Negotiation: Getting to Yes Robyn Mietkiewicz, CMP, CMM Sr. Director, Global Meeting Services Meeting Sites Resource rmietkiewicz@meetingsites.net Twitter: @RMietkiewicz

Goals For Today Understand Industry trends that impact hotel and contract negotiations Review how hotels manage for profitability and key revenue management criteria Evaluate how tracking & leveraging meeting spend drives value based negotiations Learn the key clauses that must be included to provide the utmost protection for your organization.

Industry Trends Overall spend on meetings, events and incentive travel is expected to remain flat, but activity may drop slightly for larger meetings Supply of hotel inventory to pull ahead of demand in 2017 and place further pressure on hoteliers pricing power Hotel occupancy remains at historic highs and healthy growth in average daily rate (ADR) Hotels refocus on revenue management to maximize profitability Planners focus on adoption of meetings management programs with increase of technology use to improve data collected to make strategic decisions

Industry Trends Continued More mergers and acquisitions are expected in the hotel industry Given the expected stagnation in domestic business travel, continued growth in domestic leisure travel will remain the key to fueling the U.S. travel industry Food & beverage prices expected to rise globally due to increased production prices, changes in imports and exports, and growth of special dietary requests from attendees More than 40% of business trips are extended for leisure purposes known as bleisure travelers Top budget request for 2017: Safety and Security Predictions for booking second-tier cities increased from 20% in 2016 to 27 percent in 2017 with ease of air travel and near a customer or a training facility influencing selection

Industry Trends And Updates Continued Meeting Planner Survey Challenges Increased Hotel And Meeting Support Costs Hotel Contract Terms / Added Hotel Fees & Surcharges Increased Expectations By Senior Management For Cost Savings And ROI Additionally 49% of planners feel pressure to enhance meeting results, measurable metrics and ROI 73% of corporate and association planners are tasked to demonstrate cost savings

How Hotels Value Your Meetings Variables That Influence Pricing & Availability Transient demand Arrival / departure pattern Rooms to space ratio Group food & beverage revenue Lead time Season History Potential incremental revenue Value of total account Risk # of rooms held vs. ability to pick-up block Cancellation/attrition clauses in contract Other groups contracted over same dates / revenue contribution

Industry Profit Margins (Average Hotel Chain & Independent) 80 70 60 50 40 ROOMS - 77% GROUP F&B - 38% F&B OUTLETS - 19% RECREATION/SPA - 15% RETAIL/MISC DEPTS - 15% 30 20 10 0 Sleeping Rooms Group F&B F&B Outlets Recreation/Spa Retail/Misc Depts

Meetings are BIG investments: have a negotiations plan for each meeting!

Hotel and Contract Negotiation Strategy Assure risk reduction and cost containment measures Enhance added meeting value and measurable cost savings Make mutual obligations and responsibilities perfectly clear Have an easy path and process for dispute resolution Achieve open and honest communications and negotiations

Create a Custom Master Hotel Contract Template / Amend For Each Meeting Include: All hotel contract components and clauses Value added concessions (must have vs. nice to have) Hotel fees and surcharges (eliminate or reduce) Performance clauses (do the math and calculate on profit, not revenue) Legal department liability language (indemnification, insurance, successors and assigns, dispute resolution / arbitration, etc.) Generate a cost savings / risk reduction report for each meeting (from countersigned contract)

Hotel Spend By Chain

Sleeping room attrition Guarantee a percentage of total room block, with no sliding scale Negotiate a cut-off date that works with your group history Add resell clause vs. liquidated damages In the event of damages, calculations on profit not revenue

Meeting Cancellation Present performance clauses that are fair to organization and hotel Sliding scale damages and do the math Base damages calculations on profit, not revenue Include a mitigated damages / resell clause In the event of damages, apply percentage to a future meeting Advanced deposits / refundable or applied to damages

Food & Beverage Guarantee Verify F&B spend from last year s meeting Benchmark estimated F&B projection based on meeting agenda, number of attendees and average menu prices Hotel F&B guarantee does not include service charge and sales tax Contracted guarantee to include 20% allowable attrition 45 days out, assess your attendance and actual F&B spend

Published Rate Clause (No lower rates offered after contract is signed) Protects your company if meeting attendees make reservations around group room block (via Internet/discount web sites/telephone call in) No lower rates offered once the contract is signed (excluding airline and wholesale travel rates) If the individual is an attendee of the Group s meeting and has a documented reservation in-house at the hotel, regardless of the room rate, the Group will receive credit for attrition purposes.

Fees / Surcharges Negotiate: eliminate or reduce hotel fees and surcharges Resort fee F&B Surcharges Early departure fee Maid / Bellman Parking Telephone / Internet access Health Club Meeting room rental / set-up charges (complimentary based on guaranteed room block / minimum F&B / no sliding scale)

Surcharges Ensure the hotel cannot add any surcharges to the Group Rates and will not attempt to impose any surcharges to your attendees.

Unauthorized Changes ALWAYS include verbiage in your contract that nothing can be changed or altered without prior WRITTEN approval by Group.

Breach By Hotel Hotel is responsible to pay damages to your organization if they cancel or do not perform Hotel to pay all direct and indirect costs to relocate your meeting to another hotel and or city If the room rate is higher than your existing contracted rate, the hotel is to pay the difference. Hotel to pay expenses and costs relating to marketing materials and attendee communications Hotel liable for any legal or arbitration fees Planning organization to document all costs

No Walk/Relocation Walking confirmed reservations occur when hotel is oversold Relocation clause/financial responsibility if your guests are walked when hotel oversold Guest relocated to hotel of similar/better quality at hotel s expense Hotel to provide transportation / priority wait list to return / suite upgrade based on availability

Construction and Remodeling Does not allow hotel to conduct renovations that impact your meetings Hotel to notify group if any construction, maintenance, remodeling, repairs that may be in effect over your meeting/room block dates Group has right to cancel without penalty and/or receive compensation if construction, maintenance, appearance or noise affects meeting Group reserves right to request construction, maintenance, repairs to be stopped during their meeting dates (state specific meeting dates in contract) If group does cancel due to construction, maintenance and repairs, all deposits will be returned to group in full within 30 days

Force Majeure Allows company to cancel meeting based on factors out of your control Specific terms and conditions which either group or the hotel can cancel the meeting without financial responsibilities Events out of control of parties including but not limited to flood, earthquake, fire, war, terrorist attacks, World Health Organization (WHO) alerts, curtailment of transportation, labor strikes and government regulations Anything that makes it impracticable, illegal or impossible to perform

Key Outside Vendor Support Audio Visual Production Technology Security DMC Excluding F&B, no cost or fee to utilize your own preferred suppliers

Master Account Options Sleeping Rooms Food & Beverage A/V & Production Internet / Technology Spa / Golf / Activities Business Center Miscellaneous Charges

Group rate honored 3 days prior & post meeting dates Complimentary / discounted food & beverage functions Discount on staff rooms Complimentary / discounted parking Complimentary rooms ratio / cumulative (start 1 Discount off printed banquet menus per 40) Daily complimentary continental breakfast / AM & PM breaks in staff room Complimentary suites Discount off printed AV prices Suite upgrades by category Waive / discount resort fee Club floor upgrades at group rate Complimentary entry to health / fitness club Complimentary/discounted hospitality suites VIP Transportation VIP in-room amenities Late check-out for VIPs / staff Discount off Master Account (for larger meetings or payment at departure) Value Added Concessions Prioritize for each meeting based on specific needs and meeting value Complimentary signage outside each meeting room / meal function / speaker ready room No charge for signage, easels, tables, podiums, risers, lecterns, wastebaskets, recycle baskets Complimentary acceptance & storage of boxes / product / materials 3 days prior to meeting No early departure fees Complimentary / discount Internet fees

Liquidated Damages Liquidated Damages calls for a specific dollar amount or formula to calculate a specific dollar amount to be paid to the hotel in the event of non performance Cannot be excessive or could be deemed a penalty Must clearly state the damages formula and date(s) due Hotel is not obligated to resell rooms and credit the group

Mitigated Damages Mitigated Damages are the hotels responsibility to resell sleeping rooms, meeting space and contracted services to reduce or eliminate damages In the event of attrition or cancellation notify the hotel in writing Check contract performance dates to calculate damages amount After meeting dates, conduct a hotel audit to verify occupancy and number of rooms and services resold. Assure all resold rooms and services, regardless of rates are credit to your account

Damages vs. Penalties By law, the hotel is entitled to revenues and profits as defined in the countersigned contract Always have a dollar amount or formula in the contract to define compensation to the hotel in the event of non performance The hotel is not entitled to a windfall or compensation beyond the contract value Excessive compensation is deemed a penalty, not damages and not allowable by hospitality law

Hotel Audit In the event of performance damages, audit process includes: Request a hotel room inventory / occupancy report by night Verify how many rooms were resold (individual or group, regardless of room rate) Verify how many rooms by night were out of service due to renovation or repair If attendees made their own hotel reservations (versus rooms on master), provide hotel with an electronic registration list to cross reference against all in-house guests over the meeting dates Assess other groups in-house and their room block obligations Capture any pre or post room nights

Hotel Contract Negotiations Hotel contract risk mitigation has become an important metric in SMM landscape Focus on cost containment measures in the event of non-performance

Plan and Think Before You Ink All hotel contracts are negotiable (plan and prioritize before you negotiate) A thorough and well designed contract is essential for a successful meeting Stay away from vague phrases such as ample, reasonable, to be assigned, appropriate, etc. All meeting and event space to be assigned by day (if a hotel will not assign specific space, they are not considered a candidate) There is no contract until both parties have signed the document Written changes on the contract with date and initials represent a counteroffer Discuss areas of dispute and counter offers in an open and honest manner Negotiate an option date to sign and return the contract In the event of changes to the meeting dates, room block, suites, meeting space or hotel services, create a hotel contract addendum, detailing changes and secure mutual signatures.

Six Steps To Value-Based Negotiations 1. Utilize a strategic RFP / Assess your leverage for each meeting 2. Evaluate all revenue contributions by category 3. Create a custom hotel contract / modify for each meeting 4. Focus on negotiating added meeting value / cost savings and contract risk reduction 5. Track meeting history & spend, by category / individual hotel & chain 6. From your countersigned contract, create a cost savings / risk reduction report

Complimentary Planning Resource Plan & Think Before You Ink Robyn Mietkiewicz, CMP, CMM Sr. Director, Global Meeting Services Meeting Sites Resource rmietkiewicz@meetingsites.net Twitter: @RMietkiewicz