yes. Convention centers just don’t advertise it. The problem is, planners give away their negotiating clout. They pick a city and immediately advertise they are coming to town. The convention center says, ‘What’s to negotiate? You’ve already said you’re coming here.”

What should planners do? “Put hard questions in their RFPs. Ask the center to list all its exclusives and to note when each contract is up for renewal. Ask for references for each exclusive.”

How should contracts be worded? “There should be a clause that says the group is not obligated to use exclusive providers unless their reputation for service and their prices are the same or better than the association’s preferred vendors. Also, state that if any services that aren’t exclusives when the contract is signed later become exclusives, the group is not obligated to use them. And if service levels are not up to standards that are normal and reasonable, a mutually agreeable credit amount is to be applied to the group’s master account.”

Is restitution possible? “Yes. Ask for 10 or 15 percent off the amount owed. Then send the money you think you owe and leave it up to them to come after you to negotiate a settlement. Never pay 100 percent before the event. Always hold something back for leverage.”

C.A.S.

Back to Current Issue index
M&C Home Page
Current Issue | Events Calendar | Newsline | Incentive News | Meetings Market Report
Editorial Libraries | CVB Links | Reader Survey | Hot Dates | Contact M&C