Hotel Master Services Agreement (MSA) and what it should cover

Learn what a hotel Master Services Agreement is (MSA for simplicity's sake) and the most important items to include in your hotel meeting's MSAs. Dive into the post below featuring our trusted legal partners, Barbara Dunn (Partner at Barnes & Thornburg LLP, representing groups) and Lisa Sommer Devlin (Devlin Law Firm, P.C. representing hotels) in Legalease With the Ladies - powered by HopSkip!

Introduction:

A Master Services Agreement or commonly referred to as an "MSA," is a contract that is pre-negotiated with a hotel or hotel chain, where a planner or organization is pretty much saying to the hotel, "these are the legal terms that have been pre-negotiated,".

An MSA provides more flexibility regarding things such as attrition and cancellation rates - sometimes attrition and cancellation are pre-negotiated in terms of percentages. However, hotels are usually only willing to agree to use an MSA with pre-negotiated terms like this with larger clients that are expecting to produce a significant volume of bookings at their property or across their hotel chain.

In this video, you'll learn from our trusted legal partners, attorneys Barbara Dunn and Lisa Sommer Devlin, why or why not to use an MSA for your hotel meetings and how to approach this with your hotel partner.

The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

Video Speakers: 

• Barbara Dunn (Partner at Barnes & Thornburg LLP, representing group clients) 
• Lisa Sommer Devlin (Devlin Law Firm, P.C. representing hotels)
• Sean Whalin (Co-founder and CEO, HopSkip)

Video Transcript: 

00:00
Sean Whalin
What are the most important coverage issues to include in hotel MSAs?

00:15
Lisa Sommer Devlin
Let me jump in on that because when you talk about MSAs, you're saying that you, as an organization, have a master agreement that you want the hotel to sign. From the hotel's perspective, they really hate that, to be honest. They hate it when you submit your contract. They hate it when you submit your addendum. They want you to negotiate off of their standard contract. That's how the salespeople are trained. That's the way the hotel operates. The minute you're starting to go off the hotel's paper, if you will, you're creating issues.

Hotels do agree to MSAs for large clients. If you want to have an MSA, if you want to have a pre-agreed contract with a hotel that you can use across the chain, you're going to have to provide something to the hotel to make it worth their while. To do that, you're going to have to commit to a certain volume of business per year, and you're going to have to maintain that, or they're no longer going to honor the MSA.

01:15
Lisa Sommer Devlin
The MSAs, when you do get them, often give the customer things that wouldn't ordinarily happen in a standard hotel contract because you are such a good customer. You may get more wiggle room on attrition, you may get more concessions or things like that, but that minimum is going to have to be met in order to justify the hotel doing that. In terms of new clauses or coverage things in MSAs, it's NSO different than any other contract.

You always have to have the basics of your attrition, your cancellation, your insurance, and your indemnification. I always compare hotel contracts to like weddings. It doesn't matter if it's big or small. You still have to have a photographer. You still have to have a cake. You still have to have all those basic things. The same is true in any event contract. You need to make sure that you have those basic clauses.

02:05
Lisa Sommer Devlin
Of course, the big thing now is the force majeure clause, which I'm sure we will talk about later. So Barbara, what do you think?

02:12
Sean Whalin
Lisa, do you mind, for the benefit of the audience, defining for folks that might not be familiar with that acronym what an MSA is?

02:31e
Lisa Sommer Devlin
It usually means Master Services Agreement or some variation on that. Basically, it's a pre-negotiated contract where you say these are the legal terms pre-negotiated. Sometimes even terms like attrition and cancellation are pre-negotiated in terms of percentages.

Every time you go to a hotel in that chain, you say here's our MSA, it's pre-approved. We're not going to negotiate any of these terms. All we're filling in is dates, space, and rate.

03:05
Barbara Dunn
Those of you, whether you're corporate or association side on the planner, understand the strategy. With any vendor, you negotiate upfront all the legal terms so that you don't have to involve the lawyers anymore. Procurement loves them because all the terms are hanging out there. You're essentially adding in statements of work, the scope of work orders, whatever you choose to call them, which really have the economics of the particulars, the dates, the block rates, etc.

There's a real benefit to streamlining the process. Having said that, my experience in working with clients over the years, negotiating these across the chains, is that in a lot of instances, the groups can do better with the one-offs, if you will, that is, negotiating with the properties. Lisa mentioned the heightened requirements on the hotel chain side to even get an MSA.

03:57
Barbara Dunn
In terms of language and new clauses, I don't see anything new. I see things that might need to be enhanced or scaled-down, as the case may be. So cancellation attrition. If you look across the portfolio of meetings that your organization does, how many are small, how many of these short-term bookings, long-term bookings, how many are day only, rooms only, etc?

Mapping out your meeting portfolio is a good strategy because it does allow you, from a business standpoint, to go into the marketplace, to go with your RFP hotel, and really share the value of that meeting and the terms that you have for that meeting. A short-term meeting, a small meeting, is going to be a lot different than a meeting that's very large but far out. That's where I think templates can do a disservice to groups in general if not used properly.

04:53
Barbara Dunn
What clauses do I need in a contract that I'm booking three months out or less, what clauses do I need in a contract that I may be booking three years or more in advance? That type of thing. If you haven't gone through that assessment internally, I think it's a good strategy because, again, I think it has useful value internally and externally.

As you talk with hotels and chains about the portfolio in your business, being mindful of that is a good strategy. I just don't think I agree with Lisa. It's worth expending resources and negotiating these MSA. 

05:43
Barbara Dunn
All that is set aside, both sides benefit from contracts being scaled properly and being appropriate references, and that really should be the end goal.

05:55
Lisa Sommer Devlin
Barbara makes an interesting point about that because the hotels and the association or whatever it is, spend all this time and money negotiating the MSA, and then for a particular event, as Barbara mentioned, maybe it's short-term or long-term, or whatever is. The customer says, oh, well, we need to change it for this. And the hotels get very frustrated. Either we have a pre-negotiated form, or we don't. We're not going to start changing it again.

I think it's clear from my perspective I'm not a fan of them. I think there are a lot of reasons that I think Barbara would agree with me that sometimes it's not very helpful.

06:29
Barbara Dunn
I saw Sean, one of the questions in the chat was about that RFP process, is it good to put your clauses out there? I would only put out clauses that are absolutely 100% deal-breaker-type things. Maybe it's not even the clause itself; maybe it's the concept. For example, we need Attrition to be based on 80% of the room pickup nights; we need X as opposed to saying we need this walk clause or we need this force measure clause.

I think that having the points covered is a better strategy than actually saying we have to have these clauses. Because at the end of the day, you may want to negotiate on those clauses to close the deal. Potentially you're throwing off folks who might otherwise bid on your business if they see it as an absolute lease. I'm sure you get that a lot from hotel customers as well.

07:26
Barbara Dunn
Asking about these required clauses that groups we do.

07:29
Lisa Sommer Devlin
I had one just this week where the hotel sent their contract out, and the customer came back and said well, here's our master agreement that has to be appended to every contract that we do. I said to the hotel, did they even look at your contract? Because their master agreement had every clause in the hotel contract with just variations on it. It's like, why are we doing this?

I think Barbara is right, if there's a key thing that you need, whatever it is in your contract as part of your RFP, say this is a clause that is critical to us, and you're going to get a much better reaction than if you send out these master agreements that are conflicting with the hotel agreement.

08:09
Sean Whalin
Totally agree. I'm glad that comment or that question was asked because we also agree.

On the Hopskip side, part of the RFP process on the Hopskip platform is exactly that. Planners have the ability to be able to communicate their industry contract clauses, and we also see planners utilize that as more so communicating the concept behind the clause and the deal breakers associated with the event, not necessarily going into the full-on detail during the RFP processes.

That gets ironed out when we get closer to the execution of the contract. So, great question, and great to see the engagement so far on the chat.

08:51
Lisa Sommer Devlin
Let me respond to something in the chat that somebody says, oh, why do hoteliers hate contracts? These are addenda, and these are things that the customer needs. What the hotel doesn't like is that they have their contract, and then the customer has their addendum, and usually, they want to stick them together, and they're just opposite.

What we would rather have is the hotel sends out its contract, and you say, I think that this attrition clause is too hotel-sided, too hotel-focused, let's negotiate that contract, let's change the numbers rather than just sticking together two inconsistent documents. That's the reason that hotels don't like them. They would rather negotiate their contracts and come up with something that both sides feel comfortable with than have two inconsistent documents put together. That was the point I was trying to make, and probably saying hate was not the best way I should have said it.

09:44
Barbara Dunn
Well, I'll tell you, Lisa, I mean, the chat certainly as it relates to the multiple documents, I absolutely agree too, as you do, one clean contract should be the goal, whether you start with your paper, the hotel's paper at the end of the day, one clean contract that integrates all the clauses. Otherwise, even if you have language saying if it's inconsistent in the contract, the addendum controls, and vice versa, you and I have both been involved in kind of battles on that front. So the integration of contracts is key.

I will say on the corporate side; legal might come out with an addendum that you want to slap on and fix everything in the contract. As we've talked about over the years, that, to me, is not a bad strategy. Integrating those clauses is what's key because the reason we have these clauses in the contract surprise here, we want them to be followed, and parking them in a 50-page addendum is not going to get it followed.

10:35
Barbara Dunn
Even just from a practical standpoint, I agree with all the discussion. Now, after the contract is signed and you want to change the contract, that's the amendment document, and that does need to be a separate document. You do want to go through that contract and make sure anything that the amendment could impact is going to be addressed. If you reduce your room block, making sure Attrition shows on that front that it translates or syncs with a cancellation that's a really important thing to do.

Again, this is a kind of blocking and tackling, but it is something that planners should focus on. 

11:14
Lisa Sommer Devlin
Absolutely hundred percent.

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