Hotel Contract Basics

Now that you’ve got an overview of the hotel business, let’s look at some important points regarding your hotel contracts.

A proposal is not a contract.

What you will typically get in writing from the hotel after your initial meeting(s) is a letter outlining some of the high points of your discussions. It will almost always list a room rate, meeting space charges, etc. But a letter from the salesperson is not a contract. Sometimes the letter will explicitly say that it is only a proposal, a non-binding agreement, etc. But even if it says “we are pleased to offer a room rate of $99/night and are holding space for you” the hotel is free to change its mind at any time. Here’s an easy way to tell whether it’s a contract: flip to the last page; if it doesn’t have a place for you to sign, it’s not a contract. There’s nothing wrong with proposals in the early stages of negotiating. In fact, if you are working with many hotels, it may be best for you to identify your “short list” before you start asking for contracts, using the information in the proposals as the basis of your initial negotiations. But once you have identified your top choices, you will want to ask the hotels for a contract.

FYCPAA’s bidding requirement #2 states: “Bidders must have commitments from at least two hotels, including dates showing availability of banquet and speaking rooms in the hotels, and proof that the hotel requires no commitment as to the number of people attending. This commitment needs to be represented in the form of a hotel contract out-lining the costs of doing business.” 

An example will illustrate why this is so important. Your city only has two hotels-A and B-that are capable of holding an FCYPAA. If you don’t have held space, what can happen? You come to FCYPAA and are awarded the bid. (Yippee!) You go home all excited; only to find out that Hotel A signed a contract with another group a few days before FCYPAA. Now Hotel B is your only choice, and you’ll have very little negotiating leverage, because Hotel B will find out (if it doesn’t know already) that Hotel B is your only option, and that your city has already been announced as next year’s host city.

Your contract shouldn’t be a math (or calendar) problem–use actual figures.

As we’ve discussed, pricing is often based on percentages and sliding scales and the like. Similarly, dates and time periods are described generically, like “one week” or “within ninety days.” In order to minimize the amount of work the salesperson has to do, she typically won’t make any of those generic terms specific, but you should insist on it.

Will you have to pay a deposit?

That varies from hotel to hotel, but there are some ways to minimize the chances of having to pay one. This is typical hotel contract language: Direct billing requests will be reviewed in accordance with the Hotel’s normal approval process. If direct billing has not been established, the estimated amount of the master account must be paid no later than fourteen (14) days before arrival. 

How do you keep your bill with the hotel manageable?

The first thing you should do is look for a clause like this in the contract: Hotel must be notified of the authorized signatories in writing at least 21 days prior to arrival. Whatever the deadline is, be sure to meet it. And if there is no such clause, add one something like this: Group agrees to provide names of persons authorized to charge to the Master Account in writing by [date]. Group Treasurer and Hotel Billing Manager will meet on [Monday after conference] at 10 AM to review the Master Account; all undisputed charges will be paid at the end of that meeting. Group will not be responsible for charges not authorized in advance.

What about the other clauses in the contract?

Many of them are standard contract language, sometimes referred to as boilerplate. However, there is one you will want to look out for. It’s usually headed “ARBITRATION” or “DISPUTE RESOLUTION” or something similar, and you want to have any reference to “binding arbitration” removed from your contract before you sign it. (Reference to “non-binding mediation” is OK.) Arbitration is a process that is notoriously pro-business; why would you agree to a binding decision made by an arbitrator that you’re almost sure will side with the hotel?

After we sign the contract, does every change require an amendment or addendum?

Generally, yes. Most contracts have a clause that says what’s in the contract is the entire deal and it “may not be amended or changed unless done so in a writing signed by the Hotel and the Group.” You can try to make life a little easier for everyone by adding a clause that allows the use of email. It can be as simple as “Electronic mail sent by the Hotel or the Group shall be considered a signed writing.”