Travel restrictions and geopolitical tensions are driving event cancellations, leading to disputes between planners and hotels over contracts and compensation.
Brett Sterenson, president of Hotel Lobbyists, a site-selection company that works mainly with government events, had 59 cancellations so far this year. They totaled $2.57 million in lost hotel revenue, with little to no commission paid to his firm.
“Many clients can cancel without penalty due to the flexibility of government contracts,” he said. “Others invoke force majeure. A smaller number either can’t escape penalties or are willing to pay them.”
Cancellation Penalties Should Be Shared
Even when hotels collect cancellation penalties, Sterenson rarely gets a cut.
“When a hotel collects cancellation revenue from a client, it might seem fair that I get paid for the work that led to the booking,” said Sterenson. “In most cases, I don’t.”
With a record number of cancellations, he’s pushing for some compensation.“It would be fiscally irresponsible not to try,” said Sterenson.
Typically, he earns anywhere from 7-10% commission on actualized room revenue. “In cases of cancellation, I’m paid 0%. I propose to the properties that they pay me half of my commission as a compromise,” said Sterenson.
Contracts Must Evolve
As the events industry continues to face volatility and cancellations, planners say it’s time to rethink standard practices.
“Adapting to federal policy changes should be a two-way street. Understanding and compromise are needed on all sides to keep business flowing in this environment. Unfortunately, that’s not happening yet to a significant degree,” said attorney Joshua Grimes of Grimes Law Offices.
Falling attendance adds to the tension. “Renegotiating contracts isn’t easy, and many hotels aren’t willing to consider lowering the contracted room requirements,” said Grimes.
Whether force majeure clauses cover attendance drops due to government policy depends on how they’re written, said Tyra Warner, chair, Department of Hospitality, Tourism, and Culinary Arts, College of Coastal Georgia. “Most are at best a grey area. Many don’t apply. Some planners entering into new contracts now are including a new clause specifically addressing government funding, or lack thereof. They provide a remedy either akin to a force majeure clause, being able to terminate without liability, or forgiving performance damages if they move forward with the meeting in spite of the government challenges,” said Warner.
Planners say they’re being held to strict contract terms, with limited flexibility from hotels, and that must change.
