10/3/2016
LSAE
October 3, 2016
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Attrition
Force Majeure
Cancellation
Indemnification and Insurance
Commissions and Rebates
Concessions and Multi-year Contracts
Preferred/Exclusive Providers
Internet Services
Dispute Resolution and Governing Law
Others?
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10/3/2016
Attrition
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Per Night Attrition Vs. Cumulative
Cumulative attrition - The group gets credit for all
room nights actualized, regardless of date/day of
usage. Most hotels offer this now.
◦ Set reminders for 1 week prior to the cut off dates,
and check with the hotel for remaining rooms.
◦ Hotel releasing the group block before the agreed
upon cut-off, or selling into group blocks and not
being able to honor the contract.
 Make sure you have this captured in writing if this should
happen.
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• Block Adjustment / Room Block Review Clause
• Weekly Pick-up Report
• Advance Cut-Off Notification
• Audit Terms
• Rooms available after Cut-off credit to block
• “Adjustment to Concessions” if in Attrition clause to
negotiate out
Force
Majeure
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Force majeure translates literally from
French as superior force.
In business circles, "force majeure"
describes those uncontrollable events (such
as war, labor stoppages, or extreme
weather) that are not the fault of any party
and that make it difficult or impossible to
carry out normal business.
A good Force Majeure clause:
1. Is reciprocal
2. Works for the hotel and the group
3. Applies for unforeseen circumstances
out of the control of both parties whether
they are listed by example or not
4. Provides protection in case of partial
performance, as well as full cancellation.
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10/3/2016
Art. 1873. Obligor not liable when failure
caused by a fortuitous event.
An obligor is not liable for his failure to
perform when it is caused by a fortuitous event
that makes performance impossible.
An obligor is, however, liable for his failure to
perform when he has assumed the risk of such
a fortuitous event.
An obligor is liable also when the fortuitous
event occurred after he has been put in default.
An obligor is likewise liable when the fortuitous
event that caused his failure to perform has
been preceded by his fault, without which the
failure would not have occurred.
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10/3/2016
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Fire, Flood, Earthquake, Storm, Hurricane,
Other Nature Disasters
War, Invasion, Act of Foreign Enemies,
Hostilities, Civil War, Rebellion, Revolution,
Military or Usurped Power or Confiscation
Terrorist Activities, Nationalization,
Government Sanction, Blockage, Embargo,
Labor Dispute, Strike, Lockout or Interruption
or Failure of Electricity or Telephone Service.
A Force Majeure event is NOT:
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An excuse to avoid contract performance
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Based on ‘inadvisability’ of performance
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Tied to general financial market conditions
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Based on non-specific future threats (a
hurricane next year)
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The burden of proof rests on the party relying
upon force majeure.
The party has to show that the performance
of the contract was adversely affected by the
force majeure event and that such event
and/or non-performance was beyond the
party's control and that there were no
reasonable or proportionally reasonable steps
to be taken to avoid the event and/or its
consequences.
Cancellation
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10/3/2016
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Force majeure event allows contracted groups to
terminate their performance obligation(s) in the
agreement if one of the standards set by the legal
principles is met.
By definition, if a contract is terminated, all obligations
cease to exist and both sides go back to the position
they were in before the contract was executed.
◦ Neither party owes any further obligations to the
other party.
◦ Parties contracted can protect themselves from
potential losses that may arise when a force majeure
event occurs resulting in contract termination by
obtaining the appropriate insurance coverage.
By definition, a contract is canceled when one
party decides not to perform the contract for
reasons other than a force majeure event.
Cancellation is not the same as termination.
◦ The difference should be specified in every
contract.
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Liquidated Damages: Group and Client agree to a specific
dollar amount in the contract be paid if one of the parties
cancel. It should be based on loss at various timeframe
intervals prior to actual dates.
◦ With liquidated damages, the Hotel (or client) is not
obligated to mitigate damages by reselling rooms – you
must negotiate that specifically.
Mitigated Damages: Group would be responsible for the
full damages (total profit) in the contract, but hotel would
be responsible for taking all efforts to resell rooms and
space, crediting profit from such efforts against the
damages owed in contract.
Considering a Cancellation?
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Suggested Steps:
Poll all stakeholders
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Analyze your contracts — in
terms of termination and
cancellation language
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Ask attendees, officers,
exhibitors, sponsors, and
vendors. What is the
prevailing wisdom?
Do the majority support
moving forward with the
meeting, or are their fears so
strong based on negative
perceptions that going
elsewhere is the only path
that makes sense?
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Examine the viability of
having the meeting
You may have fewer
attendees and/or reduced
support from exhibitors,
sponsors, and other
stakeholders.
Maybe it makes sense to
keep the meeting in place,
even if attendance will fall
short of original goals.
Again, each case is different
and potential contract
liability must be considered.
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Some contracts contains specific clauses that specify
when the group can cancel without damages for specific
reasons such as:
• Labor Dispute
• Change in Management/Ownership/Brand
• Renovation/Remodeling
• Pre-Opening Sales (new build, or closed for renovations)
• Unavailability of Other Facilities / Cross Dependency
Clause (Convention Center or other key elements of the
booking such as HQ hotel unavailable, or double
booking of space that would prevent the group from
performing)
Some may involve specific issues that may prevent some
attendees from coming to the meeting, but were NOT true
Force Majeure Events. Examples of these:
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SARS / AIDS / Ebola / Zika
Terrorism in several cities
Financial meltdown
Hotel employee strikes (Las Vegas / San Francisco)
**However in some of these events, hotels have allowed
groups to cancel part or all of the commitment.
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10/3/2016
Indemnification
and
Insurance
Indemnification: To secure against hurt, loss or
damage.
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In a hospitality context, an Indemnification
clause places responsibility on one or both of
the parties to the agreement for any
negligent acts they cause during the
performance of a meeting.
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Simple Negligence
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A poorly taped down
electrical cord that
causes someone to trip
and fall
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A burned out light in a
stairwell causing an
accident
Gross Negligence
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While simple
negligence is defined
as a careless mistake,
Gross Negligence is
“a willful, wanton and
reckless act” bordering
on ‘Intentional
Misconduct.
Pyrotechnics in a
ballroom which catch a
curtain on fire
Water spilled on a
restaurant floor
causing a slip and fall
Intentional Misconduct
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The most severe level
of negligence - The
conscious or willful
disregard of the rights
and safety of others.
An example purposefully locking
the exit door on a fire
escape to cause death
or injury.
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In any action for damages where a person
suffers injury, death, or loss, the degree or
percentage of fault of all persons causing or
contributing to the injury, death, or loss shall
be determined, regardless of whether the
person is a party to the action or a nonparty,
and regardless of the person's insolvency,
ability to pay, immunity by statute.
If a person suffers injury, death, or loss as the result
partly of his own negligence and partly as a result of
the fault of another person or persons, the amount of
damages recoverable shall be reduced in proportion
to the degree or percentage of negligence
attributable to the person suffering the injury, death,
or loss.
This article shall apply to any claim for recovery of
damages for injury, death, or loss asserted under any
law or legal doctrine or theory of liability, regardless
of the basis of liability.
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A well written indemnification clause should
cover the acts of BOTH parties to the
agreement. Be sure its mutual.
Indemnification needs to be backed up by
insurance.
What is “adequate” insurance?
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Today the typical limits per occurrence
should be a MINIMUM of $2 million per
occurrence.
Hotels may insist on $5 million per
occurrence. Your group and the hotel should
then each carry the same amount of
insurance and be ready to show proof, if
requested.
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In addition to risk and event cancellation
insurance, there is another type of insurance
in some contracts, exhibitor insurance.
Each exhibitor who has a booth must have
their own insurance and also sign a ‘hold
harmless’ which indemnifies the group AND
the hotel for any damage or negligence on
the part of the exhibitor.
A concept similar to termination is
cancellation of a contract. The two terms are
not the same, and that difference should be
specified in every contract. By definition, a
contract is canceled when one party decides
not to perform the contract for reasons other
than a force-majeure event. -
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Commission
& Rebates
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Commission V. Rebate
Some Hotel Companies do not allow
Commission unless you have a IATA number
Check with the local CVB for rebates and
promotions
Rebate can either be in set amount or
percentage.
Add $5.00- $10.00 to room rate for a rebate.
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10/3/2016
Concessions
and
Multi-Year
Contracts
Less Than 100 Room Nights
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Comp meeting space
1 per 40 comp
20% allowable attrition
Group rate available after cut off
Comp one bedroom suite
100-300 Room Nights
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Two comp suites
Five upgrades at group rate
$1,000 Master Account credit
based on pick-up over 100 room
nights
Seven welcome amenities
Complimentary Internet for guests
300-800 Room Nights
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Seven Staff Rooms at 50% off group
rate
Comp Welcome refreshments on
arrival day
10% off hotel AV prices
Turn down services in all rooms
10% discount at SPA
50% discount on green fees at
hotel’s golf course
2016 Banquet pricing honored for
2018
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15% discount on Food & Beverage
30% discount on hotel AV charges
Twenty upgrades to Club Level at the group rate
Five comp suites over and above
Thirty Staff room nights at 50% discount off Group rate
Five comp roundtrip airport limo transfers
Comp fitness center for all group attendees
Ten comp parking passes
Group rates offered three days pre and post event dates
5pm check-out for designated VIP’s and Staff
Double Reward Points
Hotel to provide $5,000 in décor for designated event
(2) Gift certificates for (2) nights accommodations will be provided by hotel
as giveaways.
Comp Welcome Reception
Preferred
And/or
Exclusive
Providers
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In the Addendum or Hotel’s (AV, Decorator,
etc.) “Service Standards”?
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What services are (really) non-negotiable?
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Guaranteed pricing?
Wi-Fi
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Bandwith
Dispute
Resolution
and
Governing Law
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Arbitration, a form of alternative dispute
resolution (ADR), is a technique for the
resolution of disputes outside the courts.
The parties to a dispute refer it to arbitration
by one or more persons (the "arbitrators",
"arbiters" or "arbitral tribunal"), and agree to
be bound by the arbitration decision (the
"award").
A third party reviews the evidence in the case
and imposes a decision that is legally binding
on both sides and enforceable in the courts
A provision in any written contract to settle by
arbitration a controversy thereafter arising out
of the contract, or out of the refusal to perform
the whole or any part thereof, or an agreement
in writing between two or more persons to
submit to arbitration any controversy existing
between them at the time of the agreement to
submit, shall be valid, irrevocable, and
enforceable, save upon such grounds as exist
at law or in equity for the revocation of any
contract.
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Future Concerns
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At this point, Zika would be a possible Force
Majeure claim on a case-by-case basis.
This could be expanded as more information
becomes known about the spread and
contagion of the disease.
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