Negotiating Contracts in an SMM Environment

By Debi Scholar President, The Scholar Consulting Group | October 07, 2012

There are varying degrees of maturity in Strategic Meetings Management (SMM) hotel contracting and inevitably, most hoteliers want to learn how to avoid the onerous contract negotiations in these environments. Procurement may be involved and many organizations are moving to their own hotel contracts vs. using the hotel’s paper. Even in a seller’s market, organizations want to be in the driver’s seat of racing down the road of terms and conditions. And, who can blame them? Many organizations spend millions of dollars with hotel chains and procurement leaders expect to use master service agreements to reduce overall risk and cost, and improve consistency across the whole enterprise.

Whereas ad-hoc contracting for a meeting or event requires the meeting planner and property leaders to negotiate terms, strategic sourcing usually requires procurement, meeting leaders, general counsel and chain-wide leaders to negotiate terms for an entire organization’s meetings and events. Moreover, when meeting/event contracting is integrated with transient travel contracting, the process penitentiary causes confinement for months with legal beagles shredding their opponent’s side of the contract. When hoteliers understand the SMM Hotel Contracting Maturity Model© and how it affects their negotiation strategies, then the hotel can author terms that satisfy their clients and increase the chain’s revenue. Defined, Strategic Meetings Management provides direction for organizations to guide the strategy, operations, and tactical activities of meetings and events in order to improve business processes, quality, and return on investment, and reduce costs, risks, and inefficiencies.

Twenty Components Make Up the Meetings and Events Hotel Contracting Maturity Model:

  • Identifying suppliers to bid on meetings
  • Bidding, evaluation and selection process of suppliers
  • Preferred suppliers
  • Contract language
  • Concessions and discounts
  • Negotiation practices
  • Benchmarking
  • Automating sourcing process
  • Contract signing delegation
  • Hard and soft savings, cost avoidance and cost reduction; penalty identification
  • Reporting
  • Reputational
  • Service level agreements and key performance indicators
  • Contract retention practices
  • Supplier relationship management
  • Contract and compliance
  • Standard operating procedures
  • Change management
  • Professional sourcing staff
  • Strategy, policy and continuous improvement

Each of the Hotel Contracting Maturity Model components is described in each of the following levels. For example, an organization may be in the “Learning” stage for one of the components but in the “Evolving” stage for another component. The progressive maturity model levels also include the activities from the less-mature, previous levels. The maturity model levels are:

• Learning - Describes an organization that is aware of the SMM components and may take first steps in building a program
• Developing - Describes an organization that is building an SMM program and may launch some components
• Evolving - Describes an organization that has implemented one or a few of the SMM components; Program updates may be underway
• Transforming - Describes an organization with proper oversight, governance and change management
• Mature - Describes an organization with the highest level of maturity

Using the continuum of hotel contract maturity from the “learning” stage through “mature,” let’s explore a few of the twenty components above.

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