Sourcing Academy

Termination – Construction and Renovation

Managing Hotel Construction and Renovation During Your Event

In this video, you’ll learn how to navigate your group if construction and renovation are occurring at your hotel during your event, three main areas of the construction and renovation clause to cover and more!

Overview

• To “terminate” a contract means that a party can stop performance (cancel) without having to pay damages to the other side. The most common type of termination clause is a Force Majeure or Impossibility clause, which will be discussed separately.
• The other most common types of termination clauses in event contracts are Renovation/Construction or Competitor clauses.
• When a termination occurs, it is as if the contract never occurred, and the parties have no further obligation to each other.
• If deposits have been paid, they are to be refunded, whether or not the clause specifically says so. However, if expenses have been incurred in performance rendered up to the date of termination, the party incurring those expenses is entitled to be reimbursed or paid for the expenses incurred.
• Customers are concerned that their event will be disrupted if the hotel is under renovation, and do not want projects taking place during their event.
• Depending upon the nature and scope of the project, guests may be disrupted during the event or disappointed in the aesthetics of the hotel, which can reflect negatively on the event sponsor.
• Customers often request a clause allowing them to terminate an event contract if the hotel will be under renovation.

Group Perspective

• Construction and renovation at a hotel can have a significant impact on a group’s meeting.
  • Groups should also ask the hotel about any construction to take place in areas adjacent to the hotel such as roads, driveways, entrances, parking lots, and loading docks.

• Even after having the discussion with the hotel and putting language in the contract to address construction/renovavtion, groups should regularly ask the hotel whether there is anyh planned construction or renovation – it is not enough to rely on the hotel to notify the group. The sooner the group knows about a potential issue, the better.
• Groups should consider the impact of construction on the meeting as it relates to noise, odors, dust, unavailability of amenities (such as the pool), and safety hazards.
• The contract language should provide that the hotel give notice to the group of any construction/renovation to occur at the hotel, the nature and scope of the project, the approximate timing, the parties’ opportunity to discuss the project and to agree on any necessary remedial measures to ensure the project does not interfere with the group’s meeting. If the parties can agree on a resolution, they should sign an amendment to the contract addressing the resolution. If they cannot agree on a resolution, then the group would have the right to terminate the contract without liability.
• If the group encounters construction/renovation onsite which was not disclosed to the group, the group should use its best efforts to work with the hotel to remediate any problems or concerns during the meeting. The group should also document the construction/renovation work by taking pictures or videos so that the impact of the construction/renovation can be assessed after the meeting as well.

Hotel Perspective

• Hotels have to renovate in order for the facilities to remain up to the expectations of guests.
• Renovation projects are often under consideration for years, and depend on budgets, financing, design, zoning, permitting, locating contractors and many other factors. Because it is uncertain when, the extent, or even if the project will happen, the hotel must continue to book business until the project is confirmed. Sometimes, a project under consideration for years “comes together” quickly and a start date is scheduled only a few weeks in advance.
• In addition to scheduled projects, hotels must undertake repairs that may impact facilities. Hotels cannot plan for a pipe that breaks, or an air conditioning unit that fails, or a pool filter that unexpectedly needs an unavailable part. For these reasons, hotels are usually reluctant to promise that there will be no renovation or construction on-site during an event date.
• Because renovation projects may be under consideration for extended periods, it is not helpful to include a requirement that the hotel notifies the customer of “any planned renovation.” The clause should require notification of a project once it is approved and once a start date is determined.
• When construction does occur, its impact on a scheduled group event may vary, so hotels are reluctant to grant customers an automatic right to terminate the contract if “any” construction is taking place. For example, if the scheduled event is a business meeting with little time for attendees to engage in leisure activities, if the pool is under construction it might not impact the event at all. On the other hand, if the event is an incentive trip where the attendees are coming solely to enjoy the hotel amenities, a closed pool might ruin the purpose of the event.
• Hotels prefer to include a clause that requires the parties to review the scope and nature of the construction, its potential impact on the event, and to try to reach an agreement on how the hotels will reduce the impact, or what concessions the hotel will provide to offset any inconvenience.
• If the parties agree that despite their negotiations the construction will have a “material” impact on the event (meaning that it will deprive the customer of the benefit of its contract), then the contract is terminated.