Planners Customize Contracts To Cut Cancellation Fees

<H3>Meetings Monitor</H3><H1>Planners Customize Contracts To Cut Cancellation Fees</H1>by Lauren Bielski

<B>A</B>lthough most hotel contracts pave the way for a mutually beneficial relationship with few antagonisms, many planners are mitigating the potential for costly penalties by writing their own contracts to limit the cancellation fees.

If they do pay fees, it is largely because of an unexpected need to cancel at the last minute, and in that situation, few are dissatisfied with the arrangements that are made to cut losses.

Still, in most cases, corporate planners appear to have been relatively conservative with their cancellations. About 43 percent of meeting professionals polled for the Meetings Monitor survey have had to cancel between one and five meetings in the past year (See chart, Page 1). Less than two percent canceled more than 21 meetings in the same time frame. When planners pulled their business, more than half were required to reschedule the meeting, while 24 percent lost their deposit.

Common tactics planners take to create damage control are to employ smartly written clauses that avoid fees by allowing the rebooking of a meeting of the same value within six months or even a year, or to allow some portion of the fee to be applied toward the payment of the next meeting booked.

Another popular approach is to put the onus of filling the block back on the hotel company, stating that they have to make a good-faith effort to bridge the gap before the fee is issued, said Jonathan Howe, an attorney with Howe and Hutton Ltd. in Chicago. "This can work out, provided the language is clear about the hotel's exact obligation to refill your block before they charge the fee," he said. For example, if an 800-room hotel receives notice on a cancellation for a 300-room block, a planner would have to stipulate in the contract that some percentage or all of the rooms booked after the cancellation would go to fill that block to ameliorate the payment that planners have to make. "Remember, also, that cancellation fees should reflect lost profits, not revenue, because there isn't any cost of holding your meeting if the meeting isn't there," Howe said.

Howe also advises that contract language consider the timing of when fees are paid. While hotels would likely prefer a scenario where planners pay the fee upon notice of cancellation and get a credit later if the space is rebooked in time for the meeting, planners may be able to negotiate an option that they are billed only if the block remains empty.

Are hotels getting tougher with fees? The perception of corporate planners surveyed was that hotels aren't pulling any punches in their dealings with corporate accounts. Sixty-nine percent of Monitor respondents believed that hotels more strictly enforced their cancellation clauses last year, although none of the meeting professionals interviewed felt that they had been penalized more harshly over the past year.

For one planner working with a large business that had consolidated its meetings, the sheer size of the organization generated plenty of cancellations but also offered opportunity for some preferential treatment. Diane Neiman, a Rosenbluth account manager for a high-profile, West Coast technology firm, has seen cancellations increase 45 percent this year, but has had very few problems due to the terms of her customized "cookie cutter" contract with standardized performance, cancellation and attrition clauses. On the whole, the preferred vendor program has gone very smoothly. "Some of the larger chains aren't as easy to deal with, but for the most part everyone wants to be fair when I do have to back out or change arrangements," Neiman said. "If a fee is warranted, I think it's good business to pay them."

The firm consolidated its meetings two years ago, and a centralized department handles about 80 percent of the meetings held in six domestic locations and works with preferred meeting and transient hotel vendors.

With more than 1,000 meetings under the department's belt so far, the 94 that have been canceled this year represent a reasonable percentage. Neiman wasn't at all fazed by the inevitable reshuffling that occurs in a company that large. The volume of business gives her an edge when bookings need to be changed-or when any other privileges have to be negotiated.

"Our volume really speaks loudly, and often we are let off the hook and not asked to pay fees because our preferred vendors know that, overall, we deliver the business," she said.

Included in the contract terms is a clause that asks for items such as a room block confirmation two weeks prior to the event date, another that allows no-show fees to be waived if a certain number of rooms are filled and a term that allows a 15 percent attrition.

Another meeting professional contending with a hefty meeting schedule irons out contract terms that yield a worst-case scenario she can live with. Jude Draper, travel and corporate meeting manager at GenRad Inc. in Concord, Mass., said that in her dealings with hotels regarding canceled business, some have been better than others in developing loss-cutting alternatives. "Most hotels want to maintain the relationship and are pretty good about allowing us to rebook the business within a year," she said. "But I have had situations where we haven't been able to give them enough time to resell the space, and I pay the fee. I think it's only fair in that case."

Mary Ann Bonis, a planner at Huls America in Somerset, N.J., hasn't had to test her cancellation clause yet, but she is prepared if the need arises, with a stipulation that requires hotels to attempt to book the business before charging her the fee. The department handles only one or two large meetings annually, with the majority of smaller sessions conducted in the hotel across the street from headquarters.

"We've leveraged our meetings and transient volume when developing the rate schedule and terms of the contract," Bonis acknowledged. "So far, the relationship has really worked out well."

Joel Howard, director of special events, meetings and conference services at Paramount Pictures in Hollywood, Calif., said cancellations are inevitable in the high-stakes, high- pressure and rapidly booked entertainment environment. "If it involves a hotel, they are often very gracious and don't charge us at all because we give them so much business," he said. "Otherwise, we often just pay up, because there's no way around it and little chance that we'll actually be in that location again to rebook the event."

Even in cases when fees must be paid, Howard has found that the terms have been gracious. Typically, if he books a 100-room block for four nights and then cancels, the hotel will charge only for one night, an amount that Howard thinks is "extremely fair."

<B>Drop-Dead Dates</B>

Often, the lead time is too short to permit the writing of customized contracts, but when they can be used, terms include a drop-dead date prior to which he can cancel without paying a fee.

"I also have specific requirements about the condition of the hotel and notification if other groups are staying when we are," Howard said.

Ingrid Schneider, corporate meeting manager at Quantum in Milpitas, Calif., also negotiates her own contracts, trying to get an attrition date that's fairly close to the start of the program. In addition, she puts in a stipulation that all or some portion of the fee will be applied to the rebooked meeting.

Schneider reports she has had considerably more success with individual properties and doesn't think it is possible to develop a national contract based on volume with a hotel chain that can somehow mitigate fees.