Episode 2 | How to Lose $500K (and Then Save Most of It)

I kind of looked around and said: we blew it. You are pissed, and we're going to do the best we can to make it right.

Hey everyone. I'm Jen Santos, and this is Mayhem and Method, where event pros tell the real story of what happened and what it reveals about how events actually work. Welcome back. I have with me today Therese Jardine, founder and CEO of Strategic Event Procurement. Thank you so much for being here, Therese.

I am so happy to be here with you. It's going to be a lot of fun.

So let me start with my first question. What is your favorite onsite or hotel room comfort hack for Vegas in particular — because as you know, they do not put coffee makers in the rooms most of the time.

Someone gifted me a little USB-chargeable instant espresso machine. It takes those little Nescafé pods. It's not the hottest you'll ever get, and it's not the tastiest, but as a public service — I do not go out in public before I've had my coffee, because it's just better for everybody. So I bring that with me. It gets me over the hump so I can get down and get some real coffee.

Same. I started bringing pre-ground cold brew and I do cold brew in my room overnight. I survived CES last year that way. I pre-grind it, put it in little disposable tea bags, measure it out at home, and throw it in my suitcase. You have to double-bag it or everything will smell like coffee.

Well, it depends on your opinion on coffee smell.

Fair point. I take water in my cup overnight — the Venetian now actually has refrigerators people can use, believe it or not. So I put it in the fridge, and in the morning I have perfectly good cold brew. Buy some half-and-half from Walgreens and I'm good to go.

So let's talk about the onsite situation. Can you give me a quick summary of the endpoint, and then we'll unpack from there?

People who know me know I've done hundreds of hotel contracts, and most of them went really well. We had one that didn't. It was a perfect storm — an event strategy that was still being built out, some legacy contract language, and a misunderstanding of what that language actually meant on the stakeholder side.

When you pull all those things together, we were looking at close to half a million dollars in attrition damages for one single event.

Wow. So how did that happen? Because this is what you do.

Right. I keep my butt in the seat. I keep everything running. So talk to me about what you mean by legacy contract language.

At one point there was really favorable language available to us as an organization. Due to industry changes, that favorable language wasn't as available as people were used to. In many cases we were able to avoid attrition damages because we were known to be on top of room block management. Then over the course of years, some people's views on how that should work changed. In this particular case, whereas other contracts had no attrition liability for us, this one did. Getting that message through to stakeholders — and what it really meant for them — was very challenging.

Got it. So they were operating on the assumption that what had worked for the last seven years would keep going indefinitely. And as we all know, the hotel industry — even pre-COVID — had started changing quite a bit. So even though you'd read the contract, they were like, "I know what this means. You don't need to tell me, Therese."

Sort of, yeah. You can only pull so many rabbits out of your hat. In the past, when pickup wasn't going as well as expected, demand gen or a last-minute grab on rooms would save us. In this particular case, it just didn't materialize.

So roughly — I know we're not sharing the client's name — are we talking 50 rooms, 500 rooms, a thousand rooms?

We had done nearly a whole buyout of the hotel. We had contracted close to 70% of their rooms on peak — and I think your audience knows what on peak means. I want to say it was around 200-and-some rooms on peak, which over the course of the full block was several thousand room nights. At a highly rated property, so rates were probably in the $200-plus range.

And what was the pickup shortfall? Like 50% of what you expected?

I've blocked some of that out of my mind.

Totally fair.

It was a big hole. And part of the problem was the event was the start of another event, so the gap was right in the middle — say Wednesday night — and then it swelled back up Thursday. There was no way for the hotel to put another group into those rooms. A resell was not going to happen.

So as the procurement magician, what did you do?

There was a lot of communication leading up to it. There are room block review dates, cutoff dates, release dates — and the hotel had carefully documented every one of those conversations. Our housing manager and sourcing manager had also been documenting everything.

So I walk into this room at the hotel, and everybody is sitting there with their binders and printed emails and communication logs, loaded for bear — ready to put out exactly what had happened and how they'd been wronged. And on my side of the table, everyone had their list of mitigating actions.

And I just looked around the room and said: we blew it. You are pissed. We're going to do the best we can to make it right.

That had to be hard to say.

My manager was in the room. She said she watched everybody's shoulders just drop a little bit. Because they were expecting the full defensive posture — "we've got the leverage, here's how this is going to go." And I said, no. We blew it. We really did.

The GM sat there for a second, a little puzzled, because he genuinely was not expecting that. He finally looked at me and said, "I still have empty rooms." And I said, okay. Starting the moment this meeting is over, I commit to doing the best I can to put as many heads in your beds as possible. And he said, okay.

At that point I became my own little mini housing department. There were things I could do. We had crew and staff scattered all over the city — I was staying at a different hotel, so I was the first person I moved. The other hotels in the block were performing well, so I had to go in and pull crew and staff where we could direct them.

We also put out a late-breaking bonus on the housing site for the other event that was starting right behind ours — basically: surprise availability of much better hotel rooms, here's how to change your reservation.

I had my eyes on a spreadsheet for probably 15 hours straight. I don't think I slept much that night. We plugged the hole by at least 50 — maybe 60 to 70 percent. And we also pulled some food and beverage events into that property. Things that were maybe going to be at a restaurant elsewhere, we directed as much of that revenue as we could into the hotel.

The GM was very appreciative. We still owed some money. For anyone less familiar with how hotels work — when you pay attrition damages, you're covering their lost profit on the room. But the sales managers are measured on revenue, not just profit. So even when you're paying attrition, it still leaves a mark. Doing what we could to put real revenue back into the property made a significant difference.

And what happened with the key stakeholder — the person in charge of the event strategy?

He learned a lot. I had been telling him for a while that this was really going to happen, and he just — he was new to the role, and the event was new, and he was more focused on attendee experience than on the financial ramifications. His main concern was kids coming through the lobby in flip-flops with pool noodles while executives were transitioning between breakout sessions. Whereas the people two levels above him were very focused on how the budget was coming into play.

And what did I learn? I had been escalating, but I don't think I was escalating as clearly as I should have. And I think my reputation for pulling a rabbit out of a hat meant people didn't take the warnings as seriously — because I'd always fixed it before.

I still see that GM occasionally on LinkedIn. Every time, I just think: yep. I remember. They say you learn from your mistakes. That was a master's course.

So just to make sure I'm understanding this right — attrition only covers the lost profit, not all the ancillary revenue the hotel would have generated from those guests?

Exactly. You go to a hotel, check in, have a drink at the bar, pick up a yogurt, forget your earrings and stop by the gift shop, eat breakfast. For every sleeping room night, they're counting on that additional spend. You're not contractually obligated for it because you haven't contracted for it — but that's the reality of what a hotel is counting on without the heads in beds.

And there's the STR — the STAR report — which benchmarks all of these big properties against their competitors. Room nights and revenue land in those reports. So a few conferences that miss their pickup numbers can inadvertently tank a hotel's benchmarking position. The chains don't own most of the hotels. If you pay attention at checkout, it'll usually say the property is owned by some kind of investment company and managed by someone else. So when things go sideways, the owners and management company have something to say too.

And to your point about relationships — memories are long in this industry. It makes the event organizer's ability to negotiate in the future much harder. And when you're talking about something like a 15,000-person event, there are only so many venues and hotels that can accommodate you.

What happened when you started pulling people from the other properties? Those hotels were at 90%, say — you can't go below 82 before they're upset with you too.

That was a very real concern. Crew tends to want to be as close to the convention center as possible because of the crazy hours — you don't want to be commuting 30 minutes each way. So some of those hotels called and asked what was going on. I just had to tell them: look, we've got this situation, you're performing well, and I need to do something here. We'll make it up.

That's where the relationships you develop in this industry really matter. They kind of understood what was happening and what we needed to do. And my answer to them was: if this were happening at your hotel, I would be doing the same thing for you. That credibility mattered.

The sourcing agency we had also had the ability to market across some of their other clients to fill some of the spots. I've had a few attrition situations — in one in New York City, we were able to use the corporate travel database to find people already staying in the city and move them to the property we needed to fill. Almost always, they were thrilled — the hotel we needed to fill was nicer than what they'd been in, and we covered the rate difference. Still a lot cheaper than paying full attrition damages.

Going back into that meeting — when you walked in, you were planning to defend your position?

I was. I was planning to say, here's everything we did right. And then I looked around the room and thought: I'm going to lose if I try that. Not just legally or financially — the relationship would have taken an even bigger hit. Taking a breath and just admitting we'd screwed up went a long way. I got a kudo from my boss for it.

I see that play out so often. This ability to say "I'm sorry, we screwed up" — it's something our industry could get a lot better at. I've been saying this for 15 years leading event tech teams: we succeed or fail as a team. The attendees don't care whose fault it is. The stakeholders don't care whose fault it is. They want the result. Nine times out of ten — probably 99 times out of a hundred — that comes down to showing up with a culture of collaboration and looking for the win-win.

Win-lose might be a short-term tactic, but people in this industry have really long memories. Come back the following year and try to renegotiate from that position, and your attrition requirements are going to quadruple.

Exactly. And a lot of hotels now tie your concessions directly to your room block performance. If you're paying attrition damages and making them whole in that way, you shouldn't be losing your concessions — but it's not always clean.

I actually had someone reach out to me recently in exactly that situation. They were just barely under their pickup target and were facing losing their concessions. I asked what their attrition terms were based on. Turned out it was lost profit, not lost room revenue. So I said — if you've got $150,000 in concessions you're about to lose, maybe offer to pay room revenue instead. That might be $20,000 versus losing $150,000 in concessions. Sometimes the most practical move in procurement is to pay your way out of the problem.

For context — when you say concessions, what does that mean?

Concessions in hotel contracting are the extras built into the deal. Things like: for every 40 rooms consumed, you get one comp room — a lot of companies use those for staff. Or if you use a certain number of sleeping rooms, you get a discount on food and beverage, or meeting room rental is waived, or the internet package is discounted. They create the whole package.

Most of the time, those concessions are contingent on you fulfilling your room block. When you're only a few rooms short, losing all of it can feel very heavy-handed. So what I tell my clients in those situations: don't panic, step back, look at how far short you are and what you might lose, and as crazy as it sounds from someone in procurement — sometimes just paying the man is the right move. You'll have less financial impact than you might otherwise.

And there's almost always an opportunity to talk to the other side. The contract is the starting point, not the ceiling.

What was the fallout two levels up, post-event?

I did get a call-out in a staff meeting. It was recognized that the emerging strategy for the event played a huge role in the hole we'd gotten into. When we went out to contract, the event was designed to be much larger than it ultimately ended up being. That's the push-pull of needing to contract far enough in advance to get the space you need while not knowing exactly what you need.

They also acknowledged that they hadn't given enough guidance or guardrails as those contract dates came up and I was providing information. They weren't ready to commit to the revised strategy. They owned the fact that the rest of the world didn't operate on their marketing cadence, and they understood that this was the cost of delaying a decision.

I didn't get in trouble for it. And I didn't have that client much longer after — but that's a different story.

Were there any long-term process changes? Did they revise their contract review process?

It was a combination. One thing I learned from it: a big part of the confusion was that we had an amended, amended contract. We started with a contract, then the event changed and we amended it, then it changed again and we amended the amendment. By the time we were trying to figure out who owed what, it was a spaghetti bowl.

In retrospect, we should have canceled the original contract and rewritten it clean each time the event changed significantly. It took so much time just to trace back through — the original said this, then it was changed to that, and now you have to look over there. If you're making that many changes, you're really better off starting fresh.

Okay, I feel like we've come to a natural close, and this was genuinely fascinating for me — I've never been able to peek under the covers of how this actually works. I really want to thank you for your time today. Please share with my audience how they can get in touch with you.

I'm on LinkedIn — that's a good place to message me or connect. I try to post fairly often. You can also find me at www.strategiceventprocurement.com, or email me at therese@strategiceventprocurement.com.

Wonderful. Thank you for bringing your strategic event procurement expertise to the show today. It's been a great conversation.

Thank you — you too.

Thanks for listening to another roller coaster someone else rode so you don't have to. If you enjoyed this conversation, please take a moment to rate, review, subscribe, and share — so other event pros can find the show. Until next time, tame the mayhem.