Hotel Contracts In The Age of Coronavirus: The Non-Negotiables You Absolutely Need To Protect Yourself with Bari Baumgardner and Joe Polish - Genius Network Episode #148

I probably have lost to the tunes of hundreds of thousands of dollars cause I first started doing live events in I think the very first one I did at a hotel like a boot camp was in 1995 1996. I just had no idea what I was doing and it took me getting pummeled a few times before I even started looking at this.

Losing sleep over the uncertainty of your upcoming live events? Learn how to navigate your hotel contracts with the new set of non negotiable clauses in today's episode of the Genius Network podcast. In this episode, Barry Baumgartner of Sage Event Management shares the contract must haves in the Age of Coronavirus. She'll explain the three rainy day clauses to add to your contract and reveal why you must have multiple backup plans in place. Barry and Joe will also discuss the power of negotiation in the hotel world, especially now that the playing field has been leveled and the four magic words that could save you thousands. If you'd like to join world renowned entrepreneurs at the next Genius Network annual event, then apply today for your invitation to attend. If you'd like to learn more about the Genius Network Annual event or to apply, go to geniusnetwork.com Hotel contracts in.

The Age of Corona the New Non Negotiables so, with a tremendous amount of uncertainty in the world, those of us who host live events are being forced to quickly pivot with limited information that daily, if not hourly, our hotel partners are inundated with questions and cancellations, making conversations and decisions difficult. And an increase in furloughs may be necessary, but it isn't helping. How do you decide next steps in a climate of uncertainty? Should you cancel, rebook or postpone? How do you weigh options and opportunity costs? How do you protect in the now and position for the future? Together, we're going to dispel some rampant misinformation of level the playing field with industry partners and explore next steps for your next live event, whether it's contracted, pending or waiting to be booked. We will review the three rainy day clauses that most hosts and their planners neglect in contract negotiations. The four words are non negotiables at Sage, how they saved our clients hundreds and thousands in when Corona took over the airwaves and the new clause that allows you to confidently move forward even in uncertainty. And I'm going to give a quick bio on Barry. Barry Baumgartner is the founder of Sage Event Management. She coaches authors, speakers, information marketers and influencers in the formula for launching a seven figure business using leverage of a live or virtual event to create a purpose driven payday. Her sales is service strategy for high ticket offers as the foundation for many of the industry's most profitable live events. From Russell Brunson, Jeff Walker, Lisa Sasevich, Amy Porterfield, Stu McLaren, Pete Vargas and more. You guys did my live event last year. You are amazing. Her new course, Rush the Live events Blueprint offers real world user friendly strategy first how tos for profitable live events of 5, 50, 500, 5000 or more. So you actually work with some of the biggest events and people that are doing really well in the whole space of expertise. So give it up for my friend Barry Baumgartner.

Thanks Joe, I appreciate it. This is a cause that's near and dear to my heart. Joe and I were actually talking last week or a couple weeks ago about his contract clauses and he's like, we really should be sharing this with the group because right now if you are considering doing a live event, if you're already in live event world, whether it's 5, 5, 5,000 or more, there are some rainy day clauses that make a huge difference in how the hotels are going to receive you. Trying to make a move. So contract law is shifting quickly and I'm going to walk you through what those changes are and also what some of the pivots are that you need to think about. And this is true if you're thinking of rebooking or postponing or you're starting from scratch and thinking about 2021, 22, 23. We're currently book 2025 right now, so really, really important for future bookings. So I think the first thing that's coming up for people kind of non negotiables and let me say too, we negotiate about 100 contracts a year with our hotel partners on behalf of our clients. In the last 30 days, we've canceled eight events, postponed eight events and renegotiated 22 events in addition to booking new events through 2025. So this is all very real world experience I'm going to be sharing with you. And I think if you're in live event space really quick, what you need to be thinking about is a plan A, B, C and D, which is plan A. I'm just business as usual. You know, Pedro's on the line, we just booked a contract for him. He's got an event coming up in October. It's like we are moving straight ahead as f this is going to work just fine. We're going to start marketing and for the most part, if you're in the fall. That's what we're looking at. But plan B is really interesting because when I first started talking about this three weeks ago, we were saying, yeah, if your event's in April, it's probably been canceling. If your event's in May, it's probably been canceling. If your event's in the summer, it's a tbd. And now we've moved everything off of our books through Labor Day and we're basically saying, yeah, if your events in the fall, let's just make sure we have a plan B, which is probably going virtual. So for those of you who've been thinking about doing a live event, know that this is a different conversation, but something I just want to seed for you and kind of put into your thoughts, especially for the talk my husband's going to be doing right after the break, is that virtual is very much a plan C opportunity, meaning you can quickly pivot an in person event to a virtual event, literally in the snap of your fingers. And it's working really well right now. We're actively doing that. We're seeing larger rooms virtually. We're seeing high conversions even with high ticket offers. So it's a very real Plan C. And the cool thing about that, and Blu will talk about it, is that your net is going to be higher, right, because you don't have hotel expenses, you don't have hotel liability. So for those of you who've been thinking about doing a live event and you've been waiting on the sidelines and you're thinking Corona has meant let's just Postpone it to 2021, I would submit to you there are great deals to be had at the end of 2020, and virtual is alive and well. And you can do that right now. And there's never been a better time because quite frankly, you can beta test anything you want right now because audiences are pretty forgiving. So it's an excellent opportunity. And I said plan T, business as usual, because it will be a new business as usual. You could put slash the new normal, because I think what you're going to see with a business as usual plan is things are not going to be what they used to be. You're going to see different precautions taken for registration, for food and beverage, for sleeping rooms, as we all kind of adjust to what this looks like in the new normal. So if you're thinking about any of this, there are three clauses. The three rainy day clauses Joe mentioned are cancellation force majeure and rebook. And a lot of Contracts we're seeing right now as we start to help people out, don't have a lot of these, like they have a terrible cancellation, they have a limited force, they don't even have a rebook. So we're going to talk about that. And then something for you to know is that if you are in this situation where you're negotiating with a hotel on an existing contract, something you absolutely need to know is pick up the phone. This is not an email that seen as firing a shot across the bow. Pick up the phone, talk to your hotel contact and know that your current hotel contact may have shifted because 90% of the hotel world is furloughed right now. So find out who is currently still working and talk to that person on the phone about your plan B, your plan C, your plan D. And then you start the negotiation and here's what the negotiation looks like. So I took a screen grab of a pretty typical cancellation clause. And what you're seeing here is a bunch of legalese and a sliding scale of how much you're going to pay based on when you're going to cancel. And the key thing to note here is that if it's sometime in the short term for most hotels, you're going to see 100% payment, meaning that they are charging you for all your rooms and all your food and beverage if you fall outside the force majeure window. And we'll talk about what force majeure is in just a second. But an outright cancellation is going to be on a sliding scale. They're going to expect the money to be due right away and they're generally going to be predicating it on all your food and beverage that you contracted in all of your rooms. And a really interesting thing that we're seeing are closets like this one where it actually says not only is it due at the time you cancel, this could be, if you look at these numbers, $175,000, $350,000 they're expecting right now, but if you don't pay it right now, they won't let go of the rooms and then you're basically incurring. So the timing is everything on this. Now, if you're moving forward on a renegotiation or you're starting from scratch for a future year, here's what the clause should look like. On the left hand side is the clause you just saw. And on the right hand side is the preferred clause that we're going to share with you after this so that you can easily read it and share it and use it. But what you'll see right off the bat is that we at SAGE always negotiate a sliding scale based on profit margin. And something that most people don't know is that hotels make 80% profit margin on rooms and somewhere between 25 and 40% on food and beverage. So if your event does not actualize, why should they make more money if you cancel than if you had the event? There are real costs for them to service the rooms and service the food and beverage. So when you're paying 100% cancellation, you're actually paying them more than they would have made if you'd had the event. They don't have food costs, they don't have staff costs if you've canceled your event. So right off the bat, make sure that you're including a profit margin in your staggered scale there. And then the second piece right underneath this super, super critical is that it's due in 30 days. Why is that important? Because the clause right below that says if they resell any of this, then they have to give you credit. So if there is any resale, and this could happen if it were a fall event or an early 2021 event, they have to debit that out of what you owe. So you don't want to be fighting to get your money back. You want to withhold your money, let them do the resale, do a proper audit, and then pay them what the remainder is. So profit margin, resale, and then the remainder 30 days later. Hold onto your cash as long as you can. The next piece would be the force majeure, or what we call an act of God clause. Super, super important. This is an example of what most hotel force majeure clauses look like. And you'll see it's under the heading of impossibility. Think about it. How often is it impossible to hold an event? It's pretty rare. And the force majeure is really intended for a hurricane, a fire, a strike, a flood, you know, some kind of natur disaster, a terrorist attack, a 9 11. But if you have something like Corona, it's sort of like a hurricane has landed on us and stalled and you don't know when it's leaving. Right? So it's like, when is the occurrence and is it actually impossible or illegal right now? Arguably, depending on your date, it might be. But if you're in that tweener of late summer or fall, it probably isn't. Our force majeure looks like this. And the key here is four words that Joe mentioned. Four keywords that you want in your contract clause for force majeure, no matter what. And it is impossible, illegal, unsafe, and commercially impracticable. And that's really key unsafe. And we detail in here exactly what unsafe means is really critical at a time like this. People don't feel safe to travel. Therefore, it becomes commercially impracticable to hold your event if people won't attend. It's no longer practical commercially for you to do it. Now, to be clear, this does not mean you didn't fill your room, your marketing flopped, your Facebook ads didn't work. That's within your control. This is for circumstances beyond your control that make it unsafe or commercially impractical. And then really important. The clause right below that with the arrow says if we decide to hold the event anyway, you will waive any attrition for food and beverage and room. So we're going to partner with you. We're still going to hold it even though we're in a force majeure situation. But because we're being such a great partner, you're agreeing that you'll waive the attrition? You'll waive that F and B or room attrition. It eliminates any liability for you to go all in with the hotel as your partner and continue to hold your event despite the force majeure. That's going to be especially important for fall events. For those of you that have fall or early 2021, not knowing what's going to happen, you want this protection of still being able to move forward without the massive liability that you originally incurred, and then that leads to the next piece, which is a rebook clause. And here's the sad thing. A lot of hotel contracts I'm seeing right now don't even have a rebook clause because the clients just don't know to negotiate them in there. So when we're doing audits to help people out as a give, right now we're seeing no rebook clause. You should have a clause and it should look like this. And essentially it's saying that if you re within one full year, that all the monies that you've paid so far will be applied toward that next event. So it gives you that wiggle room that any deposits are returned to you or they're applied to the next event. So that combination of getting a good cancellation clause that's in your favor levels the playing field. Having a strong force majeure whether you cancel or you decide to hold it, and having a strong rebook clause that allows you the flexibility to actually go beyond where you are to anytime within the next year. So think about it. If you were this fall and you had a rebook clause, you could push to next fall and any deposit you'd pay would apply toward that next event. And there are a million other clauses that are important, but in this day and age, these are three you absolutely need and they should be your new non negotiables, meaning that you won't sign a contract without them. There may be minor compromises on wording, but never sacrifice the key ones that I just highlighted, they're the most important and they'll make a big difference in your liability on the back end. So short overview of contract law.

That was really, really awesome and really valuable. Thank you so much. Bear, is there anything else that you want to want to say right now?

Yeah, the only quick thing would just be that everything's a negotiation and hotel world. And I think the biggest way that hotels take advantage of planners who aren't better educated or clients who don't know any better is giving them a contract that's heavily weighted. A contract from a hotel is going to be weighted in their favor and only their favor. It is not a level playing field. And every single word of a contract can be negotiated. So know that it's in your favor to do that. You have the power to do that. And in this day and age where the pendulum is about to swing from what has been the seller's market for three to five years back into a buyer's market, having this information is going to. You're going to have a better time using this than you have in the past because they're going to need your business. So being armed with the right tools allows you to level that playing field for the next three to five years.

Yeah. And I will tell you, I probably have lost to the tunes of hundreds of thousands of dollars over because I first started doing live events. I think the very first one I did at a hotel, like a boot camp was in 1995, 1996. And it was just. Yeah, I mean, I just had no idea what I was doing. And it took me getting pummeled a few times before I even started looking at this. And then secondly, hiring people that actually know what it is they're doing because what they charged to hire them, like to hire you guys as an example, you negotiate everything so the fee actually doesn't cost anything because you will end up if you don't have that type of representation. And that doesn't even factor in how you actually teach people to set up their events to create the outcome that they want, either the client experience or if you're selling or whatever the goal and objective of someone's event is. I would just encourage people work with pros. And you guys are total pros at what you do. And this is super valuable. So thank you.

Thank you, Joe don't miss another episode of Genius Network. Subscribe today@genusnetwork.com subscribe if you'd like access to the video show notes or the exercise to help you take action on what was discussed, please visit genusnetwork.com148.