Feature - April / May 2008

By Karen Brost

“Everything is negotiable,” as the saying goes. But is that really true when it comes to convention center contracts? Or are these agreements carved in stone as many people believe? According to the experts we asked, the information and insights you take with you to the bargaining table have a whole lot to do with what you walk away with.

Watch Those Good Intentions
Before we get to contracts, let’s back up a bit. Very often, the first document involved in convention center negotiations is a letter of intent, which is designed to put a temporary hold on a facility. But beware. This deceptively simple-looking one-page document can get an organization into more of a commitment than they’re ready for if it’s not worded correctly.

“Letters of intent are often not taken seriously enough,” commented Lisa Hix, Esq., an associate in the nonprofit organizations practice of the law firm Pillsbury Winthrop Shaw Pittman LLP in Washington, DC. She explained that planners often believe that by signing a letter of intent, they are simply stating an interest in using the facility, so it doesn’t occur to them to have the document reviewed by legal counsel. Yet the letter of intent may actually commit the organization to using the facility. “What people commonly don’t appreciate is that if the letter of intent has certain forms of language, it becomes a legally binding contract,” Hix said.

“What needs to be included in those letters of intent,” she continued, “is a contingency clause that includes two conditions upon which the letter of intent will not be binding. One is if the organization is unable to enter into agreements for hotel rooms and other services. The second is if the organization is unable to reach a mutually agreeable facility-use agreement with the convention center. It could be that you would eventually receive the agreement and the conditions are too onerous or the negotiations are too difficult and you can’t get it done.” In cases like these, having a contingency clause can help prevent the organization from getting locked into a convention center facility that’s not a good fit.

Flex Your Calendar
Sometimes, getting the best deal at a convention center can boil down to being flexible with your dates. “It’s supply and demand,” said Jason McGraw, CTS, senior vice president of expositions for Fairfax, VA-based InfoComm International, an association serving the professional audio-visual communications industry. “If there are vacancies at a certain time of the year, you probably have a lot more leverage than if you’re trying to book something in the first quarter in Florida. If you’re a small or mid-sized show, you probably have more flexibility in terms of where you can go and where you sit in terms of trying to fill in spaces.”

McGraw shared an example. “We’re launching a small tabletop show and training event for this fall and we’ve been shopping around to find a city in the Midwest that can accommodate us with the right space at the right rate. We’ve seen hotel rates fluctuate 20 to 30 percent in one week if you can go a week later into November instead of October when there’s peak demand. It depends on the city, but the rates can drop precipitously. If a city is very aggressive and if they’re trying to fill a hole and they have a date open, they’ll roll out the red carpet for you.”

Leverage The Power Of Multiples
McGraw’s main event is called InfoComm, a large “full-facility” show that attracts more than 31,000 attendees from more than 85 countries as well as more than 900 exhibitors. “We decided about 18 months ago to sign three-year back-to-back contracts with Orlando and Las Vegas with a rotation,” he said. “We’ll be in Las Vegas in 2008, 2010 and 2012, and in Orlando in 2009, 2011 and 2013. Then we have first space options after that to preserve our date and hall preferences in the two cities.”

He discussed the advantages of signing multi-year contracts with a facility. “You get a lot more leverage than if you’re just doing one-time shows. Previously, we just moved around. In that case, you’re like a new piece of business every time you come back. If you’re an annual, or if you’re on a permanent rotation, you definitely have more clout than if you hadn’t been to that city before.”

McGraw noted that there’s a flip side of that coin when it comes time to renegotiate.  “You may be parked in one city all of the time, but the city can take you for granted after a while. It certainly doesn’t hurt to play the field by making it known that you’re looking for a new venue. That frankly may help you get the attention of the city you want to stay in.”

Know Your Show
“The other thing that can work to your advantage in negotiations is knowing your show’s stats,” McGraw noted. “It’s important to know your pickup for your hotel block and to know what the profile of your visitors is.” He explained that knowing, for example, that your group dines out a lot and/or takes advantage of local social events can add to the conference’s appeal as a financially lucrative piece of business and therefore increase the group’s bargaining power.

McGraw explained that there are many ways to gather this information. “You can do surveys of your attendees. You can work with your hotels from last year. Ask them, ‘How much did we spend? What was your food and beverage revenue and what were our room nights?’ Oftentimes, the CVBs also do this analysis and they’ll share it with you.”

See the Value of CVBs
McGraw enlists the aid of CVBs in other ways, as well. “They are critical contacts because they have the information on the city,” he commented. “They’re aware of all the groups that are coming in and out and the future calendars. They can certainly be a good intermediary with all of the hotels. If you’re booking out a long time in advance, you’re typically working with a CVB that’s putting a citywide block of hotels together with convention space. In several cities we work with, when you get closer in, it’s typically turned over to the convention center if they’re not part of the same authority.”

View the Big Picture
Hall rental fees are just one piece of a very large puzzle when it comes to negotiating convention center agreements. “There are often a lot of preferred vendors and exclusive services involved,” McGraw noted. He gave food and beverage and Internet services as examples. “You have to find out what those costs are going to be. Because those services are exclusive, they often have higher rates, and you can’t put them out for bid. You really don’t have much latitude in negotiating those services.” The end result is that the low rental rate a facility is offering may not be such a great deal after all. “You have to look at the whole picture,” he said. “It’s not as simple as ‘How much does the hall space cost?’ It’s looking at your total spend in the facility and city.” McGraw stressed that planners also need to consider the needs of attendees and exhibitors in the negotiation process, because factors such as hotel rates may impact their decision to attend. The cost of labor is another good example. “In moving our show from Orlando to Anaheim to Las Vegas over the past few years, labor and freight rates varied tremendously from city to city, even though we were paying a similar amount for hall rental. It’s all the other factors you have to weigh.”

Sealing the Deal
So how much of a convention center contract can be negotiated? “It depends on the experience of the person you’re dealing with,” said Sue Fern, president and owner of Event Pro-SSSS, a Palm Harbor, FL-based meeting planning firm that serves the association market. “If they’ve been in the industry for a little while and they understand that quite often associations are sort of set in their ways and their funds are always tight, then you can start to get some flexibility from them.”

One of the groups Fern works with is the Florida Association of Special Districts, which is a state chapter of the American Society of Landscape Architects. “They’re all government employees, so they have their restrictions and they have their guidelines,” she explained. “To that extent, then convention centers are pretty good to work with because they are also quite often government-based so they sort of understand each other’s pain.”

Fern also works with the Association for Public Policy Analysis and Management. “They’re based in Washington, DC, but every other year they go somewhere else,” she said. “They’re under restrictions on where they can go. They have to go where the board approves. On the alternate years, it’s always a challenge.”

The meeting draws 1,200 attendees and has 14 breakouts going all the time. “It’s a hairy four days,” Fern said. For the group’s most recent event away from DC, Fern booked the Monona Terrace Community & Convention Center in Madison, WI, which connects to the 240-room Hilton Madison Monona Terrace. “They were a joy because they have a very experienced team. We also worked with the Madison Covention and Visitors Bureau. It was a nice experience.”

Putting it All On Paper
Since convention centers are often owned by municipalities and other government entities, they tend to prefer the predictability of a standardized contract. “It’s efficient for them to do that,” Hix commented. “I think that their experience is often that people will sign it thinking that it’s carved in stone and there’s nothing they can do. It’s my experience that these things can and should be negotiated.”

As part of the negotiating process, Hix says it’s a good idea to ask the convention center the best way to suggest modifications to the contract. “What I very often do is propose a set of additional terms that we draft separately. It’s an addendum that both parties sign. The amendment states that these terms will apply instead of the equivalent terms in the contract.”  She feels this is far preferable to returning a document that is redlined with attorneys’ comments written all over it.

“It’s kind of a psychological issue,” she said. “A lot of convention centers are more comfortable negotiating this way, and it’s equally as enforceable as if you had redlined the agreement. It just looks different.”

A Final Caveat
Once negotiations are complete and the contract has been signed, it may be tempting to just put the document in a file and forget about it, but that would be a mistake. “Contracts are living documents,” Hix stated. “As important as it is to have your contract reviewed by legal and your insurance provider, it’s also very important to have the document reviewed by the relevant meeting planners and affected parties, and have the deadlines and performance obligations in the contract created into a performance plan for your team.”

Convention center contracts often include deadlines that must be met to avoid defaulting on the agreement. Hix shared some examples: One is an organization might be required to provide an exhibitor layout by a specific date. If they don’t, it will be considered a default and the contract can be terminated. Another is that the convention center may reserve the right to review any promotional materials that use the convention center’s name. “People say, ‘Nobody ever told me that.’ I see this all the time,” Hix said. The last thing planners want is for a convention center to use a simple missed deadline to void the contract so they can pursue a larger piece of business.

Hix explained how she deals with this potentially troublesome situation. “What I typically put in the contract is that any act that a convention center says is subject to default will not result in default unless the association is given notice of the deficiency and the ability to cure it, so you’re never in a position where you’re tripped over a deadline.”

Hix also recommends that planners have someone go through the contract and create a separate document that flags each specific performance deadline and obligation. “They’re important milestones for communication with the convention center. The success of the event comes down to the successful management of relationships with the organizations. If they have certain expectations, and you’re not keeping track of them, it can lead to strained relations and missed communications, and you’re not getting the quality of service you could have gotten. There’s a reason they ask for these things.”

The Bottom Line
Successful convention center contract negotiations require diligence along with a skillful blend of planning, knowledge, flexibility and legal advice. As McGraw summed up, “To my knowledge, there’s no trade secret to getting a deal.”    ACF

Negotiating For Rooms By Edward G. Rogoff Meeting planners know only too well that room availability is down and, as the Law of Supply and Demand predicts, prices are up. Higher prices for attendees means reduced attendance at conferences and conventions.  The burden falls on you the meeting planner to bring the event in on budget, so when demand exceeds supply, you simply have to be a better negotiator to make sure you get the best prices possible. Here are 15 strategies to help guide you in being the best negotiator possible: 1. Look for leverage. If your meeting does not have to be booked well in advance and is smaller than the typical convention — 500 or fewer attendees — you may have more leverage with hotels that need to fill midweek gaps between big shows and weekend tourists, especially in a slowing economy. Or, leverage meeting volume if you can offer multi-year, back-to-back bookings. Check into off-season rates in first-tier cities. Look at second-tier markets, which may incentivize your group to gain your business. 2. Get every issue on the table early. Coming back with additional needs or demands after the hotel staff thought they had already met your demands is a surefire way to derail deals. 3. Be the only negotiator. Don’t let other people from your organization also contact hotels — they will confuse things and likely foul up the negotiation because they might not understand all the issues as well as you. 4. Learn about the issues with each venue and destination. What else is going on in town? Is the hotel undergoing a renovation or expansion? Is there a new hotel development coming on line? These developments may loosen up the marketplace to help you get better rates. What other services can they offer? 5. Role play. You’ve done this before. You know how these conversations go. So prepare by role playing your negotiation with a colleague, asking tough questions. 6. Establish your priorities. What is most important to you? Are you willing to trade off price against service? Are you willing to guarantee rooms for a lower price? How much lower? 7. Listen, listen and listen some more. Listening is how you learn about the needs of the other party. When you know what they need, you can be creative in trading off what you need against their needs. 8. Have a walk-away point. What is the price you can’t go above and that will force you to go elsewhere? 9. Change the value proposition for the other party. Make it more than just booking rooms. Will you be doing a press release about your event that mentions the hotel? Will you or the group be a regular customer? Will they buy other services?  Will the members of the association return for vacations? Do you book many events at other hotels owned by the same company? 10. Establish competition.  Competition is the enemy of high prices. Let them know you are talking to other hotels and even other locales so they realize they are fighting for a share of your business. 11. Set deadlines. By what date do you need this wrapped up? Remember that in a tight market, time is your enemy. 12. Deal with price last. You can’t negotiate price until you and the other party know exactly what you are getting. 13. Be confident and make concessions slowly. Don’t let them see or hear fear. That’s when smart negotiators move in for the kill. 14. Reinforce the other party’s cooperation. Be appreciative of the other party’s help and concessions. Reinforcing cooperation leads to more cooperation. 15. After closing, move forward quickly. Good deals spoil quickly. When you have a deal you like, put it in writing before memories fade. The current tight market requires you to work harder than ever, challenging you to have more conversations and negotiations than ever. Employing these key strategies should help you get the results you and your association need. Edward G. Rogoff is a professor of management and academic director of the Lawrence N. Field Center for Entrepreneurship at Baruch College in New York City. He is the author of several books, including The Entrepreneurial Conversation, which he co-authored with Michael Corbett. He conducts seminars on Tough Negotiating Made Easy, Entrepreneurship, and other business and management issues. For information, visit www.newtonprograms.com.

Contract Talks 5 Key Items Every Convention Center Agreement Should Include While there are countless details contained in every convention center contract, Lisa Hix, Esq., an associate in the nonprofit organizations practice of the law firm Pillsbury Winthrop Shaw Pittman LLP in Washington, DC, highlighted some of the key items that every legal review should include: Cancellation Clause. Some planners may think a cancellation clause is sufficient if it allows them to cancel without any additional amounts due. “But they don’t think about amounts that have already been deposited and whether those will be returned,” Hix said. “The two items to look at are whether the convention center has any obligation to relet your space, and if they do, whether income will offset amounts that you would have to pay on this space and any deposits.” Force Majeure. “This is something that can and should be negotiated,” Hix said. “What you’ll often see is that the convention center will start off with the phrase, ‘If we are unable to provide this facility, we may terminate this contract without liability.’ That’s a one-way force majeure clause. What you need is a mutual force majeure clause, one that includes the concept that if you’re unable to use the facility, then similarly, you’ll have the ability to terminate without liability. I typically put in a couple of key phrases. One is ‘acts preventing or unreasonably delaying a certain percentage of meeting attendees from attending.’ Usually, I say 30 percent. The other is ‘any other cause beyond control of the parties that makes it inadvisable, illegal, impossible or commercially impractical to use the facility.’ What the ‘commercially impractical’ phrase gets you is the ability to terminate if it would simply be financially ruinous to hold the event.” Indemnification. “What indemnification does is clearly stipulate who will be financially responsible for which acts under a contract,” Hix explained. “One of the difficult things is that convention centers that are state owned have what is called ‘sovereign immunity.’ It basically means that the state will not be held financially responsible either for the acts of its employees and agents or for structural defects that result in injury. Oftentimes, the convention center is not fully versed in what they can or cannot indemnify. They may not know if their service providers would be covered or if certain types of damage are covered. What I typically say is ‘to the full extent allowed by applicable law, the convention center will indemnify my clients for acts, omissions, etc.’” Insurance. “To the extent that you are indemnifying the convention center, make sure you have insurance coverage,” Hix said. “A lot of times, an organization will look at their convention center contract and then look at their general liability coverage, but they forget one thing. Commercial general liability policies will often exclude any liability that you assume via contract. Rather than try to understand what your coverage is and what your exclusions are, it’s best to sit down with your insurance provider and see what’s covered. I would do this while you’re in the negotiating phase. If you simply can’t get coverage, that’s a deal breaker.” Ability to Review and Dispute Bills.  A facility may agree to provide parking attendants, vendors and other services at the association’s expense, but it’s a good idea to specify in the contract that the related bills be made available for review. “When you’re having services that are being provided in addition to a basic rental fee,” Hix explained, “it’s important to be able to review and dispute the bills and to not pay any interest on an amount that you are disputing until it’s settled.” — KB