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Chapter 9 Negotiations and Contracts

Chapter 9 Negotiations and Contracts. Convention Management and Service Eighth Edition (478TXT or 478CIN). Courtesy of Nikko Hotels. Competencies for Negotiations and Contracts. Describe how hospitality salespeople prepare to negotiate with meeting planners.

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Chapter 9 Negotiations and Contracts

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

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

  3. 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. Negotiations—Purpose, Objectives, and Preparation (continued) 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. Negotiations—Purpose, Objectives, and Preparation (continued) 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

  6. 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

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

  8. 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

  9. Elements of a Contract or Letter of Agreement • Names of organization and hotel—preamble • Official dates of the meeting • Number and kinds of rooms, cut-off date • Rates/commissions • Arrival/departure pattern • Meeting space—determine release date when unused space can be released back to the hotel • Complimentary and reduced-rate rooms • Prior visits • Working space, offices, and press room (continued)

  10. Elements of a Contract or Letter of Agreement (continued) • Registration control • Exhibit space • Food functions • Refreshment breaks • Liquor • Gratuities and service charges • Audiovisual equipment • Union regulations • Master account and credit procedures—credit application (continued)

  11. Elements of a Contract or Letter of Agreement (continued) • Method of payment • Termination/cancellation clauses • Damage clause (liquidated or mitigated damages) • Attrition clause—guestroom, food and beverage, meeting room • Arbitration/dispute resolution • Warranty of authority • Insurance/indemnification • Other contract matters/addendums

  12. Convention Industry Council (CIC) Composition • 34 member organizations • Half represent sellers, half represent buyers • Members include AH&LA, DMAI, and MPI (continued)

  13. Convention Industry Council (CIC) (continued) 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.

  14. 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

  15. 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)

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