Decoding Convention Center Contracts

These contracts are often the most complicated to understand, let alone negotiate. Here’s help deciphering the toughest and most important clauses. 

By M.J. Blank

Once the General Conference of Seventh-Day Adventists wrapped up in 2005, associate meeting planner Sheri Clemmer expected to see a $100,000 rebate for transportation and other expenses related to rental of the Midwestern convention center that had hosted her group. A convention and visitors bureau salesperson had promised that concession in a letter four years earlier to help seal the deal for the 65,000-person, 11-day event. Clemmer pushed the rebate issue, presenting a copy of the letter to the convention center, only to be told that since it wasn’t part of the contract, the claim wasn’t valid. Her hard-learned lesson: Getting it in writing is not enough.

“If you are anticipating concessions from the host city, be sure those items are written directly into the contract,” she concludes.

Convention center contracts, license agreements, leases and usage agreements, as they are variously called (see sidebar on page 24), are complex and legally binding documents that are an essential part of doing business for conference managers. They are a different animal than hotel contracts, and it’s essential to understand those differences, as well as the limitations and nuances of convention contracts, and when and how they can be changed to avoid surprises.

“Whether it’s a convention center or a hotel, in essence, what you’re doing is the same-you’re reserving space under certain terms and conditions,” says Mark Roysner, a leading legal expert on convention centers and large trade show events. He has written several publications on negotiating hotel and convention facility contracts. While hotel and convention center rental agreements or contracts tend to be the same on a basic level, but there are very significant differences, he adds.

This article covers the most significant clauses and what to expect at the bargaining table.

Indemnification

Simply stated, indemnification is an agreement between two parties not to hold one of them responsible for future legal action or fines. It would be extremely rare for a convention center not to insist on an indemnification clause that protects the facility, and it’s one item that is not up for debate. However, meeting planners can ask for limitations, especially in the case of gross negligence or acts caused by the center’s owner, even it that happens to be the local government. They can also ask that the language include indemnification of the group having the convention.

Indemnification clauses offer a perfect example of how most convention center rental agreements are written. “They tend, at first blush, to come across as one-sided; all the terms favor [the centers],” Roysner explains. When publicly owned convention facilities won’t budge on indemnification, it’s often because they are legally bound to include that language in contracts. Many states and municipalities don’t allow the facility managers to pass liability on to the citizens.

Insurance

When a public facility insists that its clients have a certain level of insurance, that is not an item on the table for negotiation. So, rather than quibble over the amount, a planner would be prudent to consult with his or her organization’s insurance carrier or in-house expert and make sure the proper coverage is in place. And experts recommend making sure that any vendors or exhibitors also understand-early in the game-what coverage they will be expected to have. Finally, it’s very important to determine whether the policy covers an event in the state where it will occur.

For small groups without their own insurance, convention centers often will sell short-term policies to cover an event.

Cancellation

Terrorism and natural disasters have put cancellation clauses in the spotlight in recent years.

“Many of these contracts say that if [the convention center is] ready, willing, and able to do business, you are liable if you cancel,” Roysner says, regardless of world events, such as travel advisories, SARS or a hurricane that has closed the major hotels nearby. He thinks it’s crucial to tie together in the convention center contract any facilities that are necessary for a meeting to take place-so if the hotels surrounding the center are out of commission, the group is not liable.

Also, many convention center agreements specify 100 percent of the fees are due if a group cancels. But it may be more reasonable to pro-rate that penalty depending on how far in advance of the date the cancellation occurs and whether the dates are picked up by another group.

Roysner also thinks asking for the full contracted fee is unreasonable, and that the penalty expected should be limited to lost profits-not lost revenue.

If the cancellation is far enough in advance, Houston’s George R. Brown Convention Center will try to get the group to book for another year to avoid cancellation penalties. Some facilities are also more likely to waive or reduce penalties for regular customers.

What recourse does a group have if circumstances at a convention center change and affect its ability to host an event? “What happens if they change the hall or only have half the space you need? You want to work that out in advance so you don’t have to go to court over it,” Roysner advises.

In a worst-case scenario, facilities sometimes try to back out of an agreement “if all of a sudden they have the opportunity to get a large national convention in town,” Roysner says. The contract should include language protecting the group in this circumstance.

Linda Daniels, an independent planner based in Wheaton, Illinois, specializes in religious meetings. She says she is willing to agree to almost any cancellation or indemnity clause-provided it goes both ways. “I make sure the contract says that if you cancel, you pay us X dollars, and if we cancel, we pay you X dollars. If they won’t agree to that, then I ask them how often they cancel.” If they never cancel, she thinks the facility should be willing to include that dual provision.

Additional Charges

These clauses seem to present the biggest can of worms but are crucial to budgeting properly. The main problem is that no two facilities define additional charges the same way. Some include setups, or initial setups, in the rental fee. Some don’t include chairs. Utilities are often separate. Exclusive agreements with on-site vendors may preclude meeting planners and exhibitors from bringing in their own equipment, food, or labor for certain items, depending on the convention center.

The key to avoiding surprises with the final bill, observers say, is to provide well in advance as much detail about what will be required in the way of utilities, telecommunications, equipment, meeting space, and other requirements of the meeting.

“The more you know in advance, the better we will be able to capture what the true costs will be,” notes Lewis Dawley, general manager of the Hampton Roads Convention Center in Hampton, Virginia. For some items, such as utilities, knowing what’s needed well in advance may save money for the convention center management, which can pass the savings on to the organization.

Stella Bene-Venson, a meeting planner for the United Methodist Church, Nashville, Tennessee, isn’t an audiovisual expert, so she asks her AV person for help negotiating that portion of the contract. “It’s best if you’re not professionally trained that you have someone who can help you with areas where you are not a knowledge expert,” she suggests.

Conversely, Houston’s convention center has partners that provide information technology, food and beverage, AV, and other services. These vendors participate in site visits so they can provide answers about their fees

It’s not unreasonable to ask for a cap on charges, or request that prices quoted today remain valid even for an event several years down the road. Daniels recently negotiated a contract for an event four years from now; all the additional charges will be capped at today’s rates.

If the additional charges are not clearly outlined, ask for clarification before signing. “In my mind, you are negotiating if you ask for something before the contract is signed, and you are begging if you ask afterwards,” says Sheri Clemmer, Seventh-Day Adventists.

After her experience in 2005, she scrutinizes every final contract with a magnifying glass to ensure that any verbal promises have been included. After reviewing an agreement for a 2010 citywide convention, she uncovered a number of glitches, including a $110,000 charge for a ballroom that should have been gratis, and one free move-out date instead of the three her group had been promised.

Vangie Waybright, an independent planner who specializes in religious group events, says she has been able to negotiate the services some convention centers require-such as medical personnel-down to a minimum required by law. “But you can’t negotiate that totally out of the agreement because of their rules and liabilities,” she adds.

Other items to consider under additional charges:

• Music licensing fees: “We are ultimately responsible for paying those fees, and we shift that liability to the user, so that’s included in the permit agreement,” says Courtney Dyer, general manager at the Virginia Beach Convention Center.
• Advertising commissions: For example, Chicago’s McCormick Place stipulates in its contract that it can collect an advertising commission from exhibitors that publicize their products or services in the facility’s public spaces.
• Often, a certain level of food and beverage spending triggers a free room rental: For a 2,200-attendee meeting at McCormick Place last August, Bene-Venson successfully negotiated this type of deal. “We got complimentary meeting space because of our meal functions. We only paid for labor.”

Deposits

It’s easy to understand a convention center management’s position when it comes to deposits: They are taking the product off the market for your conference, and that deposit is a good faith gesture from the client. But this is one area with a little flexibility. Some facilities will make exceptions for, say, groups that follow strict internal accounting practices that preclude meeting the deadlines or the amounts specified in a contract.

A good track record or an ongoing relationship are also pluses. “If a group has a history, many times I can negotiate down the deposits,” says Waybright. “Part of what they’re looking for is if you pay your bills. If there is no history, it’s more difficult.”

Daniels says she has never felt comfortable paying for 100 percent of an event’s cost up front, something some contracts specify. “If I pay 100 percent before the starting date and you mess up, I have no leverage. Give me 10 percent or $5,000, something that is still on the table in case we have to come to an agreement,” she says.

Typically, contract language refers to deposits simply as “nonrefundable,” but that can be changed to exclude unexpected damages to a building that make it unusable.

Details, Details, Details

Reading and understanding a convention center contract is only part of the game. Savvy planners also ask for a copy of the center’s rules and regulations to make sure they can comply with everything.

“Not everything is contained in the contract most of the time. All the legal rules are in the contract, but all the operational rules are in the rules and regulations. Those may have a tone of liability attached to them, and they may have some restrictions on what your event is trying to accomplish,” Roysner says.

State and local laws may also impose all kinds of restrictions on events. Norwood Smith, vice president of sales for the Tampa Bay Convention and Visitors Bureau, points out that many religious groups have conferences that allow exhibitors to sell merchandise on the show floor.

“You need to check the laws of the state and the county where you’re booking to make sure that is legal and whether sales taxes need to be imposed,” he notes.

It may seem obvious, but a shrewd planner will look over the space specified and make sure it matches what was requested and matches the event’s needs. All the concessions, promises and changes discussed should be included in the document. Are the move in/move out dates correct? Are the fees what was expected?

What time period does the agreement cover? Smith says clients sometimes comment that the rental rate in the document seems a little steep. “We ask them if they realize that it’s for the whole period of time, not just one day, and that it covers so many move-in and move-out dates. Some contracts don’t include those. It’s not uniform.”

Seemingly benign details may mean a lot to a religious group. Clemmer, for instance, asks convention centers for a clause giving her group permission to cover existing a building’s signage advertising alcoholic beverages “because we don’t want that at our conventions.”

The bottom line, as with any written agreement, is to make sure everything is clear before signing. “And if you don’t understand it, ask someone who does,” Roysner says. “It can save you hundreds of thousands, if not millions, of dollars.”