As we approach the end of Q2 in 2023, M&IW’s Event Sourcing team continues to experience both new sourcing trends and long-lasting trends that have now become the norm. Some of the most common include high compression across the board, higher prices, and tougher contracting terms. After attending recent industry partner events, we are more knowledgeable than ever and are ready to share our key takeaways.
By now, everyone in the industry has experienced the greater financial costs and stricter contract terms from hotels and venues. In this two-part series, we’ll explore why these trends are occurring, our key learnings for each step of the sourcing process—from RFPs through contract execution—and general sourcing trends. Part 1 will focus on current contracting trends that everyone needs to be aware of to ensure we can get the contract across the finish line with reasonable terms and conditions for all parties.
Road Map to Successful Contracts
When it comes to contracts, you can’t assume that common pre-pandemic terms still apply. There’s a much bigger emphasis on deadlines (and therefore a bigger impact when one is missed) as well as new expectations affecting the overall budget. Here are some of the top trends to be aware of as you start the contracting process.
Advance deposits are a new and impactful trend. Pre-pandemic, it was very common for US hotels to require only a small deposit, if any, at the time of contract execution or within 10–14 business days after contract signature. This is no longer the case. We are seeing higher initial deposits required, up to 50% of the total contracted value, across all hotel brands. These deposits are required even with the intent to apply for direct billing or if direct billing has been approved.
An important item to note is deposits have deadlines, too. We have started seeing initial contract language stating that if a deposit is not received within a certain timeframe, the hotel has the right to cancel the program.
Also keep in mind that if your hotel contract is for a room block only, the hotel may require a credit card authorization form to be completed at the time of contract signature to guarantee the rooms—even if guests are responsible for paying their own charges. Be prepared to complete these timely authorization requests so you don’t lose your booking.
In addition to initial deposits, the direct billing process is more robust than ever before. It can now take 60–90 days for completion and approval. If your event is taking place in 60 days or less, you may need to pay much of the contracted liability in advance of the event, sometimes up to 90% of anticipated contracted revenue.
Hotels mean business when it comes to payments, and there is very little forgiveness if timely payments are not received. Hotels are now checking past payment history of your company when reviewing direct billing applications. If there have been late payments in the past, this will likely affect your current request. It is more important than ever to make invoice payments on time.
The bottom line is to be fully aware of the billing details included in your contract. This process alone can have a huge impact on budgeting and planning a successful event.
Rebook and Resale
As we all know, rebook and resale clauses in hotel contracts should always be included. However, hotels are generally only accepting one clause or the other, not always both. This can be problematic for myriad reasons.
We work closely with our customers’ stakeholders and planners to determine which is the best clause to include based on the scope of the meeting. The resale clause ensures that if room pick-ups are lower than anticipated, you should not be charged for the nights the hotel is able to resell some of the unoccupied guest rooms, saving you those costs. However, resell may only apply on nights when the hotel reaches 95–100% occupancy.
The rebook clause should be included if there is a possibility that the meeting may not move forward. This will provide an opportunity for you to recoup a percentage of the cancellation fees as credit towards a future program of equal or greater value, usually within twelve months or, in some cases, during the same calendar year as the cancellation date. However, don’t expect a full credit of the cancellation damages; it is much more likely it’ll be 50%. The 100% cancellation rebook clause is the exception and not the rule.
Guest Room Reservations and Concessions
New trends affecting guest rooms and concessions are also impacting today’s contracts. Some of these are particularly noteworthy because they impact not just the planning team and budget but also the attendee experience.
Hotels are pushing back on allowing name changes on guest room reservations. We now see hotels only allowing complimentary name changes for a certain percentage of the group room block, even if the arrival and departure parameters remain the same.
Pre- and Post-Event Reservations
This is another new trend. Some hotels no longer accept standard contract language that allows for the contracted rate to apply for reservations three days before and after the contracted room block. Instead, their contract language includes something along these lines: “Group rate for pre- and post- to not exceed 10% of contracted room block.”
Depending on the size of your room block, this will limit the number of guest rooms accepted at the group rate. Your attendees may have to pay the prevailing guest room rate for extended stays. Pay close attention to your room block to ensure rooms are protected at the group rate pre- and post- your event.
The days of the standard list of requested concessions are gone. Hotels may now require a precise list that will add value to your program and are being selective about what they will and will not accept. Think about those valued items before finalizing your list.
One example is the standard 1/40 comp policy. If your total room block is between 40–75 guest rooms, it may not be worth including this as a concession as it will only net you one complimentary guest room. There could be greater value if you choose to focus on meeting room internet or discounted staff rates. Take the time to determine which concessions will bring you the most value and provide true savings for your budget.
Speaking of concessions, many major brand hotels include “double points” as a concession. Does this bring value to your guests? Often, it won’t, depending on the brand. As your sourcing partner, we would prefer to see alternative concessions that will impact a standard budget line item, such as reduced fees or waived labor charges.
Additional Aha Moments
These final contracting trends are directly related to the high levels of compression we continue to see across the industry. They’re also impacted by the post-pandemic world and may come as a surprise after so much time spent stressing over COVID’s effect on events.
After contract execution, if it appears that additional guest rooms or meeting space is needed due to agenda or attendance changes, many hotels are now requiring an amendment to the agreement if these changes increase or decrease by 5% or more of the total contracted value. Gone are the days of working directly with the event services manager to add or reduce by a few guest room nights or add an additional breakout room or two.
If an amendment is needed, please engage with your sourcing manager so that we can review any such amendment to ensure that all contracted items such as attrition, deposits, and cancellation terms are updated to reflect these changes. It’s best to ensure that all relevant clauses are accurate and fully transparent to all parties.
Specific COVID clauses are no longer needed. In fact, since COVID is no longer considered a world health emergency, hotels will not agree to any COVID clause. Instead, any pandemic or travel advisory language should be included in the force majeure or impossibility clause which is standard in all contracts.
Firm Contract Due Dates
While a firm contract deadline is not a new trend, it is one we continue to see. The most important thing to remember is while contract signature extensions can be done, it is very risky. As compression remains high, especially in peak meeting seasons and in Tier 1 destinations, there may be other groups waiting behind the scenes to contract the space and rooms if timely signatures are not received.
General Hotel Industry Trends
Beyond contracting, these general industry trends have an impact on both sourcing and planning meetings and events. Despite the added layers of difficulty discussed above, it is important to continue to collaborate with our hotel partners to improve every event.
Talent and Staffing
While staffing levels have improved, many hotel employees are either new to the hotel or new to the events industry. Major hotel brands are back to 4–6% unfilled positions across their portfolio, which is very similar to pre-pandemic levels. Staffing continues to be a high focus across all brands.
This has improved the sourcing and contracting experience, but our planning teams are still facing reduced staffing levels during the pre-planning and execution of programs. We are seeing the effects of this through surveys and post-event feedback. It is very evident that the lack of experience with new employees is impacting logistics and planning for a successful event. Hotels are working hard to improve their training to assist with their on-site performance. This will continue to be their focus throughout 2023.
This is a big initiative across all hotel brands. There is an internal focus to source local vendors wherever possible, including for food, supplies, and gifts. Hotels are also utilizing their own rooftops or other green space to grow much of their own food.
Reducing single use items, such as straws and cups, is another big focus. You can also request notepads and pens made from recycled materials and hydration stations instead of individual water bottles. We have also experienced great success in working with our hotel partners on reducing food waste.
There is a new federal law called the Food Donation Improvement Act signed in January of this year which expands liability protections when donating food to local charities or food shelters. In a recent meeting, M&IW jointly worked with the hotel to donate 600 pounds of leftover food to a local shelter! Let’s continue to work together to reduce food waste and provide local food shelters with some amazing food.
Sustainability will continue to be a trend that we’ll hear more about and implement best practices for across all phases of meeting planning. For more best practices, check out our blog post about planning sustainable events.
It’s important to be aware of these trends as you prepare for the second half of 2023. As your sourcing partner, we are always looking to minimize any potential risk with your hotel agreements and share these insights as we experience them. By working together and understanding the current environment, we can continue to collaborate to ensure your future programs are successful and fiscally responsible.
Contact us to get started. Already an M&IW customer? Contact your Customer Success Manager to learn more.
Vicki Walsh, HMCC
Sr. Director, Event Sourcing
Meetings & Incentives Worldwide, Inc.
Lynn McCrory Brown, CMP, HMCC
Team Leader, Event Sourcing
Meetings & Incentives Worldwide, Inc.