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Mastering Hotel Contracts: Strategic Drafting & Negotiation Guide

Learn essential contract drafting tips, top negotiation clauses, and crucial legal terms for successful hotel partnerships. Explore case studies, metrics analysis, and expert advice. Stay ahead in the competitive hospitality industry!

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Mastering Hotel Contracts: Strategic Drafting & Negotiation Guide

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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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