Case Introduction Negotiation in the Hospitality Industry Few personal and professional skills are as important as negotiations, and yet fewer still are as seemingly challenging

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Case
Introduction
Negotiation in the Hospitality Industry
Few personal and professional skills are as important as negotiations, and yet fewer still are as seemingly
challenging. Most individuals feel uneasy about negotiating, yet know it is crucial. Negotiations pervade every
aspect of life today. Negotiations with friends, family, car dealers, clients, employees and a whole host of
people you come across in your daily activities (Firth, 2014). It is a myth that good negotiators are born. Good
negotiators constantly seek opportunities to negotiate and receive feedback on their negotiations. Thus, good
negotiators practice their interpersonal and communication skills. More importantly, it is a skill that can be
mastered with practice and feedback.
Negotiation is an art and skill that hospitality professionals need to master. The success of hospitality
businesses is not only based on profitability but also development and maintenance of long term relationships
with all stakeholders (Tamayo, 2011). Hospitality companies, managers, and employees frequently need to
handle conflicts and negotiate effectively with various parties including customers, clients, suppliers, and
employees (Mahmoud, 2015). Negotiation training is beneficial for all employees, not just management. For
example, negotiation training can help frontline employees handle customer complaints more effectively.
Negotiation training can also help with internal customer relationships (decrease in workplace conflict). Good
negotiators are promoted faster (Fiona, 2008) and have stronger workplace relationships skills (Clenney
et al., 2010). There is a need for hospitality professionals not only to learn various negotiating techniques
but also to decide which technique to use under what situation. Hospitality companies which can perform
effective negotiations to handle conflicts and disagreements with other parties (customers, suppliers) can gain
a competitive advantage over competitors.
Negotiation Strategies
Negotiation strategies are interaction patterns used by parties in conflict to achieve resolution (Ganesan,
1993). Negotiation is a process by which joint decision is made by two or more parties (Pruitt, 2013).
Generally negotiators tend to pursue the two basic negotiating strategies: integrative and distributive (Beenen
and Barbuto, 2014). The objective of integrative bargaining (also known as "symbiosis" or "problem solving" or
"win-win negotiation") negotiation strategy is to create value by means of the negotiation (bargaining process).
Using an integrative negotiation strategy, parties tend to reach mutual agreements by being collaborative,
inventive, and persistent in searching for substantial joint (financial) gains (Beenen and Barbuto, 2014).
An integrative negotiation strategy is used to develop and maintain long-term relationships between parties
(Fisher and Ury, 2011). Integrative negotiators stress the importance of open communication and information
sharing.
The objective of the distributive (extreme forms of distributive negotiations are also known as "aggressive
bargaining" or "hard distributive bargaining" or "hard-line approach" or "win-lose negotiation") negotiation strategy is to maximize substantive gains in an adversarial contest without caring about the needs of the
other party (Anderson, 1992). The extreme forms of distributive bargaining employ strategies that involve
ridiculing, attacking, or threatening adversaries and making excessive demands (Perdue and Summers,
1991). Distributive negotiators concede slowly, minimize benefits of others' concessions, exaggerate the
value of concessions, conceal information, and argue forcefully to reach favorable settlements (Anderson,
1992; Fisher and Ury, 2011).
Best Alternative to a Negotiated Agreement (BATNA)
The best alternative to a negotiated agreement (BATNA) can be defined as the proposed action a party would
take if the proposed deal was not an option (Fisher and Ury, 2011). In other words, it is the minimal acceptable
level of agreement to the negotiating party. BATNAs may include walking away, prolonging a stalemate,
stalling, approaching another potential buyer, etc. (Sebenius, 2001). Thus, BATNAs are about creating
alternatives. Learning how to develop effective BATNAs is a skill that can be taught (Fisher & Ury, 2011). It is
also important that negotiators develop their BATNA in advance of the negotiation. This gives the negotiator
leverage in the negotiation. The ability to  alternatives and potentially strengthen a weak BATNA is one
of the most important skills a negotiator can learn. Power comes from these alternatives. Learning to develop
alternatives and define a BATNA in advance lays the foundation for increasing negotiating strength, which
presents the potential for greater control, influence, and authority (Convenience Store Decisions, 2014). A
negotiator should never accept a deal unless it is better than their BATNA (Fisher & Ury, 2011).
This two-party negotiation between an Association and Hotel case study provides an opportunity for
hospitality students and professionals to practice negotiation skills. The teaching note emphasizes the
importance of identifying each party's interests, creating alternatives and options, understanding the concept
of the best alternative to a negotiated agreement (BATNA), as well as commitment.
Scenario
Parents Against Drunk Driving ("PADD") and El Camino Lodge and Golf Resort Hotel
General Information for Both Parties
Strategic Meeting Planners, Inc. ("SMP") is a meeting management company that plans, organizes, and
manages meetings, conferences, and conventions throughout the United States and other parts of the world
for its clients. SMP offers its clients a full array of meeting-management services, including strategic planning
and budgeting; site selection; contract negotiations with hotels and other vendors; marketing; accounting
and other financial services; managing revenues and disbursements; managing the registration process;
and managing the respective event onsite. SMP's clients range from Fortune 100 companies to non-profit
organizations, such as the American Kidney Association and the International Society of Toxic Tort Defense
Counsel.
One of SMP's clients is Parents Against Drunk Driving ("PADD"), a non-profit organization with over 20,000
members comprised primarily of victims of drunk-driving incidents and their families and friends. PADD's
primary mission is to reduce the number of drunk-driving incidents by (1) raising awareness of the dangers
of drinking and driving through education and public service announcements and (2) lobbying for legislation
that would (a) provide harsher penalties for drunk-driving offenders and (b) increase the fines and potential
civil liability for establishments that sell or serve alcoholic beverages to minors or persons who are obviously
intoxicated. PADD also provides a support network for those who have been victimized by drunk-driving
incidents.
Three years ago, PADD decided to hold its Annual Conference (the "Conference") on three days of this
year (the "Conference Dates") [on a Wednesday, Thursday, and Friday one week before this negotiation],
at the El Camino Lodge and Golf Resort Hotel (the "Hotel") in Palmtreal. PADD estimated that at least 700
people (excluding their spouses or any other traveling companions) would attend the Conference. After some
negotiations, PADD, through the efforts of its agent, SMP, entered into a contract with the Hotel (the "Hotel
Contract") providing in pertinent part:

Guest Room Commitment: The Hotel agrees that it will provide, and PADD agrees that it will be
responsible for using, 2100 single room nights as follows:
? Wednesday 700
? Thursday 700
? Friday 700
? Total Room Nights: 2100
• PADD's Room Rates: Based on PADD's total program requirements, the Hotel confirms the following
room rates for PADD's attendees ("PADD Rates"), excluding taxes:
? Single: $175.00
? Double: $175.00
? Additional Person: $20.00
? Junior Suites: $250.00
? Master Suites: $300.00
? All room rates are subject to applicable state and local taxes (currently 15%) in effect at the
time of check-in.
• Commission: The Hotel agrees to pay PADD's agent, SMP, a commission of ten percent (10%) on all
used room nights.
• Complimentary Rooms: PADD will be entitled to one (1) complimentary room night for every fifty (50)
revenue-generating room nights occupied. If Junior or Master Suites are occupied, they will be rated
on a daily basis as three (3) units per night and four (4) units per night, respectively.
• Cutoff Date: Reservations by attendees must be received on or before one month before the first day
of the conference ("Cutoff Date"). On the Cutoff Date, the Hotel will review the reservation pickup
for the Conference, release the unreserved rooms for general sale, and determine whether it can
accept reservations based on a space-and-rate-available basis at PADD Rates after this date. The
release of rooms for general sale following the Cutoff Date does not affect PADD's obligation under
this Contract to use guest rooms.
• Rooms Attrition: The Hotel is relying on PADD's use of 2100 Total Room Nights. PADD agrees that
a loss will be incurred by the Hotel if there is a total reduction greater than fifteen percent (15%) in
Total Room Nights actually used.
If the room nights actually used by PADD are less than eighty-five percent (85%) of the Total Room Nights,
PADD agrees to pay, as liquidated damages and not as a penalty, the difference between eighty-five percent
(85%) of the Total Room Nights and PADD's actual usage of rooms, multiplied by the average PADD Rates
for single/double rooms.
At PADD's request, SMP also contacted the Shooting Star Talent Agency (the "Talent Agency") to see if
one of its clients, Bart Napier, was available to deliver the keynote speech during the opening dinner of the
Conference. Mr. Napier was formerly a star quarterback with the Manisota Express of the Global Football
League and founder of Athletes-for-a-Higher-Calling. Mr. Napier is now in great demand on the professional
speaker circuit for his inspirational speeches on the importance of making good decisions in life, taking
responsibility for one's actions, setting good examples for our youth, and using the tragedies, failures, and
other disappointments that individuals occasionally experience in life as motivation to make positive impacts
on society.
Mr. Napier was available on that date to speak at the Conference. SMP told the Talent Agency about PADD,
its members, and its mission. SMP also gave the Talent Agency some general ideas of what the speech
should convey. SMP and the Talent Agency negotiated a contract, which PADD and Mr. Napier executed three
years ago (the "Speaker Contract"), shortly after the contract with the Hotel was signed.
The Conference began as planned, and SMP was happy to report to PADD's Board of Directors during their
meeting that afternoon that they had over 800 registrations for the Conference and appeared to meet their
room commitment at the Hotel.
During the opening dinner that evening, Mr. Napier delivered a riveting and inspiring speech that drew a
standing ovation from those in attendance, and he stayed well after his presentation to mingle with the
audience, sign autographs, and have his photograph taken with PADD's Board and other members in Afterwards, Mr. Napier retreated to the Hotel lounge to "catch-up" with two players from Manisota's
championship team who now reside in the Palmtreal area, Jimmy Beam and Tommie Collins. According to
witnesses, Mr. Napier and his friends drank tequila shots with beer "chasers" until closing. At one point, after
Mr. Napier stumbled into a cocktail waitress and caused her to drop her drink tray for a second time, the
manager had to ask Mr. Napier if he would kindly refrain from wearing his table's decorative centerpiece as a
helmet and re-enacting his famous "bootleg" touchdown run from the championship game.
The next morning, PADD members were shocked to read the headline on the front page of their
complimentary copy of the Palmtreal Tribune provided by the Hotel: "Football Star Arrested for Drunk Driving
After Delivering Keynote Speech for PADD." According to the article, Mr. Napier had been arrested for
suspicion of "driving while intoxicated" at 2:30 a.m. as he was turning from the Hotel's parking garage onto
the city's main thoroughfare, and a subsequent breathalyzer test indicated that his blood alcohol content was
more than three times the legal limit allowed under the applicable state/provincial law.
Outraged, 250 of the attendees staying at the Hotel immediately packed up their belongings and checked
out of the Hotel, refusing to pay for the next two nights of the Conference. Disgruntled attendees also began
calling the Conference's phone line, which was being monitored by SMP, demanding that their registration
fees be refunded and threatening to cancel their memberships in PADD. The registration averaged $250
per registrant, which included a ticket to the opening dinner. Additional tickets for the opening dinner sold
separately at the door for $50. PADD's annual membership dues are $200.
On the Monday following the close of the Conference, SMP received a facsimile from the Hotel advising that
PADD had failed to meet its room commitment of 2100 room nights under the Hotel Contract by 500 room
nights, and since the 1600 room nights actually used was less than eighty-five percent (85%) (1785 room
nights) of the Total Room Nights for which PADD was obligated, the Hotel was entitled to recover liquidated
damages in the sum of $32,375 (1785 room nights minus 1600 room nights = 185 room nights times the $175
PADD Rate) under the Hotel Contract's attrition clause. With PADD's consent, SMP forwarded this letter to
its outside counsel, who will represent PADD in this matter. Lawyers representing PADD and the Hotel have
contacted each other, and they have agreed to meet in Palmtreal as soon as possible to try to resolve this
matter.
Under the applicable state/provincial law, a provision in a contract liquidating the damages for the breach of
the contract is valid unless the party seeking to invalidate the provision establishes that the provision was
unreasonable under the circumstances existing at the time the contract was made. If a party succeeds in
invalidating a liquidated damage provision, an aggrieved party may nevertheless recover any actual damages
that it can prove, subject to any defenses that may otherwise be available to the opposing party.
The applicable state/provincial law contains a new "dram shop" statute, which provides that "any person who
serves or sells an alcoholic beverage to an individual who was obviously intoxicated to the extent that he or
she presented a clear danger to himself or herself and others, shall be liable for any damages caused by such
intoxication."

 

 

1. Identify relevant issues and subject matters for negotiation. 

2. Identify the interests of each party prior to the negotiation. 

3. What is the BATNA for Parents Against Drunk Driving (PADD)? 

4. What is the BATNA for the El Camino Lodge and Golf Resort Hotel?