1. © 2011, Educational Institute Chapter 9 Negotiations and Contracts Convention Management and Service Eighth Edition (478TXT or 478CIN) Courtesy of Nikko Hotels

2. © 2011, Educational Institute 1 Competencies for Negotiations and Contracts 1.Describe how hospitality salespeople prepare to negotiate with meeting planners. 2.Identify the elements of a letter of agreement, or contract, for meeting and convention sales. 3.Explain the effect of contract standardization and multiple-meeting contracts on the meetings and convention industry.

3. © 2011, Educational Institute 2 Negotiations—Purpose, Objectives, and Preparation Purpose Two or more parties try to reach an agreement for mutual benefit Create a win-win situation for the hotel and the meeting planner Sell value before offering concessions (continued)

4. © 2011, Educational Institute 3 Negotiations—Purpose, Objectives, and Preparation Objectives Balance the financial goals of the hotel and the customer’s needs Balance short-term profits and long-term relationships with meeting planners—sometimes it’s advantageous for a hotel to be generous to existing customers in order to retain them over the long term (continued)

5. © 2011, Educational Institute 4 Negotiations—Purpose, Objectives, and Preparation Preparation—Gather information in these areas: Product—property fact book; peaks, valleys, and shoulders Competition—strengths and weaknesses compared with your property’s Prospect—lifetime value of the customer is an important consideration (continued)

6. © 2011, Educational Institute 5 Prospect Research Budget for past meetings Purpose of meeting Dates—competitors may not have dates open Arrival/departure pattern—how well group fills occupancy holes Hot buttons—most important buying factors Past problems Group history—review three years of history Decision deadline

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8. 7 Meeting Negotiation Process 1.Planner learns of property via advertising, trade show, sales call, fam trip, recommendation, public relations, etc. 2.Planner contacts hotel and/or submits an RFP. 3.Hotel responds, suggesting a personal site visit and/or sends a proposal letter spelling out what the customer will receive. 4.Letter of agreement/contract is offered and negotiated.

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10. 9 Purposes of a Letter of Agreement/Contract Protects both parties Avoids unpleasant surprises Avoids disagreements that can arise from verbal agreements Helps ensure repeat business

11. © 2011, Educational Institute 10 Elements of a Contract or Letter of Agreement 1.Names of organization and hotel—preamble 2.Official dates of the meeting 3.Number and kinds of rooms, cut-off date 4.Rates/commissions 5.Arrival/departure pattern 6.Meeting space—determine release date when unused space can be released back to the hotel 7.Complimentary and reduced-rate rooms 8.Prior visits 9.Working space, offices, and press room (continued)

12. © 2011, Educational Institute 11 10.Registration control 11.Exhibit space 12.Food functions 13.Refreshment breaks 14.Liquor 15.Gratuities and service charges 16.Audiovisual equipment 17.Union regulations 18.Master account and credit procedures—credit application (continued) Elements of a Contract or Letter of Agreement

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14. © 2011, Educational Institute 13 19.Method of payment 20.Termination/cancellation clauses 21.Damage clause (liquidated or mitigated damages) 22.Attrition clause—guestroom, food and beverage, meeting room 23.Arbitration/dispute resolution 24.Warranty of authority 25.Insurance/indemnification 26.Other contract matters/addendums (continued) Elements of a Contract or Letter of Agreement

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17. © 2011, Educational Institute 16 Convention Industry Council (CIC) Composition 34 member organizations Half represent sellers, half represent buyers Members include AH&LA, DMAI, and MPI (continued)

18. © 2011, Educational Institute 17 Convention Industry Council (CIC) Objectives To bring about a sympathetic understanding and acceptance among these organizations of the responsibility of each to the other. To create a sound and consistent basis for handling convention procedures and practices through a program of study and education. To conduct educational and other activities of mutual interest to participating organizations. To acquaint the public with the fact that conventions are essential to industry and to the economy of the community and nation. (continued)

19. © 2011, Educational Institute 18 Contract Standardization and Other Meetings-Related Paperwork A standard contract facilitates the process of contract negotiation and meets the need of meeting planners for consistency when dealing with properties Already in place for some chains Some planners’ objection: meetings are unique Also standardized: event resumes, banquet event orders, billing procedures, and more

20. © 2011, Educational Institute 19 Multiple-Meetings Contracts These are contracts that schedule business over a period of one to several years. A meeting planner, for example, may contract with a hotel chain for his/her group’s 200 educational seminars held every year around the country. Used by both corporations and associations. Benefits: efficiency in negotiations and planning, guaranteed business for hotels Drawback: lack of flexibility to seek most profitable market (another group may come along that would generate more revenue but the space is tied up)