Meetings & Conventions: Planner's Portfolio March
1998
March 1998
PLANNER'S
PORTFOLIO:
The Law & the Planner
BY JONATHAN HOWE
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.
PROTECT YOURSELF
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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