Lessons Learned – Key Clauses in Post-Pandemic Meetings Contracts
In the Before Times, pre-covid, most association meeting planners likely would have seen the primary source of financial risks associated with hotel meetings contracts as being room attrition penalties caused by lower than estimated meeting attendance or, especially for those of us holding meetings in Florida and neighboring states, a cancellation due to a weather event such as a big storm or hurricane.
The COVID-19 pandemic certainly created some unprecedented contracts issues for associations with scheduled in-person meetings in 2020, as most had to be cancelled. Going into 2021, as state and employer orders against travel or group gatherings were lifted, many prospective attendees remained reluctant to travel or gather. There also was much apprehension for associations as they explored the possibility of bringing back their in-person meetings. Associations had to find ways to mitigate against both attendee health-safety risks and manage as much as possible to contain the financial risk to the association from potentially crippling hotel attrition or contract cancellation penalties.
While most associations have resumed in-person meetings, many meetings are still striving to achieve pre-covid attendance levels. However, as they move forward, wise association managers and planners entering into contracts for in-person meetings in 2023 and beyond, will do well to apply the lessons learned over these past two years.
To better mitigate your associations financial risk, there are some key clauses in your meetings contracts that you may wish to focus on more so than you have in the past. While not an exhaustive list, the following are some good areas for you to look with your legal advisor as you negotiate future hotel meetings contracts.
Attrition Clauses. Most hotel contracts include some level of allowable rooms attrition so that if all the rooms in the association’s contracted room block are not picked up, there will be no penalty to the association as long as the number of rooms not picked up does not exceed the allowable attrition rate. Both the association and the host hotel want the largest possible attendance. But in case of unforeseen drop in attendees, you should try to negotiate some additional attrition or, some hotels prefer to negotiate a one-time room block adjustment (i.e. 10 or 15%). This allows the association to reduce the room block until a specified number of days before the event as the association has a better handle on attendee registration levels.
Food & Beverage. And as important, since less attendees consume less food, discuss whether an allowable attrition rate might also be applied to your food & beverage requirements. If not, you may be able to negotiate a lower total food and beverage commitment. Most hotels are happy to increase your food and beverage guarantees later provided it’s not last minute.
Impossibility Clause/Force Majeure. While it is standard for hotel meetings contracts to include an Impossibility or Force Majeure clause, you will want to check to see that it includes mention of epidemic and pandemic. Most hotels understand that if attendees are not willing to travel or attend, it’s not possible to hold a meeting. Language to that effect should be included, where in circumstances beyond control of the parties that lead to a substantial reduced attendance (i.e. 40% of the room block not picked up), the association would be excused from liability.
Cancellation Clause. Hotel contracts typically include a cancellation clause that provides for a specific and usually quite substantial monetary penalty if the association cancels. It may already be included, but if not you may want to negotiate a mutual cancellation provision to cover the association’s direct and indirect costs of rebooking and moving the meeting to another venue in the event that the hotel needs to cancel to accommodate a larger event.
Additional Insured – It’s worthwhile to request that the hotel/event venue name your association as an additional insured on its commercial general liability insurance policy. Some may not agree to do so, but many hotels are happy to so it’s worth the ask. While this will not likely provide any coverage if an association were to lose a COVID claim, it may cover the cost of legal defense of a claim if someone brought a claim against the hotel and also named the association.
The following, while not directly related to the contract language, are some final thoughts that may help your association to mitigate some financial risks when faced with unexpected circumstances.
Work with Properties that are Willing to Work with You. Certainly you will not always be in a situation where you have numerous options to choose from. But when you do have options, work with properties that are willing to work with you. Clearly, if a property has waived attrition and cancellation penalties for you in the past, as some properties did during the uncertainty of 2021, they have demonstrated a willingness to work with you. The converse is also true.
Communication and Flexibility. Good communication is important. Try not to wait until cancellation is the only option. If you become aware that a significant portion of your attendees will not be able to attend, speak with your hotel contact to see if it is possible to reduce the size of the room block. Be open to flexible solutions. Instead of a hefty attrition penalty, perhaps the hotel would accept the group booking another meeting at the same property in the future instead.
Remember that your association and the host hotel both want a successful well-attended meeting, so your goals are aligned. Yet even hotel professionals that want to help may have some limitations on changes that can be made to some parts of their contracts, especially with some of the larger hotel chains. However, there is usually a way to address most of the areas described above that will lessen the financial risk to your association in the event that unanticipated circumstances arise. To loosely paraphrase Mick Jagger, you can’t always get what you want, but if you try, you just might get what you need.
Eric Thorn is General Counsel at Partners in Association Management