Wednesday, March 19, 2008

Hotel F&B Costs...Trust, but Verify and Watch Your Back

You've negotiated a good sleeping room rate on a very nice property for your annual meeting. Members will be delighted at the place! Everything is looking terrific and your board of directors is pleased.

They are pleased, that is, until you present a food and beverage (F&B) budget for the event that looks for all the world like you've decided on a menu of Russian Beluga caviar, top shelf vodka, and truffles laced with shards of pure gold.

Then, they begin to wonder about your sanity and your negotiating skills. All you did, though, was get a good room rate and assume the hotel would be fair to you when it comes to F&B costs. But your assumption of fairness on the hotel's part, not to mention your failure to control your expense liabilities, has put you in a very, very disturbing situation.

That's the scenario you could face if you fail to include in your contract negotiations with the hotel some very specific parameters about the costs of F&B. Without caps in cost escalation from existing menus, maximum contractual per-person stipulations, or some other means of controlling F&B costs, you are at the mercy of the property. You don't have to serve Beluga caviar and top shelf vodka; you simply have to order a sandwich and a glass of iced tea and you could find yourself in very hot water if the hotel decides it's reasonable to charge $45 for the sandwich and $7 for the tea. Without contractual limits, you have no recourse; you're stuck.

So, how does one avoid the embarrassing and potentially career-altering scenario presented above? Here are some tips that will help:
  • Insist that the hotel make written commitments (written because hotel staff are notorious for disappearing before your event and their replacements cannot rely on your "word" that their predessors made them) to you that will limit your F&B outlay;
  • Incorporate into your contract some very specific numbers that restrict outrageous escalations in prices, such as: Per-person prices for base-level full breakfast shall not exceed $14, inclusive; per-person prices for base-level plated luncheon shall not exceed $21, inclusive; per-person prices for base-level plated dinner shall not exceed $31, inclusive (where inclusive means inclusive of tax, service charge, and gratuity) [of course, you must define "base level"];
  • Limit liability by incorporating an F&B commitment, in dollars, that you must meet, while simultaneously controlling per-meal costs, such as: group's F&B minimum commitment to the hotel shall be $17,500 (based on the aggregate expenditures on meals whose costs shall be based on an average cost per person of $13 for breakfast, $19 for lunch, and $29 for dinner) and, once achieved, group shall have no further commitment to hotel for F&B costs; and/or
  • Include a contractual provision that gives you the latitude to order "off menu" so that you can present a meal and ask for an item-by-item cost (so you can adjust the per-person cost to adapt to your financial capacities).

There are many, many ways to ensure that you and your board are not unpleasantly surprised at the cost of an event. You should know, before the contract is signed, what your F&B costs (and other hotel-related costs) will be, based on your estimated attendance. It's good professional practice to develop an event budget (whether "official" or not) before beginning the process of looking for venues for meetings. Your meeting specs should, ideally, indicate an expected price range for each meal, so that hotels know what's expected of them...and to give them fair warning that you'll expect their contracts to be adjusted accordingly.

You should have a spreadsheet that presents your final expected numbers before you start selecting menus. If not, you've not finished your preparatory work.

Finally, don't expect the hotel staff to look out after your best interests. That's not their job. Their job is to look out after the hotel owners' best interests. Your job is to look out after your association's best interests. A food and beverage budget that suggests you're planning to order Beluga caviar and top shelf vodka looks like you're looking out after the wrong interests.