At first brush, a convention center contract doesn’t seem much different than a hotel contract. Both are legally binding agreements through which your organization takes possession of and utilizes space for a relatively short period of time. In practice, however, the similarities nearly end there. Understanding the differences arms meeting professionals with more realistic expectations for negotiation outcomes and provides a better understanding of strategy for reaching a satisfactory agreement.
The principal differences between convention center contracts and hotel contracts arise from economic forces. Anyone with experience dealing with convention centers knows that the majority of them are owned and operated by a division of government or an appointed authority. For this reason, convention centers don’t experience market pressures to the same extent hotels do. In any given city, there are far more hotels than convention centers; with less competition, the convention center has a clear upper hand in contract negotiation. Plus, rules or regulations that are in force often effectively close off the negotiability of many contract clauses. Even when convention centers are privately owned, competitive forces are usually absent.
Don’t give up here, though. Realistic expectations and an understanding of limited bargaining power help the meeting professional focus in on the most important contract matters that can actually be modified. What follows are tips from my experience in achieving better negotiation outcomes.
Starting Early & Contingency Clauses
It seems obvious in hindsight, but at the time it’s often ignored: start early. The closer to your meeting, the more hardship you’ll have finding alternatives. The convention center knows this, and understands it has more control as time goes on. Get the agreement early and have a lawyer review it for you. Paying an experienced attorney for a few hours to review the proposed agreement can save you a lot of time, expense and surprise down the road. Know what’s in the form agreement and get a feel for what you can live with and what you can’t. If you can start to look at convention center contracts while several destinations are available, you’ve placed market pressure on the convention center that it doesn’t ordinarily experience. Starting early is the key to leveling the field.
Next, propose replacement contract language yourself, rather than merely identifying what you’d like changed. Whether you supply an addendum with terms or make changes within the form agreement, proposing your own language is the soundest approach.
Critically, your hotel agreements should be forming at about the same time. There’s particular risk in entering into one contract on the assumption another will be formed. Contingency clauses are the answer to this problem. When you sign an agreement knowing that the negotiation of another important meeting contract is in progress, you should always condition the agreement you’re signing on the successful completion of the other unsigned agreement. If the convention center deal falls apart, your organization can terminate the hotel contracts without liability, or vice versa. It’s an easy way to manage risk and keep the meeting plans moving along.
On important clauses regarding indemnification and liability, I tell my clients up front: Don’t waste breath trying to remove these. The convention center isn’t going to budge. Most of the time, the best you can do is to take unilateral clauses and make them mutual ones. Plainly, your best bet is to take clauses that only apply against your interest and make them apply equally against the parties. If the convention center wants you to defend them in any lawsuit by a third party arising from your organization’s (or its attendees’) actions, you, too, want to be defended against a lawsuit by a third party arising from the convention center’s (and its employees’ or contractors’) actions.
Check carefully the manner in which the convention center’s liability is limited to you. What is its total exposure? Is it a simple refund of your deposits? Or nothing more than the total amount you’ve paid? Seek to negotiate these rules as equitably as possible.
Lastly, when looking at indemnification and liability clauses, know when and how your insurance coverage applies. The ideal liability scenario is for all indemnification responsibilities and damages owed to be covered entirely by insurance. If you can negotiate a clause that limits liability only to the extent insurance coverage applies, you’ve done quite well for your organization.
The Rules & Regulations
In the course of legal review, one of the most frustrating matters I encounter is ever-absent rules and regulations. The ordinary convention center contract allows for rules and regulations to be modified at any time, usually without notice. Not only are the rules and regulations unseen, they could be rewritten tomorrow and you’d have no idea.
The best practical outcome is a requirement for them to be written up front, with the addition of a clause that allows for termination should the convention center wish to make a modification you disfavor. In other words, you desire to be notified of any proposed modification and reserve the right to accept or reject it without liability.
Starting as early as possible and taking an approach to modify unilateral clauses to mutual ones creates the best outcome in convention center contract negotiations. Focus on the big pieces: liability, indemnification, insurance and cancellation. These are the areas that bring the most risk to your organization, and with limited bargaining power, should be dealt with first.
Robert Sumner, Esq. Is a partner at Sumner & Associates, P.C. in Atlanta.