Source: Robin Roth, Senior Contracts Editor and Jeremy Janszen, Conferon Express Manager, Conferon, Inc.
E-Specs: October 26, 2004

How often do you find yourself facing minimum dollar guarantees for food and beverage in hotel contracts? F&B performance terms are becoming much more frequent in these contracts. How can the impact of yet ANOTHER liability be minimized - or negotiated out entirely?

First, make sure the basic requirements are covered:

• F&B performance terms should be covered in a stand-alone separate clause.
• Charges should be for lost profit only, in the range of 30-35% of the slippage. If the slippage is being charged as meeting room rental (encountered frequently these days since rental goes straight to the bottom line), the rental amounts should be equivalent to 30-35% of the F&B slippage. Make sure you're not paying more in damages through rental fees than you would have in lost F&B profit.
• Get credit for any ICW (In Conjunction With) F&B revenue your group generates, as well as resold functions. Charges should be due after the meeting dates so that these calculations can be included.

For negotiating strategies, try these suggestions:

• The most useful argument you have is the value of your business (seasonality, total anticipated revenue, rooms-to-space ratio). With a strong position, you may be able to negotiate F&B performance out entirely.
• Know your true F&B spend and agree to a performance dollar amount at or below this figure. (80% of the target is the norm.)
• Try to trade liabilities. If the hotel insists on F&B performance, ask that meeting room rental fees or other liabilities be removed or reduced in exchange.
• Your history of the amount your group has spent in the last three occurrences of your program can reassure the hotel that you'll likely perform the same way. This can support your request for no formal F&B performance obligation, since both parties are working from the same historical data.
• Provide more business (read "revenue") by booking multiple years or meetings if possible. This added weight lends momentum to your negotiations.
• Be aware that hotels provide function space in order to sell guestrooms. Using a fair ratio of both places you in a stronger position. Consuming more function space may trigger a hotel request for minimum F&B revenue to offset potential lost room revenue, since the shortage of available function space will make it harder to sell the remaining guestrooms.

Considering these options may leave you with one less liability to worry about.

(Note: This information is not intended to be "legal advice." A qualified attorney should be consulted to review all legal issues.)