Leading Meeting Professionals

Professional Convention Management Association

April 21 2014

4 Tips For Effective Hotel Contract Negotiations

By David McMillin
Hotel Negotiation Tips

Before any planner can focus on the the fun elements of bringing attendees together, there’s one not-so-enjoyable item that looms overhead: signing the hotel contract. I caught up with Tyra Hilliard, PhD, JD, CMP, professor, speaker, and contract expert, to get a sense of some of the key issues facing planners and suppliers in today’s industry. Before you enter your next negotiation, here are four helpful tips to take with you to the table.

1) Don’t blame the hotel sales rep for an unexpected surprise.

Just found out the fourth floor is getting a makeover when your group arrives? Realized that jackhammers will be tearing up the main entrance during your meeting? Most likely, the hotel sales rep was just as surprised to learn about it.

“I always feel a bit bad for hotel sales people,” Hilliard says. “They’re not among the first to know about when a renovation might occur. The owner is the one making the ultimate decision.”

“When a renovation arises after the contract is signed, it’s not the sales representative’s fault,” Hilliard adds.

Still, there are ways for planners to stay updated about any upcoming work at the property. Hilliard recommends the contract should stipulate that the hotel must inform the planner of any potential renovation interruptions within 10 days of knowing about the project. All signs point to more of those projects at hotels around the US, too.

“Since the economy has bounced back, the potential for renovations has become a bigger concern,” Hilliard says. “There is more construction. Hotels are constantly upgrading to keep up with their competition.”

SEE ALSO: 3 Tips To Be A Better Negotiator

2) Food and beverage discounts aren’t that easy to deliver.

While it’s easy to believe that feeding 1,000 attendees should qualify for some type of bulk discount, the reality is that F&B isn’t doing much for the hotel’s bottom line in the first place.

“Food and beverage is not a huge profit area for hotels,” Hilliard says. “They already have very limited profit margins, so they’re limited in their ability to discount even further.”

Rather than asking for a percentage off catering costs, Hilliard recommends that planners consider asking for concessions on non-food related items such as free parking for attendees, free Wi-Fi or a discount on AV services. However, some of those offerings may be tough to secure, too.

“A lot of parking garages aren’t owned by the hotel,” Hilliard says. “They’re leased, so the hotel can’t always make the final call.”

SEE ALSO: How To Reign In Your F&B Costs

3) Know who has the upper hand.

“It’s a seller’s market in most markets,” Hilliard says. “Because of that, there’s less of a willingness to adjust how hoteliers calculate attrition damages.”

Data from PKF Hospitality show that those sellers are going to continue feeling very healthy, too. In 2014, occupancy rates are expected to reach pre-recession levels. While new properties are being built, demand continues to outpace supply.

“During past expansions, we have seen three to five consecutive years of 100,000 or more net new hotel rooms entering the market,” R. Mark Woodworth, President, PKF, says. “Our current supply forecasts for the next three years are well below that threshold.”

SEE ALSO: The Mistake You’re Making In Your Negotiations

4) Do your research.

Looking for ways to strengthen your bargaining power? It all starts with education.

“Knowing the history of your meeting is critical,” Hilliard says. “If you can show five years of history, the hotel will feel a lot better in terms of flexibility with slippage in your room block.”

Understanding your own organization is just one piece of the puzzle, though. Hilliard recommends learning more about the ebb and flow of business in the destination.

“Knowledge is power in negotiations,” Hilliard says. “I would love to see planners do more research on the market where they’re looking host their meeting. Find out how many hotel rooms are within a certain radius and what the average occupancy rates are during your meeting.”

Looking for more insights to take with you to your next contract discussion? Click here for PCMA’s Sales & Negotiations OnDemand education bundle.

This educational article was brought to you by MGM Resorts. Click here to learn how MGM can help take your meeting to a new level of attendee engagement.

MGM Resorts International

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