Understanding Disclosure of Third Party Payments, Rebates, Commission
In this video, you’ll learn what third-party payments, rebates, and commissions are and why they are used, as well as things to consider when groups attempt to seek rebates.
Experts
Barbara Dunn
(representing Groups)
Partner at Barnes & Thornburg, LLP
Lisa Sommer Devlin
(representing Hotels)
Devlin Law Firm, P.C.
Overview
Hotel room rates may be commissionable to a designated agent and/or may include a rebate. A rebate and commissions are different.
A rebate is typically paid to the group itself and is usually a set dollar amount from the Group’s room rate and is paid to the Group after the meeting. Groups often use rebate revenue to offset their costs of using the convention center or shuttling/transportation costs.
Commissions are usually paid to a third-party company that assists with the group’s booking and are generally based on the contracted room revenue
Group Perspective
Rebates should be specified in the hotel contract, e.g., “The Group rate includes a rebate of $10.00 per night for each room night utilized and paid for by Group’s attendees. The rebate will be paid to the Group within thirty (30) days of the Group’s last departure date.”
Many hotels require that the Group disclose the rebate to its attendees so that it is not viewed as a charge that the Hotel is imposing on the guest.
Groups will often make any required disclosure of a rebate in its meeting registration materials, e.g., “A portion of the room rate will be used to offset Group’s meeting expenses.”
Hotel Perspective
Any time a payment is made out of the room rate to a third party without disclosure, it could be considered a “bribe” or other impermissible payment, depending upon the applicable state law, which could expose both the group and the hotel to civil or criminal liability.
Rather than take a risk that failure to disclose rebate or commission is improper, hotels typically require the group to take responsibility for making disclosure to attendees.
The group or third party should not be reluctant to disclose as having to “hide” how you make money or pay for your event suggests impropriety.
Rebates and sometimes commission increase the room rate, which may make the rate non-competitive in the market and incent attendees to try to book lower priced rooms outside the official room block.
Consider increasing the event registration fee by the amount of the rebate rather than adding it to the guest room rate.
Managing Competitors and Conflicting Groups at Your Event Hotel
In this video, you’ll learn how to approach if a competitor is booked at the same hotel as your group. How to navigate if a competitor is in violation of your competitor clause? How to go about adding a competitor clause to your contract at your event hotel.
Experts
Barbara Dunn
(representing Groups)
Partner at Barnes & Thornburg, LLP
Lisa Sommer Devlin
(representing Hotels)
Devlin Law Firm, P.C.
Overview
Including a clause in your event contract that requires the hotel to not host any of the group’s competitors over the dates of the event and if the hotel does the group can cancel without any liability.
Group Perspective
When it comes to the competition and competing groups clause, often times there are two major areas for concern for planners:
Competitor groups piggybacking on your meeting. Meaning that they don’t want to be an exhibitor or sponsor but they want to draw attendees into a hospitality function, otherwise known as the suitcasing.
Conflicting groups. If there’s an organization that’s staying at the same hotel during your dates that is against whatever the group is doing. These conflicting groups are not necessarily competitive groups but equally as problematic for the meeting
If someone is booked in violation of that provision, talk it out with your hotel partner to work out a resolution. If a resolution can’t be reached then the group might seek to have the hotel terminate the contract.
Tip: Keep the lines of communication open; make sure that if there is a concern about either a competing group or a conflicting group in-house, that the group addresses that with the hotel early and often. Remember, it’s not just at the time you negotiate and sign the contract, every day leading up to the meeting where there’s a possibility of a booking of a competing or conflicting group. Doing periodic check-ins is a really good strategy for both the groups and hotels to manage this issue.
Hotel Perspective
Competitor clauses in event contracts. It’s typical in the industry to see a clause in a contract that says, ‘Venue will not host any of our competitors over the dates of our event and if the venue does, then, we are allowed to cancel without liability.’
The first thing you need to think about when you’re dealing with competitor clauses is “why don’t we want the competitor here at this time?” because that’s going to drive how your clause goes. For example:
You don’t want them hearing about the confidential topics that you’re discussing during your meeting
You don’t want the competitor mingling with your attendees in the bar after hours or things like that.
You don’t want the competitor in the house at the same time because you don’t want them drawing away from your meeting attendance into their attendance.
If it’s a competitor situation where you don’t want somebody hearing your secrets, saying, I can cancel if you book these other people isn’t necessarily going to help you. Because in this world of espionage and computer hacking, if your competitor wants to find out what you’re doing in your meeting, there are a million ways they can do it other than scheduling an event at a hotel at the same time.
If you think that that’s important because you don’t want people mingling, you need to have a list of stated competitors that can’t be in the hotel at the same time. Naming it by industries is not a good idea, because the hotel has salespeople locally, nationally, potentially, worldwide that aren’t going to know who isn’t allowed to be at your event at the same time.
Identify any competitor or conflicting groups by name but be reasonable. It’s not reasonable to prevent a hotel from booking other business simply because you’re concerned about those issues. You always have to remember even if the hotel doesn’t book other group business. Those people can be reserving guest rooms on the internet and the hotel has no idea that they’re there.
Tip: Planners and hotels should have a so you can manage that competitor issue and be very forthright about what it is you’re concerned about so that you can come up with a clause to work together on those kinds of things.
If it’s because you don’t want people having events that are going to compete with your event and draw your attendees away, your first consideration should be, where am I scheduling my event? If you’re worried about competing events, taking your attendees, it might not be a good idea to have your event in locations where your competitors might also be hosting events.
Remember: Even if you eliminate the competitors from the hotel, they could book the hotel next door and still drive your attendees away.
Tip: Considering holding your event to another place where there’s less opportunity for the competitor or conflicting groups scenario to occur
If the hotel does make a mistake and a competitor or conflicting group is staying at the same hotel during your meeting dates, instead of having an automatic right to cancel, you should have the clause say that the parties will sit down and work out whether or not it is still possible to go forward with additional security or something of that nature. Then, if necessary, you can cancel.
In this video, you’ll learn what housing pirates are, how to avoid them, and what to do if you encounter housing pirates leading up to your group’s event.
Experts
Barbara Dunn (representing Groups) Partner at Barnes & Thornburg, LLP
Lisa Sommer Devlin (representing Hotels) Devlin Law Firm, P.C.
Overview
Companies that try to attract attendees to reserve hotel rooms through their agency rather than through the group’s authorized Travel Seller.
Group Perspective
Housing pirates are an ongoing issue in the industry and it is one that both groups and hotels should be aligned to address.
Example: The housing pirate company will say, ‘Coming to Chicago for the meeting stay with us. Here are our lowest rates.’ And the group attendee looks at that and says, ‘Heck these are half the price of the group’s rates. This is a really good deal.’ And then in some cases, they’ll go through that process and reserve a room only to find out that it might not be a cancelable reservation and it might not even be a real reservation at all.
It’s an issue for the group because the housing pirate company is speaking on behalf of the organization. In some cases, even using the organization’s name and logo. When of course it’s not authorized to do so. So, groups can consider including language and hotel contracts that speak to a bit of a cooperative effort on behalf of the group and the hotel, that if one or the other becomes aware that a housing pirate has acquired rooms in the hotel and is reselling them that the group and hotel will work together to combat that. Because a cease-and-desist letter can come not only from the group, but it can also come from the hotels.
Tip: the best defense is a good offense.
Make sure you’re educating your attendees, your exhibitors that these pirates are out there.
Inform your group members, that they might receive a phone call or an email from a company representing that they’re in connection with the group’s meeting. However, provide a reminder to your group members that our official housing company is ABC company or that housing can only be made through this link.
Hotel Perspective
Groups will often request clauses saying, ‘Hotel agrees, it won’t allow pirates to do things or hotel won’t do secret marketing.’ Hotels don’t want these pirates out there any more than the groups do.
The hotels can’t stop it, but they will try. However, it’s important to understand the hotel may sell a certain allotment of rooms to wholesalers and then those wholesalers resell the room to yet another wholesale company. That’s the pirate. So, this is an organization that the hotel does not know and has no relationship with.
In wholesale contracts, it always has a provision that the wholesaler is not allowed to sell those rooms to groups or other types of events in the hotel. They’re always supposed to be sold for specific purposes using leisure travelers.
So, the contract is not being breached by the wholesaler that the hotel deals with, it’s being breached down the line.
If this comes up and you contact your hotel partner and say, ‘Hey somebody’s contacting our attendees and claiming that they have rooms.’ The hotel will always work with you to send that cease-and-desist letter. They don’t want this to happen either, they’re not engaged in misconduct. And the most frightening thing that happens is that sometimes these pirates don’t have any inventory at all.
Unfortunately, situations have occurred where people have reserved rooms from these third parties down the line, they get to the hotel to check-in and there’s no room for them at all. And now they’ve pre-paid they can’t get the money back and they don’t have any place to stay.
Alignment and the partnership between the group and the hotel are very important. The parties need to work together to identify when this is happening and reach out to whoever it is that’s engaged in that piracy and get them to stop.
A Legal Perspective to Understanding Confidentiality in Hotel Contracts
Learn what this clause means and gain insight into the legal perspective from both the group and the hotel side of the contracting process.
Experts
Barbara Dunn (representing Groups) Partner at Barnes & Thornburg, LLP
Lisa Sommer Devlin (representing Hotels) Devlin Law Firm, P.C.
Overview
Customers and consumers are increasingly concerned about data privacy and confidentiality in general.
Often, a “generic” clause is used to require the hotel to treat everything about the event as confidential. A “one size fits all” clause is not the answer.
Instead, focus on the specific confidentiality issues for the event as well as how the parties can work together to achieve the particular confidentiality goal.
Group Perspective
Customers should consider including confidentiality language if there are particular requirements for their meeting.
Ideally, Customers should address these confidentiality requirements in the RFP.
Customer should do everything it can on its end to maintain confidentiality – reminding meeting attendees, not distributing documents electronically, having a paper shredder in the room
Customer should ensure that there is not a need for banquet staff to come in/out of the room for meal functions during discussion of confidential items
Customer should interface with the hotel’s management and security with any special details needed for speakers and VIPs
Items for customer to consider when reviewing/drafting a confidentiality clause:
Keep it confidential that it is having its meeting at the hotel
Limit access to meeting and function space
Secure/re-keying for meeting space to ensure limited access
Require hotel’s assistance with special security needs such as for speakers and VIPs
Special equiment needed in meeting and function space such as paper shredder
Determine whether any other groups are meeting at the hotel over the dates and, if so, the identity of the groups (unless the hotel is prohibited from such disclosure by the other group)
Less is more when it comes to the clause – better to manage confidentiality through internal and practical procedures rather than shifting the burden to the hotel
Hotel Perspective
Hotels host thousands of events annually and provide the same services regardless of meeting content.
Hotels do not want or need confidential information from customers to host an event, and do not want to be legally responsible for such information so will resist confidentiality clauses.
The group must clearly define what is confidential and what is not confidential.
The group should determine what information it wants to protect:
Fact that group is having a meeting at a hotel?
Are trade secrets being discussed/displayed during meetings?
Identity of speakers or attendees at event?
Then negotiate specific actions that parties will take to protect it:
Agreement not to post information about group’s event in the hotel
Use meeting space on one floor with limited access or remote area of hotel
Protections to keep meeting content private like security outside door, staff not in room during presentations, shredders for written information
Special security procedures to protect VIP speakers or attendees like entering through the service entrance, limiting staff who interact with VIPs, and having staff sign a confidentiality agreement