While America is facing a firestorm of inflationary prices and supply chain issues coupled with an increasing consumer appetite for live in-person events, organizers and administrators (e.g., rights holders) are wise to remember key strategies when negotiating with facility vendors who are ready to earn your business. The underlying premise when planning an event that requires facility space and services (e.g., catering, audio-visual technology, scoreboard operations, etc.) is to maintain a win-win mindset throughout the process, and remember, it IS a process.
Before starting any negotiation with a facility rep or one of their partners, the first step is to narrow down suitable facility options based on availability, location and capacity to meet the needs of the event. Before narrowing the field to suitable options for your event, rights holders must review any facility being considered to ensure it will meet all the minimum requirements. The goal for the rights holder should be to secure the facility that is the best fit, and not necessarily the least expensive.
Good negotiators know that the cost to lease a facility space is not the tell-all factor that should guide a final decision. For example, a resort with an attractive conference space may waive the rental fee but it may also require guaranteed occupancy rates for which your organization is responsible, regardless of final participation numbers. Event organizers should be aware of effective strategies to negotiate a facility reservation and to continue with the right approach that will assure costs are controlled and event service needs are met at the standards expected.
The following seven strategies will assist in guiding negotiations with facility vendors.
# 1. Do the Homework
Research is the only way to become familiar with industry standards, market rates and the landscape of the facility rental business. Before creating a preliminary budget and entering into negotiations, the event organizer or rights holder should be knowledgeable enough about pricing and the general business of facility leasing to gauge what is and isn’t a reasonable expense. In addition, other considerations apply. For example, a new venue, eager to establish itself as a player in the event market space, may provide additional incentives.
The Internet is a starting point to download catering guides and other materials from facilities that publish fees and service expenses. It is also a means to read reviews from past clients or discover how long a facility has been operating. It is also beneficial to meet personally with representatives from local facilities and to connect with professionals who are experienced in contracting with facility vendors. The axiom is, after all, knowledge is power.
Doing the homework to become familiar with general costs associated with facility leases and the underpinnings of how rental agreements work will allow event organizers to take the driver’s seat in the negotiations process by arming themselves with a realistic budget and practical information.
# 2. Treat the Budget like a GPS
It is essential to have an itemized budget inclusive of all deliverables for an event (e.g., marketing, staffing, equipment, technology needs, etc.). A comprehensive budget is a static baseline tool to quantify a path and guide decisions to ensure the bottom line is not compromised. However, event organizers and sales representatives know there is typically more than one way to reach a destination.
A global positioning system (GPS) accounts for bumps in the road, detours and alternate routes. With a win-win mentality, rights holders and facility or sales reps can each use concrete facts and creative thinking to ensure all necessary items from a budget are delivered while maintaining the bottom line which should be viewed as your best alternative pricing threshold. Exploring multiple alternatives and solutions to each financial problem area is a road trip in itself.
Negotiating is a process, not an event. It is not always a sprint to the finish line. In some cases, it may become necessary to make concessions in the quantity or quality of service items, labor responsibilities may need to be shifted or outside contractors used for fulfillment. Whether the directions are leading the two parties down familiar or unfamiliar terrain, maintaining the best alternative bottom line should always serve as the final destination.
# 3. Lead with Needs, Not Numbers
The rights holder or event organizer should not provide an event budget before receiving an estimate or quote. Financial numbers should follow the needs of the event. The party searching for a location should provide a detailed checklist of their needs, so the facility vendor has a clear understanding of all the requirements to successfully host the proposed event in their venue. This checklist should include an accurate head count of the total anticipated participants, registrants, spectators or guests and anything else that will impact pricing.
After reviewing the proposal and asking for clarification on any points, the facility vendor should provide an initial proposal. Once the estimate or quote is received, review it to determine if all the logistical and operational needs will be met and to identify any misalignments or potential obstacles. If the initial information or checklist provided to the facility team clearly and accurately articulates all the required needs, the review process should be expedited.
Clearly, an expediting option is eliminated if the estimate yields too wide of a gap between the bottom line pricing provided by the facility and the bottom line budget of the rights holder. However, if the rights holder accurately predicted the relative costs of leasing a facility and securing the necessary services to operate an event, the gap should be narrow enough to successfully negotiate the contract.
# 4 Embrace Experimentation
After reviewing estimates or quotes and narrowing the field to viable facility options, true negotiations can begin. On occasion, very few changes may be necessary to reach an agreement, yet in other situations, creativity and out-of-the-box thinking may be essential to close a gap in price, terms or service expectations.
Experimentation has the greatest potential to lead to unconventional deal structuring arrangements that will satisfy both the facility and the event organizer. Being bold with suggestions to find the formula that would be acceptable to the opposite side facilitates communication transparency. Transactions are not only about price negotiations. Occasionally valuation gaps can be mitigated by structuring longer-term deals (e.g., two or three-year arrangements), sweetening the pot with incentives for multiple bookings or offsetting labor costs if the event organizer provides staffing.
There are plenty of points in a facility agreement that can be amended which is where experimentation flourishes. Free wi-fi, transportation, parking or discounted service charges are items that can be negotiated. Typically, a facility will have a list of approved vendors; however, suggesting a third-party provider for service arrangements such as audio-visual may cut costs. In some cases, facilities may have third-party union contracts and the event organizer needs to be aware of this non-negotiable area during the due diligence phase. If there is flexibility on the event date and time, selecting options in the off-season or non-peak period may also drive down the total cost for event operations.
Guaranteed bookings are another point of leverage to negotiate better pricing since guest rooms typically are the most profitable revenue source for a hotel with meeting space. Guaranteeing a minimum for food and beverage may also produce price breaks in other areas of an agreement.
Ideally, a customer can suggest a customized menu (as opposed to a pre-set menu) or compare the difference between a plated and buffet-style meal to determine how food quantities and staffing needs affect prices. Similarly, experimenting with repurposing an event space (e.g., converting a registration area in the morning to a breakout room in the afternoon) may also produce cost savings. When both sides embrace experimentation and creativity in negotiations, a suitable workable arrangement is far more achievable.
#5 Balance Skepticism and Good-Faith Intentions
The goal of a facility is to maximize its revenue on every event they host, and that too, is the goal of every event owner. However, skepticism is necessary on both sides to avoid potentially unscrupulous behavior. On the part of a hotel, for example, this might include as hidden prices and other non-disclosures – and on the part of a client, it might be exaggerating room night potential or downplaying any problems that have occurred during previous events.
Event organizers should be wary of the promise of free rental space contingent upon other conditions such as guaranteed minimums on hotel occupancy. The apparent savings in a free lease arrangement is typically manifested in higher than normal prices to book a hotel room or secure hospitality, equipment, and services. Additionally, the penalty fees incurred by not meeting the minimum guaranteed room occupancy may far outweigh the original venue rental price. Best practices for balancing skepticism and good faith intentions include asking and clarifying questions, checking facts, comparing costs, providing and obtaining information in writing, and keeping communication lines open. The review of event comments on the internet about the facility should provide a picture of the facility’s pricing strategies.
# 6 Review the Fine Print
A facility lease agreement should be straightforward with easily understandable terms and conditions, without the aid of legal assistance. However, the representative of a facility should be willing to have a contract reviewed by a third party as a sign of integrity and transparency, a foundation of good business.
A typical facility lease agreement or contract will include payment terms, deposits or pre-payment details, consequences for late payments, cancellation provisions, service charges, attrition rates and penalties for un-booked rooms, liability stipulations, conditions for force majeure and a host of other applicable details that are considered the fine print.
Agreements generally provide reasonable dates to adjust guest or participant numbers to avoid incurring penalties if falling below minimum guarantees. Policies and stipulations for alcohol consumption, security detail, firearms, and foreseeable risk areas are traditionally included in addition to the jurisdiction in the event litigation is necessary for any reason including a breach by either party. Reading the fine print is not only a prudent means to ensure all conditions are understood and satisfactory, but it is also a necessity to avoid incurring unanticipated costs. Finally, reading the fine print provides opportunities for amending any area prior to authorized signatures binding the agreement.
# 7 Never Fully Close the Deal
Signing the facility lease should not be viewed as a sign of simply closing the deal since the deal should never fully close. Any event planner will know that the end of negotiations is simply the doorway to the next step in your event. Negotiating an amicable agreement with both parties feeling ownership in the event is a foundation for building a mutually beneficial relationship that should continue well after the ink has dried on a contract. Communication throughout the event is necessary to ensure the fulfillment of all areas of the lease agreement.
Committing to further communication may lead to becoming a gateway for new markets and future business in sponsorship opportunities and client referrals. At the very least, viewing the relationship between the rights holder and facility owner as an ongoing partnership improves the likelihood of high satisfaction by both parties. SDM