Solving Problems and Making Decisions
In the following pages I will discuss the nature, scope and impact of problems that can arise within the industry, what can be done to resolve the issues, and how we can evaluate the final outcome. A common problem that is faced within my industry, and the problem which I have chosen to concentrate on in this document, comes in the form of clients cancelling events after signing a formal agreement or contract with a venue. There are numerous reasons that cancellation of an event may be necessary. These include: Changes in the clients financial situation; issues that have arisen between the client and the venue or the venue’s affiliates; a decrease in the number of attendees meaning that it is no longer feasible to run the event; an increase in the number of attendees meaning that the venue is no longer suitable; a venue may encounter an issue which means that they are no longer capable of holding the event (therefore the event is cancelled by the venue).
These are just a small number out of a myriad of reasons that I have encountered in the past. I will be concentrating on cancellations made by the client in this discussion. Agreements or contract include clauses which state the penalties involved in cancellations. These terms are there to protect both the client and the venue. By signing these contracts, the client are agreeing to honour the terms described. Many venues will show flexibility with these terms as a gesture of good will, however this is not always the case and is completely at the discretion of the venue. Dependant on the amount of notice of cancellation provided by the client, cancellation charges that are incurred can vary greatly. The notice periods required can also vary greatly from venue to venue. For example, the following has been taken from the terms and conditions provided by a chain of UK hotels: Date of cancellation
Cancellation payable as a percentage of Revenue for all facilities, equipment and ancillary services reserved In excess of 36 weeks prior to the start date
Between 36 weeks and 24 weeks prior to the arrival date
25% of the revenue
Between 24 weeks and 8 weeks prior to the arrival date
50% of the revenue
Between 8 weeks and 2 weeks prior to the arrival date
75% of the revenue
Less than 2 weeks prior to the arrival date
90% of the revenue
This shows that should the client cancel their event more than 36 weeks prior to the start of their event then they will not incur any cancellation charges, however as the date of the event draws nearer the charges are increased in stages. Staggered terms such as these are common with major hotel groups. The terms above are unusual, however, as this particular group will charge a maximum of 90% cancellation charges whereas many venues will charge up to 100% of the contracted revenue at their specified notice period. Another venue may have a clause in their terms and conditions which states that should a cancellation be made once the contract is signed then there will be 100% charges regardless of the notice period. In order to solve the problems encountered under these circumstances, we need to know: what has been agreed between the client and the venue; what the client expects as an outcome of the cancellation (i.e. does the client want charges reduced or waived, or do they accept the fact that these charges will be made?); and the reason for cancellation.
Finding out what has been agreed between the client and the venue would usually involve checking the contracted terms and conditions, however in some cases there may have been further agreements negotiated subsequent to the contract being signed. It is always best to ensure that all correspondence is acquired to gain a full understanding. Written correspondence is essential as this ensures that all terms are mutually understood. With regards to the client’s expectations, the client would usually outline this when requesting cancellation of their event. Where this is not the case, this can be discussed with the decision maker thus ascertaining a full picture of the client’s wishes. In all cases, even when the client accepts that the charges will be levied, it is part of our responsibility as a customer service driven agency to make an attempt to negotiate any charges that may apply, therefore ensuring the best deal for the client. From a commission perspective, it may seem that it would be beneficial for cancellation charges to be made.
If venues agree to waive cancellation charges then the work that has been put in to that event from our side (enquiries being sent to venues, quotations being sent to the client, queries being handled on behalf of the client, negotiation both of costs for the event and the cancellation charges themselves, and administration of correspondence leading to the confirmation and contracting of the event), would all have been done at a loss to the company. In the long run, however, if clients can see that the work that we are doing is in their best interests then we are in a position to gain repeat business from that particular client, and from any potential further business that may have been referred to us by that client. This brings us to the methods that we can employ to solve these issues. There are a number of possible solutions available to us which we can use, including: Reiterating the charges that will be applicable as outlined in the contract that has been signed by the client, and authorising the venue to issue an invoice.
This may be the only possible solution (albeit the last resort) where the venue are either unable or unwilling to make any reductions to cancellation charges. Discussing alternatives to cancellation with the client and venue. I have encountered cases in the past where the venue and the client have been able to come to a mutual agreement where charges have been waived in lieu of the client re-booking the event for a later date, therefore postponing the event rather than cancelling. Another possible alternative that is occasionally suggested by venues is to offset the cancellation charges against a potential future event. This means that the client settles the cancellation charges in full, and this cost or part thereof is deducted from a future invoice. Asking the venue outright if they will be willing to offer a reduction in the cancellation charges, or even waive the charges in full.
There have been numerous occasions where venues have agreed to this. Agree a “minimum chargeable numbers” with the venue prior to confirmation of the event. This means that the client is allowed to reduce the attendee numbers to the agreed amount without incurring cancellation charges, regardless of the notice period given. For example, a client recently booked a meeting for 220 delegates for which I had negotiated a “minimum chargeable numbers” of 190. Should the client need to make a reduction in the attendee numbers, or cancel the entire event, the maximum number of delegates that the venue can charge the client for is 190, even where 100% cancellation charges apply. This gives the client an immediate reduction in cancellation charges As there are numerous options that one can employ in order to come to a solution for the issues caused by cancellations, we have to effectively decide which of the options is best. To assist in making this decision, we can use a SWOT analysis, meaning that we evaluate the Strengths, Weaknesses, Opportunities and Threats of each option. Below is an example of a SWOT analysis for the aforementioned options.
Option 1 – Accepting cancellation charges based on contracted terms and conditions Strength: Using this option avoids the loss of commission for the booking, and also avoids affecting the working relationship with the venue. Weakness: This option can cause the client to lose faith in the service provided as an agent, and may affect the client’s relationship both with ourselves and the venue Opportunity: The relationship with the venue will be reinforced as the venue’s terms and conditions are being adhered to. Threat: The client may resent having to pay cancellation charges, and also may be reluctant to pass future business through our company. The client may also feedback to their affiliates that a negotiation effort has not been made. Option 2 – Discussing alternatives to cancellation with clients Strength: The clients will see that we are working on options to avoid them incurring cancellation charges and therefore the client’s faith in the service will be fortified. Should the client be willing or able to rebook the same event for a later date, then the venue will not be losing out on revenue and we would not be losing out on commission for the booking.
Weakness: Depending on the reason for cancellation, an alternative such as postponing the event for a later date may not be suitable. For example, should the cancellation be due to the client having an issue of some kind with the venue then they would not be in a position to rebook. Opportunity: Using this option we have the opportunity to maximise on the commission earned for the booking. Should both the client and the venue be able to agree to this option, this would show the client flexibility from the venue and would prove our worth to the client, opening up the opportunity to gain future business for both ourselves and the venue. Threat: The venue may not agree to rebook for another date without incurring cancellation charges. This would of course mean that if the client does go ahead with rebooking, we gain commission on both the cancellation charges and the rebooked meeting, however the client would lose faith in our negotiation ability and buying power within the industry. If the client is not going to rebook the same meeting, and the venue offers to offset the cancellation charges against a future event the client may see this as a bribe for future business. This would affect the client’s perception of the venue. Option 3 – Asking the venue to reduce or waive charges as a goodwill gesture.
Strength: This is a quick and easy solution which allows the venue to show their willing and flexibility. Even a small reduction in the cost may be viewed by the client as a substantial negotiation, and would therefore prove our influence within the industry and would show the client that their business is valued by the venue. Weakness: As the client has signed a contract the venue is not obliged to agree to do this. Should a venue refuse to waive or reduce charges in goodwill, the client may lose faith in our negotiation abilities and may resent the venue for refusal. Opportunity: Should the venue agree to do this, this opens the opportunity to receive further business from the client for both ourselves and the venue. Threat: Should the venue agree on one occasion, the client may expect for this to be agreed for any future occasions. This is not something that venues will be able to agree to for every cancellation and refusal may leave the client with a negative perception of the venue. Option 4 – Agreeing minimum chargeable numbers with the venue.
Strength: Negotiation is done at the time of enquiry, therefore no extra negotiation is necessary at the time of cancellation. This minimises the amount of time spent on a booking and therefore maximises on our commission earned. Agreeing minimum chargeable numbers gives an immediate reduction in charges at the time of cancellation. Weakness: Negotiation on this cannot be done post-contract, and therefore must be done in the enquiry stages. The venue is not obliged to agree to offer this, regardless of when the request is made. Opportunities: Although perhaps slightly immoral, it is possible to arrange the minimum numbers with the venue without the client’s knowledge, therefore seeming to very quickly negotiate a reduction in the costs at the time of cancellation. Threat: Should the client be expecting the charges to be waived in full, this is less likely if the venue has agreed the minimum chargeable numbers, as they have already in effect agreed to reduce the charges.
From the above SWOT analysis of the selection of options provided, there are three possible steps which make up the best final solution. The first step that we should take is to ensure that Minimum Chargeable Numbers are in place, especially for larger events where it is unlikely that the full charges can be waived, as this provides an instant solution. If, at the time of cancellation, we find that this is not in place, then we would move directly on to the below. The next step would be to ask the venue if they are willing to offer a reduction in the charges. The best way to do this is a telephone call to the person within the appropriate department with the authority to make this decision.
In many cases this would be the Sales Department Manager. If this is successful, and the venue agree to reduce charges, an email should be sent to the venue to back up the conversation and written confirmation of the reduction needs to be acquired. Once we have this written confirmation, we can send an email to the client to advise of the venue’s offer. This email should include the original charge, the monetary amount and/or percentage offered as a reduction, and the final remaining total charge. Below is an example of how this email could be set out:
Following from our recent correspondence regarding cancellation of your event at The Meeting Venue commencing on 1st June 2012, I am delighted to inform you that I have negotiated the following reduction charges in the applicable cancellation charges:
Charge as per contracted terms: £22,000
Reduction offered: 50%
Total remaining charges: £11,000
An invoice for this amount will be sent directly to you from the venue. Should you require any further information or assistance, please do not hesitate to contact me.
In the event that the venue refuses to reduce the charges for any reason, the total amount of charges should be acquired from the venue in writing. Once received, this information can then be provided to the client in an email. The email should be written in a way that will not be detrimental to the relationship between the venue and the client, or ourselves and the client, and should include the total monetary amount of charges.
Following from our recent correspondence regarding cancellation of your event at The Meeting Venue commencing on 1st June 2012, I have been in negotiations with the venue over the total amount of cancellation charges that have been incurred. It is with regret that I must inform you that on this occasion the venue have been unable to make any reductions to the applicable cancellation charges. The charges, as per the contracted terms, stand at £22,000. This is 100% of the total contracted cost of the event. An invoice for this amount will be sent directly to you from the venue. Should you require any further information or assistance, please do not hesitate to contact me.
In order to close the issue, we need to monitor and evaluate the effect that the cancellation has had on the frequency and value of the business placed in the venue, and the effect that any charges incurred have had on the business that we receive from the client. Business placed at the venue by the client (via ourselves) can be evaluated over a period of time taking in to account the frequency and value of previous business. This can be easily recorded on a spreadsheet and exported to a Bar Graph for an easy visual reference. Below is a graph showing how this would work, using the example meeting from the emails above as the cancelled event.
The above graph shows that the cancelled event was valued at approximately £20,000.00. In the three months prior to this event the client ran 8 events at this particular venue ranging from approximately £20,000.00 to approximately £27,000.00. In the three months following the cancelled event only 4 events were placed, meaning the frequency has halved. These four events also showed a decline in value. The decline in the client’s business placed at this venue cannot necessarily be directly attributed to the cancellation charges, as we need to take in to account certain other possible reasons, including venue availability at the time of enquiry; the client’s conferencing calendar may be busier between March to June than between June and September; conferences that are booked by the client between June and September may need to be placed in a different location.
For a more accurate evaluation we can look at trends in previous years using the same technique as above, and also look into the frequency and value placed via ourselves in general along with the study of the trend for that specific venue. For further information on whether the charges have affected the client placing business in the venue, we can directly request feedback from the client. Customer Satisfaction surveys can be an effective method of monitoring the client’s experiences at the venues that we work with. This gives the client chance to directly voice any concerns that they may have.