by Cheryl Lawson
OK, Let's get real here about the AIG St. Regis event. As an event professional, I have had mixed feelings about this story and have been reluctant to give my feedback since I am one of those Americans suffering in poor economy.
With that said, my questions are:
When was the contract signed & what was the anticipated income? Although this was not covered in any of the blogs or news reports I found on the subject, most events/conferences of this type are planned months if not years in advanced. Epiphany Trader http://www.epiphanytrader.com/AIG_Invoice1.shtml lists a copy of the final invoice. You'll note, there was a $58,373.00 attrition charge. What that says to me is that this was an event booked for more sleeping rooms and or F&B than they actually utilized.
What was the Attrition Clause? For those of you who are not familiar, all hotel contracts include some type of attrition clause. The attrition clause allows the hotel/resort to recoup any losses if the group fails to meet it's contracted room block and or food and beverage expenses. What we do know about the AIG event is that there was a shortage of either rooms or food and beverage for the final event. (note the $58,373.00 attrition charge).
Here is an example from one of my own events (of significantly smaller budget) of the anticipated income statement.
At this time, the resort is holding 505 room nights for your use over the contracted dates, which,
including the resort charge, will generate total room revenue of $48,411.00. Planned banquet food and beverage revenue is $24,000.00. These figures shall be referred to herein as the “Anticipated Room Night and Banquet Food and Beverage Revenue Figures.” All food and beverage is subject to a 21% service charge. All revenue figures are net and not inclusive of taxes, service charge or commissions.
From the same event from above, here is the wording regarding attrition.
At the reservations due date as established above, we will calculate the amount of room attrition which we anticipate will be due. We will advise you of that amount shortly thereafter, and that amount will be due immediately upon receipt of our invoice. Upon receipt of your payment, that amount will be credited to your master account and will be applied to the final calculation of rooms and food and beverage attrition upon the conclusion of your meeting.
What was the negotiated room rate? What the invoice does not make clear, is how many rooms were utilized and what was the negotiated sleeping room rate. Any event professional worth their weight in USB drives knows that you can negotiate better than published rates for clients. When people see and hear the Ritz Carlton or St.Regis, they somehow assume that negotiations are not possible. That is simply not true. All properties will negotiate!
What was the cancellation clause? Most hotel/resort cancellation clauses require some form of payment as penalty within 0 - 365 days of the contracted event, and most always there is a 90-100% payment penalty within 0-90 days of an event.
An example of how a cancellation clause reads.
In the event of a group cancellation occurring 0 to 90 days prior to arrival, liquidated damages in the amount of ninety percent of the "Anticipated Room Night and Banquet Food and Beverage Revenue Figures" will be due, plus applicable taxes and service charges.
In the event of a group cancellation occurring 91 to 180 days prior to arrival, liquidated damages in the amount of eighty percent of the "Anticipated Room Night and Banquet Food and Beverage Revenue Figures" will be due, plus applicable taxes and service charges.
In the event of a group cancellation occurring 181 to 365 days prior to arrival, liquidated damages in the amount of seventy percent of the "Anticipated Room Night and Banquet Food and Beverage Revenue Figures" will be due, plus applicable taxes and service charges.
Should AIG have scrapped this event and simply paid the penalty?
Now that you have taken one of my classes :-), the real question is. Should they (AIG) have gone ahead with this conference or paid the penaly? Of course hind sight is 20/20 and due to the overwhelming bad press received from their decision, I would be a fool to suggest they go ahead with this event as they did. Perhaps the spin doctors who I'm sure are at the ready for these big firms could have preempted the bad publicity by "leaking" the contract signature dates, and the cancellation policy.
I even heard one of the guys in the meetings podcast mention a suggestion that AIG should have donated the trip to military families. Maybe some combination of the contractual facts a charitable aspect would have smoothed the rough edges a bit more.
Maybe a bit too much Monday morning quarterbacking here, so I'll move on.
How does this effect future publicly held companies' event and meeting expenditures and plans. My biggest concern now is... how will this impact events/meetings and conferences as we move forward in this economic environment. It is true that in tough times, face to face meetings to share common goals and new directions are the best way to calm both employeees and customers fears.
An informed event/meeting professional can easily communicate to clients,customers, and vendors the importance of appearance vs. value. Hone your negotiating skills, become a better communicator, and stay above reproach!
Sometimes you will have to cut your losses and cancel and event/meeting with short notice, but you will survive to go on another day!
Cheryl Lawson, MBA
