Often I am asked “Are we in a buyer’s or seller’s market?” My typical lawyer response is along the lines of it really doesn’t matter because we always keep our eye on the items which get us in trouble such as attrition, cancellation, liquor liability etc. Like in the movie “Million Dollar Baby,” protect yourself at all times. In a seller’s market, space is tougher to come by and more expensive, but the liability issues remain the same. What makes this seller’s market different is the high degree of owner influence in dispute resolution.
In the past, planners worked with sales managers to envision, create, plan and execute special events and meetings. In the event things did not go as planned, the planner could count on the sales manager to make things right. In more difficult situations, the planner and sales manager could enlist the help of the property’s general manager to save the day. Cancellation and attrition are a part of the business, and in years past, there was a spirit of cooperation. Remember the creative solutions? “OK, sorry you need to cancel, but if you pay a chunk of the cancellation fee we’ll give you a credit if you bring your event back to our property in the future.” Or, “sorry you need to downsize your event, but if you agree to move your function into a smaller room, we will waive/reduce the attrition.” It was the land of bunnies and rainbows, an industry with the unstated goal of repeat business. It appears those days are, at least for the time being, gone.
These days we see the hotel’s ownership group calling the financial shots, and almost always with a near total disregard of maintaining the client relationship. One wonders at times if the owner cares about past relationships as well as future business. The sales manager cares, the general manager cares, but are we really sure about ownership? I recently had a mediation in Miami concerning a series of contracts which needed to be cancelled because the group simply outgrew its space. As an incentive for the 2016, 2017 and 2018 contracts, the hotel long ago gave the group certain concessions in the years leading up to 2016. When the group notified the hotel that it was necessary to cancel 2017 and 2018, the hotel sought the entire retail value of the concessions granted. Initially we thought the demand for full retail value was not appropriate as the hotel did not pay full retail value out of its pocket for such things as free parking, free cocktail party, free this free that…but in the spirit of resolving the matter we nevertheless offered to pay 2/3 of the retail value of the concessions granted (since we cancelled 2/3 of the contracts in question).
A good offer, right? Not for the owners, they wanted the full retail value of all of the concessions granted. It gets better. So we drag everybody to Miami for the mediation and the hotel’s “generous last, best and final whatever offer” was $225,000 on top of the full retail value of the concessions granted. The $225,000 being for supposed lost interest plus attorneys fees. So much for each side being willing to bend a little bit in order to resolve a dispute. Needless to say the mediation failed. By the way, the mediator, a retired judge with 60 years of experience, says he has never seen anything like it. Moreover, the attorney for the hotel is a good friend and very respected in the field. I know his hands are being tied by the owners.
The takeaway from all of this is if this is what is happening to a long-time large customer, just think how a smaller customer will be treated. We need to inform our customers of this phenomenon. While we are dealing with good people at the hotel, it is the man behind the curtain who is calling the shots. Protecting ourselves at all times means educating our clients that we must be precise in our estimations. It used to be “go big or go home,” plan it and they will come. Now the smart planner is saying to be as precise as possible and err on the side of going too low. Better to scramble for rooms and space than to wonder if the hotel will go after our group for the shortfall. They will.