- Hi there, I'm Bari Baumgardner,
founder of Sage Event Management
and I'm here to talk to you today about a trend
that is driving event planners crazy.
It's a new trend that's coming strictly
because we're an incredibly strong economy right now
and it's what happens, are you ready for this?
What happens if the hotel cancels on you?
A lot of people in our industry, myself included,
spend a lot of time negotiating contracts specifically
around hotel cancellation clauses,
and generally the thing that you're most concerned about,
is how much money will you pay if you cancel
on the hotel?
It's typically a staggered clause which means depending
on how far out it is that you cancel,
how much money you owe.
The closer you can cancel to an event,
the more money you owe the hotel,
but here's what they don't tell you.
In a strong economy like this,
hotels are actually canceling on clients, that's right.
Here's what that looks like.
Hotel decides they get a better piece of business.
Your business all considered is valued
at X number of dollars.
A new better client comes along
and their business is valued at this number of dollars.
The hotel weighs the two and says better piece
of business, you know what?
I'll cancel on them take this business
and guess what?
You have no protection in your contract.
you know what the hotel does?
They send you a note
and it says sorry to tell you,
we're actually going to be canceling on you.
That's right, they owe you nothing
because most people don't have any protection
in their hotel contracts to guard against it.
Let me tell you a quick little story about this.
One of our clients, Marsha Weeder had gone
to a hotel a couple years in a row.
We really loved this hotel
and so when it came time to renew her contract
to do her next event we went straight to that hotel,
negotiated the contract, back we were,
super simple and easy.
We're just about to start marketing for her event
and we get a letter from the hotel, guess what?
They sold to a condo development company.
Now that hotel's gonna be a condo, and guess what?
It's gonna happen before her event.
The sale is gonna happen before her event takes place,
so the hotel cancels on her, but guess what?
Silver lining, we had negotiated a cancellation
by hotel clause in Marsha's contract
which meant the hotel had to pay her
because they were canceling on her without fair notice.
So they wrote her a check for $100,000, that's right.
It's nice little bonus when you're about
to start marketing your event to get a six figure payday.
So she got $100,000 because the hotel canceled on her.
That was a lost opportunity for her.
She had to delay her marketing.
We had to find a new venue, that takes time,
and so there's a cost associated with that,
and that's why we got a really nice payout.
So here's the deal.
It's a really strong economy
no matter what anybody tells you.
The hotel industry swings
on a pendulum like everything else.
Sometimes it's weak, sometimes it's strong.
We just came out of about a five year period
where hotels were in a buyer's market.
That meant that event planners
and clients like you had the upper hand
when it came to hotel negotiations,
but now that pendulum has swung
and we're back to it being a seller's market.
And what happens in the seller's market,
especially after a drought like the one
that we just came out of,
is hotels are hungry to make up lost revenues
and what that means is cash is king.
We've also got a massive trend with a lot
of hotels being owned by investors.
And investors are driven by cash.
They wanna make as much money as they possibly can
and hoteliers have to report to those investors.
They're doing anything they can
to boost those hotel profits
which means if a better piece of business comes along,
they're more likely to take that business over yours.
So how do you keep this from being a problem?
Specifically what you wanna do is you wanna look
at the value of your business.
Really realistically what the hotels are gonna look at
when they're evaluating your value is
how much are you bringing in room revenue,
how much are you bringing in food and beverage revenue,
how much are you bringing rental,
if you're not smart enough to negotiate out of rental.
So they look at rooms, meeting space F and B,
and meeting space rental.
Those are the three ways they value your business.
So you can evaluate pretty quickly
how much your business is worth.
You can also tell by how much the hotel is willing
to give you in discounts.
If they're giving you a low room rate, a low F and B,
that's obviously a weak time for them,
you've caught them in a soft spot
which is really good for you from the perspective
that you can keep your cost down,
but it can make you a little bit liable
from the perspective,
or a little bit vulnerable is a better word.
It can make you a little bit vulnerable if the hotel
easily gets a better piece
of business than the one you brought them.
If they use those same metrics,
someone comes to them and is willing
to offer them more money in rooms,
more money in meeting space food and beverage,
more money in meeting space rental,
you could quickly find yourself in the firing line.
So you really wanna know where you're stacking up
with the value of the business.
You wanna make sure you're factoring
that into your own cancellation clause
for what you'd owe the hotel.
You should never owe the hotel more if you cancel
if you didn't have the event than if you did right?
So that's the one side of it.
But the flip side is you really wanna make sure
that you're evaluating what the hotel would owe you.
At Sage we put teeth in the contract
and our goal with having teeth in the contract
under a cancellation by hotel clause is it is
so painful for the hotel to cancel on you,
it would cost them so much to cancel on you,
it's not worth it to take that better piece of business.
At Sage that typically looks like saying they have
to help find a new venue,
they have to pay the difference in costs between their hotel
and a new venue.
They have to pay for site selection.
They have to pay for marketing costs.
The have to pay for any refunded travel cost.
All those things start to add up really quickly
for an event and think about it,
the closer you get to the event,
the more likely you've invested a lot in marketing.
Your attendees have invested in travel,
those are all refunds that have to be made.
The hotel would have to pay them.
That's a really hard, tough pill to swallow.
If you're thinking about this,
you're about to book a hotel any time
in the next six months to a year
and you're concerned about how to navigate this,
you've got questions on contracts
or contract clauses, post it in the comments here
or send us a quick email at eventsatpoweredbysage.com.
We'll be happy to take those questions
and answer them in a future video.
So just a quick recap here,
economy has shifted, pendulum has shifted,
you are in a seller's market.
Buyer beware, you have to be super careful.
You really wanna be careful not
to only negotiate your own clause around cancellation,
but cancellation by hotel.
That's all for today, bye for now.
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