Subject: Hotels Become Inhospitable To Cancellations Date: Published: 3/29/93 (116 lines) Source: Wall Street Journal. Copyright Dow Jones & Co. Inc. Law -- Legal Beat: Hotels Become Inhospitable To Cancellations ---- By Edward Felsenthal Staff Reporter of The Wall Street Journal Faced with an epidemic of convention cancellations, the hospitality industry is finding it can't always live up to its name. Many hoteliers, including some prestige chains, have started suing groups that plan, and then cancel, conventions. In the past, most hotels strained to avoid such disputes, preferring to swallow cancellation losses rather than offend convention clients. But forgiveness is a luxury service some hotels can no longer afford to provide. "The message now is that we want to give you warm hospitality. We want to give you a first-class meeting. But we also expect you to honor your promises to us," says Steven Rudner, a Phoenix lawyer for several major hotel chains, including Hyatt Corp. and Princess Hotels International. In a case filed last month, for example, four Des Moines, Iowa, hotels -- including two Holiday Inns and an Embassy Suites -- sued the Business Professionals of America for canceling a convention contract that reserved more than 3,000 rooms. Business Professionals is a Columbus, Ohio, vocational-education association. When the association agreed to hold the conference in Des Moines, it had a board member from Iowa, according to Stanley Thompson, a lawyer for the hotels. That board member died, prompting Business Professionals to switch its meeting to San Francisco, Mr. Thompson says. Business Professionals contends the suit wasn't filed in the correct court and is seeking to have the case dismissed, according to Jonathan Howe, a lawyer for the group. Shelving a dead board member's pet project may sound petty, but lawyers say it is typical of the reasons some conventions are canceled. Because groups usually negotiate convention contracts years in advance, a group often has new leaders when the time for its meeting finally rolls around. The new leaders may then decide, "`I don't really want to go to San Diego, or worse, my spouse doesn't want to go to San Diego, and I think we ought to move {the convention} to Miami,'" says Jed Mandel, a Chicago hospitality lawyer. Uncontrollable events such as earthquakes and airline strikes also can trigger cancellations. A decade ago, convention-cancellation lawsuits were rare. Then in 1986, the industry watched five Denver hotels wage an unusually public battle against the American Society for Cell Biology. The group had reserved hundreds of rooms for its 1986 convention, then canceled less than a year before the scheduled date. The ensuing lawsuit was "an alert to the industry that associations may in fact be held responsible when they cancel and don't have any justification for doing so," says Scott Crabtree, who represented the Denver hotels. One of the hotels won a $50,000 judgment against the group, and the case then settled out of court, Mr. Crabtree says. Since then, overbuilding of hotel space and recessionary pressures have made hotels hungrier for convention dollars. Shedding their white-glove image, many are adopting a harder line toward fickle conventioneers. "If you're fat and happy and making plenty of money, you don't sue as readily as when you need money," says Chester Merritt, a vice president at the American Society of Association Executives, which estimates that associations spend about $26 billion a year on meetings and conventions. Hotels also have been affected of late by cutbacks in corporate travel budgets, a development that has caused unusually high cancellation rates. At Hyatt, for example, in the past 18 months about 20% of those reserving rooms for conventions have either canceled or failed to show up, according to James Evans, senior vice president for sales. "Anything above 8% sets off an alarm," he says. Even with alarm bells ringing, hoteliers still appear more reluctant than other plaintiffs to hale their adversaries into court. Lawyers say that although convention-related lawsuits are on the rise, more than 95% of cancellation disputes don't end up in courts. Mr. Rudner, for example, has represented hotels in more than 250 convention-cancellation disputes. Almost all of those settled, and in all but 20 of them, no lawsuit was ever filed. "My clients are in the business of being nice to people, and they don't want to sue anybody" if they can avoid it, Mr. Rudner says. But a hotelier can land in court with its would-be patron, even if the hotel does nothing more than threaten to enforce a contract. In 1991, Harvard University canceled plans for Boston to host the International Conference on AIDS. The university had already contracted for rooms from three hotel concerns, Marriott Hotels Inc., Sheraton Boston Corp. and Saunders Hotels Co. After the conference was canceled, the companies demanded $1.6 million in damages from Harvard. "We informed them that they had signed a contract that we were going to hold them to," says Hank Shafran, a spokesman for Marriott. "We certainly would have preferred to settle this issue and not get into litigation." But Harvard refused to settle, and in January asked a court to resolve the dispute. The university contends the cancellation was unavoidable because of U. S. laws restricting the ability of HIV-infected people to enter the country. Hospitality-industry experts expect hotels to continue enforcing convention contracts vigorously, but they say the number of cases litigated may actually decline. For one thing, many hotels are rewriting their contracts to state clearly the penalties for canceling. Many groups that plan conventions are buying cancellation insurance to protect themselves from such penalties. And enforcing current contracts ultimately may curb cancellations by sending the message that conventions can't be freely annulled. "Years went by in which hotels allowed {cancellations} to happen," says Mr. Rudner. "When you've allowed yourself to be a patsy year after year, people just presume you will always be one." -- Paul M. Barrett contributed to this article. [This article is made available here by Dow Jones Co. for the personal and non-commercial use of callers to this bbs, in the hope that it will be of some help to those who are suffering from the disease and others who are seeking to help them.]