Hotel Contracts - Done Right

I suspect that many readers would concur that perhaps the most frustrating part of hotel sales is enforcing contracts. You see, we often find ourselves caught between taking care of the customer and taking care of the business. It's hard to develop solid relationships and repeat business if your customers don't feel taken care of; and it's hard to maximize revenues if you are taking too good care of your customers. So, I propose a solution: write the contracts well from the onset and be sure your customer understands what they are signing.

In my experience, too many sales managers will send out a contract to a client, without discussing the terms in any detail. I believe they do this because they are (consciously or subconsciously) trying avoid an uncomfortable conversation. True, discussing the details of cancellation and attrition penalties can be a sticky conversation - but it is oh-so-much more sticky when done after the agreement is already signed. What makes the issue even more challenging is the number of clients who sign agreements without a) reading them or b) understanding them. The client, either rushed, confused or both, just signs it and returns it without regard for the details on page 2 thru 5. Newsflash: those pages matter and should be discussed before everyone signs in agreement.

Each group is evaluated differently based on the pattern, program details, market segment, history, season, budget, etc. For some reason though, sales managers often fail to consider the group's realistic ability pay any breach of contract penalties (particularly with SMERF groups). So, I ask the question, what is the point of a cancellation or attrition clause if your group doesn't have the financial means to pay that penalty? Obviously that is pointless, so you need to find another way to protect the hotel within the contract - one that is realistic for all parties. Perhaps you could establish a more strict deposit policy, smaller block, individual reservation cancellation penalty, or move the cutoff date. Maybe you need to avoid the formal contract and just offer a "courtesy block" or in some scenarios you might decide the business isn't a good fit for your hotel/resort. Your negotiating options are only limited by your creativity to make it work, with realistic terms, for all involved.

In my view, the first step of having a solid contract is insuring that a) your expectations are realistic, b) that the customer understands the contract terms, and c) that you mutually agree to them before signing on the dotted line. Renegotiating a contract after it's been signed (whether a couple days or few months later) is a recipe for a frustrating and potentially relationship killing conversation. In the unfortunate circumstance when a client fails to fulfill their obligations, they should not be surprised by the consequences. That's the key - no surprises. And the only way I can think of to insure there are no surprises is to make certain you and the customer are clear on your mutual expectations and each clause of the agreement. After all, the whole point of a contract is to pre-establish terms, conditions, penalties and damages so there is no need for mediator or lawsuit in the event of a performance failure. They are written to protect both the hotel and the customer.

All this being said, yes, there will still be circumstances where you offer after-the-fact concessions or waivers of penalties/damages. However, then it is only being done as good-will, for which you will be praised as your client as a hero! They will have a much greater appreciation of your gesture if they understood the initial agreement, instead of having that "this isn't fair and you should let me out" attitude that comes from an uninformed client.

So, go, sell some rooms and conferences, and be sure to review that contract with your client before they sign it.