Negotiating tips from John Foster
Everyone whoâs been to a meetings industry conference likely has heard John Foster, Esq., of Foster, Jensen, & Gulley, LLC, talk about contracts. I know I have, many times. And yet I always learn something new. That was the case yesterday when I heard Foster speak at the Passkey Housing Forum yesterday in Boston.
Some key points from his session:
⢠âHotels today donât hesitate to sue their clients,â he said. Theyâre also trying to shift as much of the risk as they can to meeting planners which, he said, âI donât think is unreasonable as long as they do it the right way.â
⢠Johnâs Golden Rule:
If you ask for something before a contract exists, itâs called negotiating. If you ask for something after a contract exists, itâs called begging.
⢠Use a three-step process for your contract. The first time, look the contract over for clauses that are vague, one-sided, or overly burdensome. The second time, look for whatâs missing that needs to be added. Citing the case of the International Womenâs Bowling Congress v. Hyatt, where the lack of an attrition cause led to a lawsuit, he said, âIf the bowling group had just one more sentence, they could have avoided two years of litigation.â
The third step is to revise, provide addenda, or rewrite the contract to include all the new terms and conditions. âGive the other side what theyâre asking for, but change the terms—thatâs the secret of compromising,â he said.
⢠âPenaltiesâ are meaningless in civil litigation, with âpenaltyâ being defined as something that allows the injured party to benefit more than they would have if the contract were performed. Contracts should always talk about damages, not penalties.
⢠Damages equal lost profits, not total lost revenues. In hotels, the average is 75-85 percent profit margins on guest rooms; 25-35 percent on catered food; and 80-85 percent on alcohol beverage functions. I loved how Foster said to respond to a hotelier who insisted on getting 100 percent of revenue for guest rooms: âAre you crazy?â He added that they should ask why you should pay for expenses they donât incur.
Sales bonuses are based on total revenue, he said, not profit, which is why salespeople tend to think this way. âItâs not your obligation to help them meet their revenue goals,â he said. If they wonât budge, ask to speak with someone who is authorized to make those changes, because this really isnât up for dispute.
⢠Hotels like to have groups guarantee theyâll spend a minimum amount of revenue for guest rooms in their attrition clauses. Foster says, donât let them do this. This shifts all the risk to planners. For example, what if you booked the meeting in 1999 for a 2002 meeting? The economy completely changed, so your negotiated $200 group rate wonât look so hot when the rack rate is now $150. If your contract was written to guarantee revenue, youâre basically out of luck if you canât make the minimum. âItâs not your responsibility to manage a hotelâs room rates,â he said. âWhy should it be the hotelâs responsibility to manage the plannerâs revenues?â
A better way is to base your formula on guaranteed room nights, he said. Also, include an audit provision so you can check for rooms that should be credited to you.
There was a whole lot more, but my fingers are getting tired. Go see him speak at the next conference you go to, if you havenât already.
