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At a time when COVID-19 is shutting down events, it’s best if hotels and organizations have cooperative attitudes when negotiating issues over cancelled events. (DeMorris Byrd on Unsplash)
Takeaways:
- Event planners and hotels need to work together — not as adversaries — to come to equitable terms over canceled and postponed meetings.
- Taking a hardline stance can be detrimental, potentially resulting in years of expenses.
- There is no precedent for this business shutdown, but we can look to Sept. 11 and the 2008-2009 financial recession for lessons in how to work best with hotel partners.
- Everything is open to negotiation.
An attorney representing dozens of the top hotel chains nationwide says negotiations over cancellations and postponements between venues and meeting planners have taken both cooperative and hardline tones.
“Attitude is everything,” Phoenix-based attorney Lisa Sommer Devlin said. “You can’t come in with guns a blazin’ and demand a refund under no uncertain terms. Much better would be to say, ‘Let’s talk about my [July, for example] meeting. What options are out there?’ Hotels want to keep your business, and in this industry, people have long memories. You want to maintain a healthy relationship. These are unprecedented times and people need to realize that and work together, not as adversaries.”
Lisa Sommer Devlin
Sommer Devlin spoke of two negotiations that each took on different tact. In one, the meeting planner for an October event wanted to use the force majeure clause, saying it “was applicable because the economic realities caused by COVID-19 will prevent them from marketing their show, attracting sponsors, and bringing in attendees,” Sommer Devlin said. “They were unwilling to cut a deal. They said to the hotel chain, ‘We aren’t paying you anything, go ahead and sue us.’”
The problem with that approach, she said, is that bringing the case to court is unlikely to benefit either party. The time — perhaps years — and expense involved are probably not worth the effort, especially because neither side can be sure what the outcome may be, Sommer Devlin said.
“These are unprecedented times and courts and the law usually lag behind,” she added. “We won’t know how these things will be interpreted, or what factors will be important in the decision.” She said that courts could go back as far as World War II to find such a comparable “shutdown” taking place in the country.
But Sommer Devlin said that some parallels can be drawn in more-recent history.
“We saw this kind of hardline position during the aftermath of Sept. 11 and the financial crisis” of 2008-2009, she said. “These associations and corporate groups know that hotels today are in a world of hurt — even desperate. Most of them aren’t even operating right now,” Sommer Devlin said. She’s found that some event organizers are taking “financial advantage of the situation” by attempting to negotiate “extraordinary terms.”
In another case, Devlin said a meeting set for early March in Florida was postponed. The group holding it wanted to use force majeure, but the event was not scheduled at a time when public officials had stepped in to ban events. The compromise was one that Sommer Devlin said is becoming common: The two parties decided to split the deposit the hotel had collected. “Half would go to the hotel, and half would be applied to a future event reservation.”
Sommer Devlin said force majeure may be applicable to events when local government officials have disallowed meetings from taking place. “If you had a meeting scheduled for April, it’s not going to happen. As for May, I don’t know. Then there are those in June and later, which probably can happen. Some groups are claiming they are excused for as late as November, when in the past view weeks, many events scheduled for this spring were re-booked for October and beyond. If we’re still battling the virus in October, this world will have much bigger problems on its hands than the value of a corporate meeting.”
Sommer Devlin said that the overall the tone of negotiations during the past month has been fluid as the coronavirus crisis has evolved. “In early to mid-March, the hotels were standing firm,” she said. “Then, when both sides realized just how serious a situation we were in, both sides began to soften and compromise. Now it’s swinging slightly to the side where meeting planners are being more uncompromising,” she said. “It’s come in waves, we just don’t know when that wave,” indicating an end to the crisis, “is going to hit the shore.”
Advice From an Association Attorney
Paula Goedert
In Association Laboratory’s recent report, The Strategic and Economic Impact of COVID-19 on Associations, Chicago-based attorney Paula Cozzi Goedert, a partner in the corporate department of Barnes and Thornburg LLC who concentrates her practice on the representation of nonprofit organizations, said that the top legal issue facing associations going forward is the force majeure clause. “The force majeure clause in contracts is critical,” Goedert said in the report. “It is not boilerplate. Setting the bar for cancellation at ‘illegal or impossible’ is too high. ‘Commercially impractical’ is good. ‘Inadvisable’ is better.”
She recommended that associations review this clause in-depth with a qualified legal counsel. “Consider this provision,” Goedert said, “as important as room rates.”
Goedert also mentioned the prevailing party contract clause — a provision that requires the losing party in litigation to pay the expenses incurred by the prevailing party, including attorney fees — as being of major concern to associations. “These clauses are particularly attractive to organizations that need to bring a suit against their client for non-payment of fees,” she said. She cautioned against signing any agreements in which the prevailing party gets their legal expenses paid.
Finally, Goedert said that associations have already lost money during the coronavirus crisis “by assuming that the other side would not negotiate. Everything is open to negotiation. A bill or invoice may not be the other side’s final position, but only the opening move in a chess game. Don’t hesitate,” she said, “to politely but firmly press your points.”
Paul Bergeron is a freelance writer in Herndon, Virginia.
What Events Professionals Need to Know About COVID-19
PCMA has created a COVID-19 resources page to help event professionals find reliable information about the pandemic and to share events industry-related resources to ensure they are prepared now and in the future.