As hotels prepare for a new round of property improvements in the next 12 months, meeting planners concerned about the potential of renovations to disrupt their events are taking contractual measures to address that possibility. Four years ago, a wave of upscale hotel renovations led to cancelled meetings and some planners, without specific cancellation clauses in their contracts protecting them from unexpected construction, found themselves forced out of hotels.
According to the American Hotel & Lodging Association's 2004 Lodging Survey, about 17 percent of deluxe hotels plan major structural upgrades during the next year.
"It's important that, if renovations are on the increase, people keep it on their checklist. It can be overlooked," said Tony Pastor, site and contract specialist for McKinsey and Co. "Nonprofessional meeting planners certainly aren't thinking about it."
"In 2000, there was so much construction that every hotel in the country had some degree of construction or update," said Dave Scypinski, senior vice president of industry relations for Starwood Hotels & Resorts. "Customers got very jumpy. They definitely beefed up their cancellation or construction clauses. Right now, it's less of an issue, although as the economy improves, you'll see more hotels renovating and you are going to get into that issue again."
This time, planners may be more prepared, and standard contracts are starting to address the issue of renovations and construction more specifically. "We by contract insist that there are no renovations going on," Pastor said. "We don't want to come by and find the pool not operating."
The best way to make sure there is no construction going on when you want to have your meeting is to specify heavy penalties for such disruptions in the meeting contract, Pastor said. "The key is to make these clauses as nasty as possible," he said.
Pastor said he might demand complimentary rooms, free transportation and monetary compensation in a contract for a large meeting, but that isn't what he wants. "Bottom line, I don't want to be there," Pastor said. "You look silly as a meeting planner bringing a group in while there is construction going on."
Hotel managers don't want angry customers on their hands either, Scypinski said. "You just don't want to surprise them. That's when customers get the most upset," he said. "We will tell you as soon as we know about it. We'll also tell you the scope, timing, how you're affected and how we are going to help reduce the way you are affected."
Smaller meetings may be easier to work around, but larger meetings may have been booked two to eight years in advance, before renovation projects were scheduled, Scypinski said.
"We have a property down in Florida that we're talking about doing construction in the very near future," Scypinski said. "We still do not have a very solid start date or end date, because you have to get financing, you have to get approval, there is a contractor you have to hire, so it's very difficult to say one or two years in the future that you can't do this."
However, Scypinski added, it is not fair for a meeting planner to insist on a clause giving them the right to completely pull out of a contract over a small construction project. "What we do want to avoid is an arbitrary cancellation just because there might be something going on. Typically, a customer will submit a clause saying, 'If there is renovation occurring on your property around or immediately before the meeting we reserve the right immediately to cancel and move the meeting to another facility.' Of course, this doesn't give us the ability right to say, 'well, of 100 percent of the meeting, only 10 percent or 20 percent is affected and this is what we're going to do.' "
Both planners and suppliers named cancellation and attrition clauses the second most influential operational trend on meetings in the FutureWatch 2004 survey by Meeting Professionals International (Meetings Today, Feb. 9).
If the worst happens, and construction or breakdowns are unavoidable during a planned event, Pastor said that a quick and fair response from hotel management usually appeases most meeting planners. Pastor recalled a computer breakdown at one of his events at an Arizona desert resort, when his customer's 500 most important clients couldn't check in for four hours. The next morning the hotel management had sent a gift and apology to every person in the group, not just the guests.
"The hotel acted without being pushed," Pastor said. "I've always found when hotels take a fair but timely response to the issue, people are willing to look the other way."
Both planners and hotel managers said communication is the key to solving disputes over renovation clauses. Building a long-term relationship also can help when unexpected construction disrupts an event. "You don't mind living in your own mess but you don't want to live in someone else's mess," according to Pastor. "You can manage it better with a relationship."
When in doubt, it is better for a contract to be loaded down in detail, rather than too broad. Planners do not need more proof of that than the 1996 case of Hilton Hotels vs. Healthdyne. The meeting contract required Hilton to make "substantial progress" in its renovation by a specific date. Healthdyne pulled the meeting after it felt that hadn't happened.
"The ensuing litigation, which lasted three and a half years, resulted because the parties never specified in the contract an objective meaning of what was meant by the words 'substantial progress,' " said John Foster, an Atlanta-based attorney specializing in the hotel industry and hospitality law. At the trial, the jury found in favor of the hotel, Foster said.