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EVENT INTELLIGENCE

How Venue Contracts Are Changing

Five ways venue agreements are changing, and how they can cost—or save—lots of time and money.

Illustration: BizBash

If you haven't taken a close look at venue contracts lately, you might be in for a surprise. Venue owners and their lawyers are throwing in new clauses and tweaking existing ones all the time, and—of course—those changes are more likely to benefit the venue’s interests than its guests’. Check out this overview of recent trends, and then look at the fine print on the contracts on your desk.

Privacy of guest data is under fire. More hotels have begun using contracts to lay claim to guests’ personal data, so when an event brings a big group to a hotel, it’s up to sharp-eyed planners to strike or amend those clauses—or risk having their attendees’ info get used in ways they weren’t expecting. Last year, Starwood Hotels & Resorts added a clause to its standard contract that lets it use guest data for future marketing campaigns. The initial verbiage of the clause (later amended) even let them sell guest data to third parties and stipulated that the event host would be legally responsible if that information fell into the wrong hands.

Understandably, industry lawyers are alarmed by this prospect, especially since many point out that other brands will probably adopt similar clauses in the future. “I think everyone’s starting to get concerned about data privacy,” says Jim Goldberg, a lawyer with Goldberg & Associates in Washington, D.C. “Most planners don’t have the authority to transfer names [to other organizations].” In fact, event organizers can get into legal trouble if their handling of guests’ information doesn’t conform to the organization’s privacy policies.
      
John Foster, an attorney with Foster, Jensen & Gully in Atlanta, points out another liability: Many corporate meeting and event managers have compelling reasons to keep the details—including attendance—of their meetings under wraps. “Corporations that are in a highly competitive business might not want [others] to know they’re having a meeting,” Foster says. “They don’t want their competitors to know they’re in the hotel.”
 
His advice for dealing with such a clause is simple: “I’ve always advised against signing those, because the planners don’t have the authority [to release personal data] unless they go out to attendees and get release forms.” Save yourself the trouble, and strike the clause before signing.

Insurance and indemnification requirements are getting stricter.
The burgeoning real estate market of the last several years means that hotels are worth a lot more—and the cost of insuring them has shot up, too. “Because of the market we’re in, owners are realizing that the values of their hotels are growing at an astronomical rate, and they need to protect that value,” says Steve Rudner, a hotel lawyer with Rudner Law Offices in Dallas. As a result, many hotel contracts today demand a higher level of liability insurance from groups. The once standard ceiling of $1 million has been raised to as high as $2 million in some cases.

Industry lawyers say it’s important to remember that this increase isn’t as onerous as it seems. Property-damage claims—except in the case of severe fires—rarely exceed the amounts put forth in insurance policies. But lawyers like Jim Goldberg caution against contract verbiage that makes the group responsible for damage caused by its attendees and even by hotel employees. With such provisions in place, he says, “Anything that goes wrong is your fault.” If a hotel employee starts a grease fire in the kitchen or if an attendee starts a room fire with a candle or cigarette, the group would be on the hook for potentially astronomical damages. Your best bet is to strike clauses like this or talk directly to the venue’s lawyer to get this stipulation removed from the contract.

Don’t assume a force majeure clause is a get-out-of-jail-free card. After the terrorist attacks of September 11, 2001, hotels touted their force majeure clauses—contract language that allows groups to cancel without penalty if a disaster strikes—to lure back skittish groups. When groups try to invoke these clauses, though, they’re often surprised to find that hotels have begun interpreting them in a markedly different light.

“There’s a difference between the way hotels look at the issue versus the way planners do, and they’re somewhat opposed to each other,” Foster cautions. He saw how hotels have begun pushing back when he worked with the American Association for Cancer Research in 2003, when the group canceled its annual citywide meeting, to have been held in Toronto, as a result of the SARS outbreak.        

“Three weeks prior to the meeting, we started getting major cancellations,” says Michael Stewart, the association’s C.F.O. “Each day there was a new crisis.” Since many of the association’s constituents are doctors who treat immune- compromised patients, the group’s governing body decided to pull the plug on the meeting two days out, leaving roughly two dozen broken contracts in its wake.
       
Stewart was surprised to learn that in spite of numerous health advisories urging travelers to avoid Toronto, the hotels initially wanted to play hardball. “Their view was, the buildings and infrastructure were there, so it’s not impossible to hold the meeting.” Legal wrangling ensued before the group ultimately reached a settlement, and today Stewart says the association’s contract includes a reference to disease outbreaks and pandemics in its force majeure clause.

Service requirements and charges are on the rise. Industry lawyers say service charges—the additional 15 to 22 percent tacked on to the final bill—and arrangements that force event organizers to use third-party vendors of the venue’s choosing are both on the increase. “We’ve started to see service charges come up on [audiovisual production] and things like that,” Goldberg says. “To me, this is just a way of increasing the price without increasing the price.”

Marion Piccuito, who plans sales and marketing meetings for pharmaceutical company Serono, says she’s seen this charge and others slipped into some of her recent contracts. “It was a little bit of a surprise to see how the fees are creeping in,” Piccuito says, adding that she’s learned to watch for audiovisual service fees of 20 percent or more, along with requirements that she have one of the venue’s audiovisual people on hand to “assist” even if she brings in her own technicians. It’s a new incarnation of the requirement that events use a venue’s in-house contract vendors—a clause planners love to hate.        
       
Exclusives are also still a sticking point, especially since some venues are piling on the requirements. While meeting managers have grown accustomed to using exclusive catering and audiovisual vendors, some new contracts require using computer-rental providers, tech services, and even decorators of the venue’s choosing.
       
“We’re seeing more venues going to exclusive arrangements with all providers,” says Barbara F. Dunn, an attorney and partner at Howe & Hutton Ltd. in St. Louis. Dunn had to fight when a convention center tried to bar one of her clients from having a cybercafe, on the grounds that it infringed upon the services of the venue’s business center.
       
The best way to fight these clauses, lawyers say, is to ask up front about exclusives and to state in the contract that no vendor agreements other than the ones you specify will be honored. If the venue values your business, it might be willing to drop some of the requirements.

Meal guarantees are often based on dollars, not attendance. Finally, industry lawyers point to a change that actually benefits event hosts: Hotels are dropping requirements for head counts at meal functions and instead are asking groups to guarantee a dollar amount. “We are seeing a definite trend away from the use of counts as the basis for attrition and, instead, the use of food and beverage minimums,” Steve Rudner says. “This gives the group a tremendous amount of additional flexibility.” Rudner says that as recently as five years ago, only five percent of contracts that crossed his desk included the use of food and beverage minimums; now, he says, that figure is closer to 50 percent.
      
F&B minimums give planners the option to ramp up the quality of the entrée or the number of appetizers rather than pay a penalty if fewer people turn out for a meal. Sure, the money’s still going to the hotel, but it’s going toward an enhanced guest experience and not straight into the coffers. 


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