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Issues Facing the Meeting Industry


Posted on May 15, 2006

By Lisa Sommer Devlin

I was honored to be asked to serve as a “Meeting Industry Guru” this week to create a “point/counterpoint” blog with John Foster.  After several discussions with John on how we would approach this task, we decided to start with a summary of our opinions on the key issues facing the industry and then follow up with in depth discussions on the issues.  While John usually represents groups and associations and I represent hotels, I anticipate that we will not have serious disagreement on the major issues to address.

There are many topics we could discuss, but it seems that the same clauses and issues in meeting contracts continue to generate the most discussion, debate and often confusion.  Here is a list of the things that I think hoteliers and meeting planners should be most concerned about:

FORCE MAJEURE 

Under what circumstances does the law excuse a party from some or all of its obligations under a contract because of unforeseen or unexpected events?  How do clauses agreed upon by the parties change the legal standard?  Has the law kept pace with to our global economy, instant communication, and ability to travel almost anywhere in the world within a day?  How are hotels and meeting planners reacting to these issues? 

CANCELLATION CLAUSES

What are the losses suffered by a hotel when a group cancels?  What is the loss suffered by a group if a hotel cancels?  What should a cancellation clause include, and how can the parties determine if it is fair and legally enforceable?  What does the law require as opposed to what a party may be able to negotiate to include in a clause?

ATTRITION CLAUSES

How does an attrition situation differ from cancellation?  What can the hotel and groups do to reduce attrition?  What are the parties legally entitled or required to include in the clause, versus what can be negotiated?  Are there commonly requested attrition terms that present legal problems for the hotel or the group?

LABOR UNION ISSUES

The major hotel workers’ union is threatening a variety of actions that could impact the industry, from boycotts to strikes, to direct communication to attendees.  How will this impact meetings from the perspective of the hotels and the groups?  What are the legal issues, versus the business issues? 

“STANDARD” CONTRACTS

It seems that every hotel and every group has its own contract form and negotiations to get an agreement take forever. While it would seem that a standard form would make doing business easier, what are the dangers? Why are industry attorneys who represent both hotels and groups so strongly against any “standard” form? 

These are the topics that I intend to explore this week. As John and I go back and forth, I am sure that he will raise other issues and the comments from those who read the blog may lead us into other areas.  I am sure that the debate will be lively!

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Comments

Bob Cherny

Lisa and John,

Your list of topics is certainly relevant and important. Could I add one more? Please?

Entertainment contracts are full of clauses that represent potential land mines for the unwary. Some discussion of these contracts would be helpful.

Thanks!

Bob Cherny
Paradise Show and Design

Kim Knight

Regarding attrition - I have heard conflicting advice regarding the attrition statement in a contract. For example, I had come to an agreement with a hotel regarding booking an overflow block of rooms. Attrition was never discussed, and the final contract presented by the hotel did not contain an attrition clause at all. I was then advised by a fellow staff member that my contract had to contain an attrition clause -- even if the attrition was zero -- it had to be spelled out in the contract in order to protect me. Is that true? Of course when I added the "zero attrition" clause and sent it back to the hotel for review, they quickly changed their tune and added attrition fees. I feel like if I had just accepted the contract without the clause at all, there would not have been any liability.

Joan Eisenstodt

Re "standard contracts": Am hoping you will both chime in on the APEX initiative and the contracts panels' work. Tho' it is not about standard contracts it is about best practices.

One more: for those of us who do citywide meetings - the issue of when the contracts are signed w/ the conv. center and the hotels and the pitfalls of timing.

Thanks.

LisaDevlin

Sorry for the delay in responding to comments--I am still learning about how to "blog!"
Bob--I'm not as well versed in entertainment contracts and I doubt we'll have a chance to get to the issue--perhaps Dave McCann can have a future guru address.

Kim, the fact that there is no attrition clause in the contract does not mean that you will not owe, it means that the hotel would have to prove its actual losses. Only if the contract has specific language saying that you will NOT owe would you avoid attrition. There is no requirement for an attrition clause, but it is a good idea to have one.

Joan, I think I addressed your APEX issue today. As to citywides, it is a perennial problem that centers generally refuse to commit more than a year out. You need to have a carefully drafted contingency clause in your hotel contracts allowing you to cancel if the center is not available.

John S. Foster, Esq., CHME

Hello Kim (via email and post)

I'd like to address your comments and questions about attrition clauses.

In 1999 my partners and I handled the seminal case on this question: "Hyatt Regency Buffalo v. WIBC".
We represented the WIBC and won the case on Summary Judgement. The issue in the suit was whether WIBC owed the Hotel for attrition damages even though there was no attrition clause in the contract. The court ruled in favor of the Group saying they did not owe the Hotel. The Court clarified the issue further. The Court found that not only was there no attrition clause in the contract but there was no other terms that required WIBC to
pay attrition damages to the Hotel for low pick-up.

Bottom line, you can't assume that "no attrition clause" means no attrition damages will be due. You have to
look at all the terms in the entire contract (also called "reading the fine print"). Hotels usually use words and phrases like "ABC Group guarantees it will use X number of room nights" or "spend X dollars in room revenue". Other clauses might say: "Hotel is relying on ABC group to spend X dollars". All of these, and other similar clauses, could mean that the ABC Group owes the hotel for 100% of the room nights or lost profit guaranteed even though none of the clauses are labeled "Attrition Clause". My advice to meeting sponsors since 1999 is that if you negotiate for no attrition damages
the contract needs to say "ABC Group does not control where its attendees stay and does guarantee and will not be responsible for unsold rooms in its block".

Without some sort of reference to attrition in the contract there exists an ambiguity that could lead to a dispute between the parties in the future. That's what happen to Hyatt and WIBC. 

Attached in the email version is a PowerPoint presentation I prepared summarizing the WIBC case conclusions. Also attached
is an article I wrote titled "Defensive Contract Negotiations". You may find them helpful.

Good luck. Please let me know if I may assist you further.

John

John S. Foster, Esq., CHME
Attorney and Counselor at Law
Foster, Jensen & Gulley, LLC
1447 Peachtree Street, NE
Suite 1009
Atlanta, Ga. 30309-3027
404-873-5200 ext: 22
404-873-6560 - fax
404-229-7069 - cell
John.Foster@FJGLaw.net
http://www.FJGlaw.net

Consultant and Counselor to
Associations, Trade Shows & Event Sponsors, Meeting & Convention Professionals

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