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Contracts 2014: Who’s in the Driver’s Seat?

Contracts 2014: Who’s in the Driver’s Seat?. SGMP 2014 National Education Conference James M Goldberg. Understanding the Metrics, Cycles. Occupancy 2005 – 65.0%; 2009 – 54.6%; 2014 – 63.2% Average daily rate 2005 - $92.94; 2009 - $98.19; 2014 - $115.31

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Contracts 2014: Who’s in the Driver’s Seat?

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  1. Contracts 2014: Who’s in the Driver’s Seat? SGMP 2014 National Education Conference James M Goldberg

  2. Understanding the Metrics, Cycles • Occupancy • 2005 – 65.0%; 2009 – 54.6%; 2014 – 63.2% • Average daily rate • 2005 - $92.94; 2009 - $98.19; 2014 - $115.31 • Revenue per available room (RevPAR) • 2005 - $57.37; 2009 - $53.57; 2014 - $73.82

  3. Relationships • Hotel says: “It’s a relationship business” • But, really, it’s a business relationship

  4. Contract Drafting “Traps” • Do not assume anything • Make everything clear • Avoid vague words • “Anticipated gross revenue” • “Average group rate” • Anticipate problems

  5. Top Clauses for Contract Negotiation • Names of Parties • Dispute Resolution • Quiet “Enjoyment” • Indemnification • No Fees, No Policies • Cancellation • Termination/Force Majeure • Attrition

  6. Names of Parties • Ownership and management are split • 70%+ of all properties are franchised • The wrong way: “flag” name • The right way: legal name of owner or manager

  7. Dispute Resolution • Arbitration v. litigation • Public v. private • Waiver of jury trial? • Venue • Choice of law • Attorney’s fees

  8. “Quiet Enjoyment” • Other groups in house • Collective bargaining status • Construction/renovation • Safety and security

  9. Indemnification • Negligence, gross negligence, sole negligence • Be responsible for only what you cause • Make indemnification mutual

  10. No Fees, No Policies • Surcharges are plentiful • Resort fees • Master folio billing fees • Automatic gratuities for housekeeping • Fees for room audits • Disclosure and agreement

  11. Cancellation • Liquidated v. actual damages • State in dollars-and-cents • Base on lost profit, not revenue • 73% for sleeping rooms, 24% for f&b • Mitigation • Credit for resold rooms • Credit for charges to individual guests

  12. Termination/Force Majeure • Termination differs from cancellation • No fee is involved • What is force majeure? • “Illegal or impossible” standard • Other reasons for termination • Construction • Convention center unavailability • Change in management or brand

  13. Attrition • A major problem when attendance is voluntary • “Use it or lose it” provisions • Horizontal v. vertical • Base on room nights, not on “anticipated revenue” • Other attrition fees • Meeting room rental, f&b, concessions

  14. Questions?

  15. Meeting Contracts: What You Don’t Know Can Hurt You SGMP Educational Program James M. Goldberg

  16. Questions?

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