12+1 Key Points for a Successful Hotel Procurement and Contract Negotiation

After 20 years in international hotel development, preparing and revising hotel group contracts and selling projects, I have learnt that the relationship between hotel developers and suppliers is a complicated melody. Hotel suppliers aim to get the best deal and building relationships. On the other hand, hotel owners and corporate directors wish to maximize the total booking value, get the best locations, cut down on concessions, and turn clients into fans with a long life cycle.

How can both perspectives and interests agree and both win?

Here I share 12+1 key points.

👉 Will these tips always be accepted by the hotel? Are they useful to you?. Let me know in your comments below.

Hotel contract and procurement key points:

1- Purpose of the Meeting.

This clause specifies the meeting’s purpose. It functions with the force majeure clause which protects each party should an event outside of either party’s control affect contracted performance obligations.

2- Develop Your Own Contract

The ideal starting point for #contract negotiations is to write your own version of the hotel contract. You might find yourself in the situation of a hotel tender deciding to include a list of items or brands, or you might be in an OTA, #Furniture or Foodservice company supplying products to hotels. Whatever the case might be, I always recommend to work directly with a lawyer to write your own contract.

3- Get Everything in Writing

If the hotel company doesn’t accept the #contract, I send the hotel a prioritized list of items/clauses I wish to be included in the hotel’s contract. These items should not surprise the hotel. By the #contract-negotiation phase, the hotel should know the basic needs, based on the request for proposal (RFP) and subsequent conversations.

4- Read Every Word

I suggest that you not only read every word of your hotel contract, but read it three times – carefully. I approach each contract like I’m reading a detective story and I like to figure out exactly what’s happening. With the years, I´ve learnt to keep an eye out for hidden fees. For example, recently I was digging through a new contract for the opening of a hotel in Dominican Republic, and saw that they were charging extra penalties. It wasn’t a deal-breaker, but it certainly alerted me to what else might be hidden.

5- Negotiate For More Sales

Absolutely!. Do not loose the opportunity to think long term and seeding for a new project. You can negotiate for specific clauses for products to be included in a contract at discounted rates. Extra equipment, future needs for a second phase of the project, etc.

6- Specify Penalties

Most hotel contracts include specific penalties if you fail to comply with the terms of the contract, but many do not include penalties for the hotel if it cancels your requests or fails to meet other terms in the contract.

7- Sell Your Value to the Hotel Chain

If a hotel recognizes the value of your business, it will be more willing to negotiate in your favor. The ideal path to follow is creating personal relations with the decision makers at the hotel chain headquarters. To help the hotel recognize this value, you have to know what the target is about and what it will bring to each facility; then ask the facility what its priorities are.

8- Customize the Contract to Your Attendees

Once negotiations begin, prioritize your negotiation points based on the specific needs of your attendees profiles: technical, financial, legal, etc.

9- Define Terms

At the same time than working in international sales and business development, I used to work as legal interpreter in court cases regarding hotel contract disputes and international affairs. And I found that the majority of cases come down to how each side interprets the language in the contract.

10- Ask Questions

Throughout the contract negotiation process, ask open-ended questions about the contract terms and how the hotel operates, such as: “can you tell me what your quality KPIs are?”.

11- Protect Yourself

Hotel contracts almost always include clauses that protect the hotel if you cancel orders or fail to meet deadlines. These clauses are fair, in theory, because the hotel chain may forfeit other business to finalize your project. But pay a close attention, since they might be abusive.

12- Personally identifiable information/GDPR.

Hotel developers and owners wish to make sure suppliers are complying with all privacy laws as well as the GDPR, when applicable. The agreement should specify that all involved companies will comply with all privacy laws as well as the GDPR requirements, when applicable.

12+1. Patience

Patience will be a great ally when it comes to negotiate. Try always to control stress levels, include deadlines, but do not allow them to control your work. A good management of people is the key.

I would definitely recommend all boutique hotels to join LUSH association to enjoy all its benefits and support of its expert members.

As the Luxury Sustainable Hotels International Association (LUSH) motto says: “Together we make the change”.