2 Top Meetings Lawyers Detail Major Contracts for Business Events | Meetings Today
The only constant in business events is change, and when it comes to contracts, fluctuating market dynamics have created a stubborn atmosphere of uncertainty in an industry built around planning for the. . .
The only constant in business events is change, and when it comes to contracts, fluctuating market dynamics have created a stubborn atmosphere of uncertainty in an industry built around planning for the future. This constantly shifting landscape—involving government regulations, prices, event security and even a basic agreement on what exactly constitutes a force-majeure situation—has planners throwing up their hands in frustration. So, we reached out to two of the most prominent meetings industry attorneys to get a lay of the land. Joshua Grimes, president of Grimes Law Offices, listed pricing and cost increases, attendance and security as three issues currently impacting in-person meetings and events, with the ever-present specter of force majeure rearing its head in even more confusing ways as venues become far less agreeable on what constitutes an “act of God” in terms of attrition and cancellation. Let’s peel back the onion, courtesy of Grimes and his industry legal colleague Tyra Warner. [Related Webinar:Meetings Contract Clauses You Need to Know]1. Pricing and Cost IncreasesJoshua GrimesDuring aMeetings Today Podcast taping, Grimes echoed what’s on the minds of most business-event planners: how to strategize around an unpredictable economy impacted by sudden shifts in federal government trade policy; an on-again, off-again U. S. war with Iran; and an inflationary environment that just won’t seem to ease. [Related Podcast:The Latest Meetings Industry Trends]“We’re seeing tariffs set by the federal government come and go, which impacts the cost of goods and services; particularly things that are brought in from other countries, which is a lot of food and other goods,” Grimes said. “Inflation has been on the increase. We’ve had the war with Iran, which has increased the cost of oil. “All of these things have made pricing very unpredictable in two respects,” he continued. “One is if you’re signing a contract now or negotiating a contract now, it’s difficult to determine prices. Even if a meeting is three or four months away, we don’t know if prices are going to go up or down. At the time that we’re having this conversation, the president said he’s going to impose [a toll] to bring oil through the Strait of Hormuz, which means that the price of oil could go up even further, and that could increase the cost of goods. ”Grimes contends that while venues will typically agree to not raise prices, say, more than 3% to 5% a year, if planners are negotiating a contract now, they should factor in that prices could actually increase less than that—or even decrease—if the war with Iran is resolved in the next few months. “The price of oil could dramatically go down, and that could lower the price of food and certain kinds of products. It’s important to account for both directions; the challenge is how to effectively do that in a contract,” he said. “Part of it involves developing a contract clause that may include certain factors that would cause prices to go up or down, or maybe even tie the costs in your contract to what the Consumer Price Index is right now, and any changes between when you sign the contract and the time of your meeting. It’s more critical than ever to consider doing that. ”[MoreMeetings Industry Legal and Contracts Content]2. Predicting AttendancePerhaps the biggest worry for business event planners is attrition, and the substantial penalties that ensue when room block assurances are not met. “What we’re seeing now is attendance that is very hard to predict due to circumstances that we weren’t considering as much a few years ago,” Grimes offered. “Meetings that depend on foreign attendance have really seen drop-offs and fluctuations due to difficulties in getting visas; reluctance to come to the U. S. because of government policies; concerns that social media might be inspected at the airport or prior to a visa being granted; whether foreign conflicts are causing airlines to have interruptions—things like that. The price of oil rising dramatically, the cost of airfare; all of these things are making attendance more and more unpredictable. ”Medical meetings, for which attendees are often dependent on government grants to attend, can be particularly susceptible to uncertainty. A strategy to address volatility in the marketplace is to not rely as much on event history when predicting room-block minimums, but to have more flexibility by checking in with the venue further in advance. “My suggestion for contracts is that you really consider not just meeting history, but what could happen and build more fluctuation,” Grimes advised. “Maybe even have an option to reduce attendance without any sort of damages or penalty at some point between when you sign the contract and maybe a year before the meeting, or even six months before the meeting, because attendance is so unpredictable these days. ”[Related:Event Contracts Survey: Planners’ Biggest Sticking Points]3. SecurityThe very nature of in-person events makes security an issue of supreme importance, as hundreds if not thousands of people are gathered in one place. But the issues involved can be more nuanced than many believe. “We’re seeing different considerations for security; everything from disruptions in a meeting, protests in a meeting, even concerns about protests internally amongst meeting attendees,” Grimes said. “These things can happen because you’re going to have a VIP speaker or because of the content of the meeting. Maybe it’s a company that is now attracting protests and attention. There’s a much more heightened concern about security at meetings and it needs to be dealt with in terms of who’s going to pay for it. “Traditionally, the venue only provided a very rudimentary level of security and the groups had to pay. But now it’s a question of whether groups can get adequate security on their own at reasonable cost, even if it has to be backed up by law enforcement—if law enforcement has the resources available,” Grimes added. “The important point here is that security, which maybe a few years ago was really just a factor for large meetings and very high-profile meetings, these days is a consideration for almost any meeting, except maybe a smaller, closed-door meeting. ”[Related:RFPs: Make an Offer They Can't Refuse]4. Force MajeureGrimes emphasized that venues seem to be much more aggressive when it comes to defining what a force-majeure situation is. “It’s one thing to have a force-majeure clause, but it’s another thing to actually be able to invoke it,” Grimes said. “I would argue that with some venues and suppliers these days, nothing would be a force majeure. “What I have seen recently is situations that are almost textbook force-majeure situations but the venues don’t want to acknowledge it even though it’s a clear force majeure, and there’s really very little precedent on how to handle that,” Grimes continued, citing as an example the curtailing of air service during the U. S. war with Iran. “I did not hear of any successful invocations where groups felt that they were going to have a drop off in attendance that should at least cause attrition to be minimized because of the situation with airline reductions or terminations,” he said, “but there was no acknowledgment that it might be a force majeure. ”Even what is undoubtedly considered an “act of God”—major weather events—have been challenged by venues. “This last winter, we had some weather events in the Southeast that caused in some cities power outages affecting hundreds of thousands of people, but I know of situations where the hotels refused to acknowledge that it was a force majeure even while their city was without power,” Grimes said. “I think we’re now at a point [where] you could have a clear force-majeure situation but the venues and hotels will not acknowledge it. I think the industry has to consider that and how we deal with that in our contracts. ”[Related:Setting the Stage: Expert Advice for Affordable, Effective AV and Production]The ‘Big Three’ (and Two More!)Tyra WarnerWhile Grimes focused on some of the more topical meetings-industry legal issues of the day, fellow attorney Tyra Warner provided details about the three legal hassles that always seem to rise to the fore. “As far as important contract issues, I consistently call attrition, cancellation and force majeure the ‘Big 3’ because they have the biggest potential financial impact,” she said. “But incompatible groups and construction/remodeling are also important issues. ”Warner offered insights into the “Big 3” but threw in a couple more for good measure. ”1. AttritionNeedless to say, this is a challenging clause for all planners. Even those groups who never faced attrition before have seen it in light of Covid, government actions and other issues. The big thing with attrition is to make sure the group pays for a property’s lost profit and not lost revenue. The hotel is not entitled to make more money off of an empty room than they would have if the room had been occupied. An empty room doesn’t incur the same expenses an occupied room does. The other important tactics are making sure the group gets credit for any rooms in their block that are resold (the hotel can sell any other rooms in their inventory first) and making sure an audit is done so the group gets credit for all rooms occupied by attendees regardless of rate and reservation method. [Related:5 Essential Meetings Logistics Contract Tips]2. CancellationLike attrition, the group should pay lost profits and not lost revenue, and should get credit for resold rooms. They may also ask for some or all of the cancellation fee to be credited toward a rebooking if the group has an upcoming meeting they can place in the same hotel. 3. Force MajeureThis clause is the epitome of a “gray area. ” It is rarely a slam dunk that an incident constitutes a force majeure, even with natural disasters. The key is that whatever happened has to make it “illegal, impossible or commercially impracticable” (which is how I like to see force-majeure clauses written) to hold or host the meeting. It’s not necessary to try to put every possible incident in the force-majeure clause as long as there is language like, “or similar occurrences or emergencies” as a catch-all for the incidents we didn’t anticipate. [Related:5 Meetings Contract Challenges and Solutions for Uncertain Times]4. Incompatible GroupsCorporate meeting planners are typically good at including a “no competitors” clause in their contracts, but any type of group may encounter an incompatible group. I recently heard a planner talking about a group that was taking a certification test and there was a loud social event next door. That’s incompatible. Including a clause that says the hotel won’t book an incompatible group is a start, but the clause needs to go on and have remedies if the hotel does book an incompatible group. I like to look at three-fold remedies:The group can terminate without liability. The hotel will move the incompatible group to another space or another hotel. The hotel will pay to move the contracting group to another space or another hotel. [Related:8 Meetings and Events Contract Points for Turbulent Times]5. Construction/RemodelingDepending on how far out a meeting is booked, it is possible that construction or remodeling may be scheduled after the contract is signed but before or during the meeting. If it is known before the contract is signed, obviously the hotel should disclose that. If it comes up after the contract is signed, the language should say that the hotel will notify the group within x days of finding out about the construction/remodeling. Again, consider a three-fold clause remedy:Group can terminate without liability. Hotel will suspend construction during group’s meeting days/times. Group will be relocated to a space in the contracted hotel or in an alternate hotel at contracted hotel’s expense. An exception should be made for emergency repairs. About the authorTyler Davidson is the vice president and chief content director for Meetings Today, which publishes the meetings industry trade magazine Meetings Today as well asMeetingsToday. com, various newsletters, webinars, the in-person Meetings Today LIVE! Hosted-buyer events and other meetings and events industry B2B channels. Tyler has covered the travel trade for nearly 35 years. In his role with Meetings Today, which recently won the prestigious FOLIO: Eddies Award for best magazine issue, Tyler leads the editorial team on its mission to provide the most in-depth meetings content in the industry. Previously, he worked as the Asia, Canada, Pacific Northwest and Western U. S. editor at Travel Weekly magazine and TravelAge West. Before joining the dual editorial staff producing destination sections for Travel Weekly and TravelAge West, Tyler was the Africa, Israel, Middle East, Switzerland and Pacific Northwest editor at TravelAge West. He also undertook general news and feature assignments while working at the magazines. Besides reporting on the travel trade, Tyler has covered the real estate industry, held various editorial positions at the San Francisco-based national satire magazine The Nose, wrote freelance technology industry pieces and covered the San Francisco 49ers and Oakland Raiders for a bilingual newspaper in San Francisco. He has a B. A. in Journalism from San Francisco State University, where he worked in various editorial capacities on its award-winning student magazine, Prism. Contact:[email protected]