Negotiating In the New Century

By Mark Kustwan
Your meeting contract is the foundation on which everything else is built. Work with hotels on contracts that balance precision and flexibility. And watch your ego: Remember, a win/ lose situation, even if you "win," can be more hazardous in the long run than a win/win agreement.
First, Know Your Value
No matter what the current trends, your first step in negotiating is to know what your conference is worth to the property. Does it take place during the off-season, shoulder season, or in season? Will it fill a "hole"? How do the days of the week fit in with the hotel's traditional occupancy? How much is your banquet business worth? You usually start off in a strong negotiating position, since much of the insurance industry's business is considered quality business. Just ask an hotelier.
What's Changed
F&B Costs: Banquet prices have skyrocketed over the past few years. I understand that banquet F&B is now the second-highest profit center in many hotels, after guestrooms. There was a time when we felt uneasy discussing banquet food discounts since the profit was only 19 to 21 percent. Well, that's not the case today. Larger profits are built into the menu pricing. And service charges (which are not necessarily passed along to the banquet servers) often go straight to the bottom line. If you know your anticipated expenditure for F&B and how it affects the catering department's revenue goals, this is an area where you could help your bottom line.
Service Fees: Some of you may remember the days when the hotel sales manager explained that high room rates were the result of added "amenities." Things like atrium lobbies, larger guestrooms, complimentary newspapers, in-room coffeemakers, fitness centers, pools, and more. Now we are charged a "service fee" for many of these same amenities, but rates continue to increase. This fee may be something you can use as a trade-off in order to gain other concessions.
Attrition: Planners make educated estimates on what will be needed two or three years out. Do we really know what the economy will be like then? Or what changes our industries will go through? When negotiating this part of a contract, expect the property to accept some of the risk by reducing your liability-5 to 10 percent slippage is only a starting point!
Cancellation Policy: What are the chances of canceling? With the continuing trends of corporate mergers and cost reduction, canceling is a possibility--if a remote one. Look closely at the hotel's cancellation paragraph and don't take it lightly. Be prepared to pay the price if you cancel, but make sure the cancellation penalty is based on a percentage of the total room revenue so that you're compensating the hotel only for its lost profit.Remember that an event is only as successful as the foundation it rests on. Lay the groundwork with a solid contract, and then you can enjoy the more creative tasks we all find rewarding.

This article appeared in the January/February 2001 issue of Insurance Conference Planner Magazine