10/3/2016. LSAE October 3, 2016

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Joan Dorsey
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1 LSAE October 3, 2016 Attrition Force Majeure Cancellation Indemnification and Insurance Commissions and Rebates Concessions and Multi-year Contracts Preferred/Exclusive Providers Internet Services Dispute Resolution and Governing Law Others? 1

2 Attrition Per Night Attrition Vs. Cumulative Cumulative attrition - The group gets credit for all room nights actualized, regardless of date/day of usage. Most hotels offer this now. Set reminders for 1 week prior to the cut off dates, and check with the hotel for remaining rooms. Hotel releasing the group block before the agreed upon cut-off, or selling into group blocks and not being able to honor the contract. Make sure you have this captured in writing if this should happen. 2

3 Block Adjustment / Room Block Review Clause Weekly Pick-up Report Advance Cut-Off Notification Audit Terms Rooms available after Cut-off credit to block Adjustment to Concessions if in Attrition clause to negotiate out Force Majeure 3

4 Force majeure translates literally from French as superior force. In business circles, "force majeure" describes those uncontrollable events (such as war, labor stoppages, or extreme weather) that are not the fault of any party and that make it difficult or impossible to carry out normal business. A good Force Majeure clause: 1. Is reciprocal 2. Works for the hotel and the group 3. Applies for unforeseen circumstances out of the control of both parties whether they are listed by example or not 4. Provides protection in case of partial performance, as well as full cancellation. 4

5 Art Obligor not liable when failure caused by a fortuitous event. An obligor is not liable for his failure to perform when it is caused by a fortuitous event that makes performance impossible. An obligor is, however, liable for his failure to perform when he has assumed the risk of such a fortuitous event. An obligor is liable also when the fortuitous event occurred after he has been put in default. An obligor is likewise liable when the fortuitous event that caused his failure to perform has been preceded by his fault, without which the failure would not have occurred. 5

6 Fire, Flood, Earthquake, Storm, Hurricane, Other Nature Disasters War, Invasion, Act of Foreign Enemies, Hostilities, Civil War, Rebellion, Revolution, Military or Usurped Power or Confiscation Terrorist Activities, Nationalization, Government Sanction, Blockage, Embargo, Labor Dispute, Strike, Lockout or Interruption or Failure of Electricity or Telephone Service. A Force Majeure event is NOT: An excuse to avoid contract performance Based on inadvisability of performance Tied to general financial market conditions Based on non-specific future threats (a hurricane next year) 6

7 The burden of proof rests on the party relying upon force majeure. The party has to show that the performance of the contract was adversely affected by the force majeure event and that such event and/or non-performance was beyond the party's control and that there were no reasonable or proportionally reasonable steps to be taken to avoid the event and/or its consequences. Cancellation 7

8 Force majeure event allows contracted groups to terminate their performance obligation(s) in the agreement if one of the standards set by the legal principles is met. By definition, if a contract is terminated, all obligations cease to exist and both sides go back to the position they were in before the contract was executed. Neither party owes any further obligations to the other party. Parties contracted can protect themselves from potential losses that may arise when a force majeure event occurs resulting in contract termination by obtaining the appropriate insurance coverage. By definition, a contract is canceled when one party decides not to perform the contract for reasons other than a force majeure event. Cancellation is not the same as termination. The difference should be specified in every contract. 8

9 Liquidated Damages: Group and Client agree to a specific dollar amount in the contract be paid if one of the parties cancel. It should be based on loss at various timeframe intervals prior to actual dates. With liquidated damages, the Hotel (or client) is not obligated to mitigate damages by reselling rooms you must negotiate that specifically. Mitigated Damages: Group would be responsible for the full damages (total profit) in the contract, but hotel would be responsible for taking all efforts to resell rooms and space, crediting profit from such efforts against the damages owed in contract. Considering a Cancellation? Suggested Steps: Poll all stakeholders Analyze your contracts in terms of termination and cancellation language Ask attendees, officers, exhibitors, sponsors, and vendors. What is the prevailing wisdom? Do the majority support moving forward with the meeting, or are their fears so strong based on negative perceptions that going elsewhere is the only path that makes sense? Examine the viability of having the meeting You may have fewer attendees and/or reduced support from exhibitors, sponsors, and other stakeholders. Maybe it makes sense to keep the meeting in place, even if attendance will fall short of original goals. Again, each case is different and potential contract liability must be considered. 9

10 Some contracts contains specific clauses that specify when the group can cancel without damages for specific reasons such as: Labor Dispute Change in Management/Ownership/Brand Renovation/Remodeling Pre-Opening Sales (new build, or closed for renovations) Unavailability of Other Facilities / Cross Dependency Clause (Convention Center or other key elements of the booking such as HQ hotel unavailable, or double booking of space that would prevent the group from performing) Some may involve specific issues that may prevent some attendees from coming to the meeting, but were NOT true Force Majeure Events. Examples of these: SARS / AIDS / Ebola / Zika Terrorism in several cities Financial meltdown Hotel employee strikes (Las Vegas / San Francisco) **However in some of these events, hotels have allowed groups to cancel part or all of the commitment. 10

11 Indemnification and Insurance Indemnification: To secure against hurt, loss or damage. In a hospitality context, an Indemnification clause places responsibility on one or both of the parties to the agreement for any negligent acts they cause during the performance of a meeting. 11

12 Simple Negligence A poorly taped down electrical cord that causes someone to trip and fall A burned out light in a stairwell causing an accident Pyrotechnics in a ballroom which catch a curtain on fire Water spilled on a restaurant floor causing a slip and fall Gross Negligence Intentional Misconduct While simple negligence is defined as a careless mistake, Gross Negligence is a willful, wanton and reckless act bordering on Intentional Misconduct. The most severe level of negligence - The conscious or willful disregard of the rights and safety of others. An example - purposefully locking the exit door on a fire escape to cause death or injury. 12

13 In any action for damages where a person suffers injury, death, or loss, the degree or percentage of fault of all persons causing or contributing to the injury, death, or loss shall be determined, regardless of whether the person is a party to the action or a nonparty, and regardless of the person's insolvency, ability to pay, immunity by statute. If a person suffers injury, death, or loss as the result partly of his own negligence and partly as a result of the fault of another person or persons, the amount of damages recoverable shall be reduced in proportion to the degree or percentage of negligence attributable to the person suffering the injury, death, or loss. This article shall apply to any claim for recovery of damages for injury, death, or loss asserted under any law or legal doctrine or theory of liability, regardless of the basis of liability. 13

14 A well written indemnification clause should cover the acts of BOTH parties to the agreement. Be sure its mutual. Indemnification needs to be backed up by insurance. What is adequate insurance? Today the typical limits per occurrence should be a MINIMUM of $2 million per occurrence. Hotels may insist on $5 million per occurrence. Your group and the hotel should then each carry the same amount of insurance and be ready to show proof, if requested. 14

15 In addition to risk and event cancellation insurance, there is another type of insurance in some contracts, exhibitor insurance. Each exhibitor who has a booth must have their own insurance and also sign a hold harmless which indemnifies the group AND the hotel for any damage or negligence on the part of the exhibitor. A concept similar to termination is cancellation of a contract. The two terms are not the same, and that difference should be specified in every contract. By definition, a contract is canceled when one party decides not to perform the contract for reasons other than a force-majeure event. - 15

16 Commission & Rebates Commission V. Rebate Some Hotel Companies do not allow Commission unless you have a IATA number Check with the local CVB for rebates and promotions Rebate can either be in set amount or percentage. Add $5.00- $10.00 to room rate for a rebate. 16

Concessions and Multi-Year Contracts Less Than 100 Room Nights Comp meeting space 1 per 40 comp 20% allowable attrition Group rate available after cut off Comp one bedroom suite 100-300 Room Nights

17 Concessions and Multi-Year Contracts Less Than 100 Room Nights Comp meeting space 1 per 40 comp 20% allowable attrition Group rate available after cut off Comp one bedroom suite Room Nights Two comp suites Five upgrades at group rate $1,000 Master Account credit based on pick-up over 100 room nights Seven welcome amenities Complimentary Internet for guests Room Nights Seven Staff Rooms at 50% off group rate Comp Welcome refreshments on arrival day 10% off hotel AV prices Turn down services in all rooms 10% discount at SPA 50% discount on green fees at hotel s golf course 2016 Banquet pricing honored for

15% discount on Food & Beverage 30% discount on hotel AV charges Twenty upgrades to Club Level at the

comp roundtrip airport limo transfers Comp fitness center for all group attendees Ten comp parking passes

Double Reward Points Hotel to provide $5,000 in décor for designated event (2) Gift certificates for (2)

18 15% discount on Food & Beverage 30% discount on hotel AV charges Twenty upgrades to Club Level at the group rate Five comp suites over and above Thirty Staff room nights at 50% discount off Group rate Five comp roundtrip airport limo transfers Comp fitness center for all group attendees Ten comp parking passes Group rates offered three days pre and post event dates 5pm check-out for designated VIP s and Staff Double Reward Points Hotel to provide $5,000 in décor for designated event (2) Gift certificates for (2) nights accommodations will be provided by hotel as giveaways. Comp Welcome Reception Preferred And/or Exclusive Providers 18

19 In the Addendum or Hotel s (AV, Decorator, etc.) Service Standards? What services are (really) non-negotiable? Guaranteed pricing? Wi-Fi 19

20 Bandwith Dispute Resolution and Governing Law 20

21 Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts. The parties to a dispute refer it to arbitration by one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), and agree to be bound by the arbitration decision (the "award"). A third party reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 21

22 Future Concerns 22

23 At this point, Zika would be a possible Force Majeure claim on a case-by-case basis. This could be expanded as more information becomes known about the spread and contagion of the disease. 23

The total value of this contract based on the guest room block and catering commitment is $

The total value of this contract based on the guest room block and catering commitment is $ 615 Washington Ave. SE Minneapolis, MN 55414 Hotel Phone Number: 612-379-8888 Sales Fax: 612-379-8436 Regents of the University of Minnesota ( University ) Through its Date: Group Name: Group Contact: