Buyers Tilt At Short-Term Limits

<B> Buyers Tilt At Short-Term Limits</B>

By Chris Davis

One would think that changing or canceling a meeting planned just a month or two in advance would not be too difficult to do, but planners of short-term meetings have come to understand that in the current market, damages still apply.

Among the concerns of attendees at BTN's Corporate Travel World show in New York last month (<I>BTN,</I> April 12) were strategies for planning--and canceling--short-term meetings. Buyers expressed resentment over attrition and cancellation policies for business signed late in the game, and hotels countered that they run the risk of turning away other groups, even at the eleventh hour. "There's so much pressure to get the contract, sign it and send it back, but sometimes they still get canceled," said PricewaterhouseCoopers meeting manager Barbara Cummins. "We've had hotels try to enforce cancellation penalties, but is it really a win-win situation to collect the damages when they only took the rooms out of circulation for a few hours?"

"If you cancel 30 minutes after you've signed the contract, I wouldn't charge the cancellation fee because I should still be able to sell the rooms," agreed Marian Fuller, sales director for the Hilton Chicago O'Hare Airport. "But if you call Friday to cancel a Monday program, I probably can no longer sell that room. I can't jeopardize the revenue."

Attorney John Foster of Atlanta said, "corporate business tends to book on short term and cancel on short term. Therefore, corporate planners have to be comfortable with their exit strategies."

"If you book a year out, you'll have a sliding scale of what you owe for cancellation and attrition, but I don't have that luxury with short-term meetings," said Michelle Rubin, meetings and special events manager for Stamford, Conn.-based Champion International Corp. Still, "with a month of lead time, I may have a piece of business that fits perfectly into a spot a hotel has been trying to sell for a year."

Still, there are ways to decrease the chance of your meeting being canceled in the first place, or to avoid paying full damages if it is. It depends on such variables as the planner's relationship with the supplier and the total business the company brings to the facility or chain.

The first step to avoiding damages, Rubin said, is to make sure that the internal meeting sponsor understands the financial consequences if the size is cut or the meeting is canceled. To that end, have hotels include an actual cash damage figure for attrition or cancellation in the contract, as opposed to a percentage of the lost revenue, and spell out cash damages for cancellation of food and beverage, recreation activities and AV equipment separately. "I don't want to become a mathematician," she said. "I need to know that if I cancel, it will cost a specific cash amount."

Industry attorneys also suggested separating exit-strategy and outright cancellation clauses in contracts. Foster suggested buyout clauses giving either party the right to walk away from the contract for a fee.

Perhaps a simpler hedge against attrition damages, Foster said, is to give yourself a cushion by negotiating a smaller room block than the maximum you will require, though there will not be enough rooms if everyone does attend. "You have to do a risk analysis," he said. "If the meeting is for important clients, you might not want to lowball the block. But otherwise, isn't it better to put a few people in a hotel across the street than to write a check for attrition damages?"

Some buyers have found success with clauses that allow them to walk away if certain changes within the company occur, said Frank Moskowitz, a hospitality industry attorney with the Phoenix-based law firm of Smock & Weinberger. "Be aware of what's going on inside the company. If there are events that are going to intercede or that could change the meeting's dynamics, protect yourself in the contract," he said. "A change of company management, for example, could be an out."

There's a better chance of negotiating such clauses if you have an existing relationship with the facility. "We don't want to turn away a customer who may use us all the time for another group that's just thinking about holding a meeting here," Fuller said.

Agreed Jan Hennessey, corporate meeting services manager for Oakland, Calif.-based Kaiser Permanente, "If you have a good relationship, you can work out ways to handle the situation. I want to be fair. If we cancel a gigantic program one month out, we're liable and I understand that. But if the meeting is small and we promise to bring more business back, I hope they'll cooperate."

No matter what the relationship, it never hurts to ask to have damages applied to credit for another meeting at the property. "Everything is negotiable, even after a signed contract," Rubin said. "The worst they can tell me is that I owe the money--but then I have the choice of never booking the property again. It can't be a situation where you owe the hotel damages so now you hate them. They have a business to run and you have a contract.