Contracts are the backbone of business operations, especially in the hospitality sector, where agreements often span years and involve essential services like energy, maintenance, or technology partnerships.
Recently, I took over a hotel bound by a five-year contract with an electric car charging company. This agreement, despite being beneficial in principle, has proven costly, with expenses outpacing revenues.
As a new operator, I’m faced with renegotiating or exiting this agreement to ensure it aligns with our financial goals.
The rigidity of long-term contracts can be particularly challenging. Many agreements come with no exit clauses or excessive notice periods, making it nearly impossible for businesses to pivot when market dynamics change.
While it’s understandable that contractors seek security and guaranteed revenues, overly restrictive terms can be excessive.
In the hospitality sector, such rigid contracts can be particularly burdensome. A 2024 article from The Times reported that small firms are frequently pressured into long-term business support contracts, some extending up to ten years, which can lead to financial strain and limit their ability to adapt to changing market conditions.
In the hospitality industry, where agility is crucial, businesses must have the ability to adapt quickly. Whether dealing with fluctuating energy costs, supplier pricing changes, or evolving guest expectations, restrictive contracts can stifle growth.
Flexible contracts that include reasonable exit or renegotiation clauses offer a more balanced approach, benefiting both parties and allowing businesses to respond to changing needs.
As industry professionals, we must advocate for fairer contract structures that support business sustainability. Long-term agreements should come with safeguards that protect operators from untenable terms while still providing contractors with stability.
Open dialogue and mutual understanding between parties can lead to contracts that foster innovation, growth, and mutual success—benefiting not just one party but the industry as a whole.
Ultimately, reviewing existing contracts, identifying key areas for negotiation, and pushing for flexibility in new agreements can empower hospitality businesses to thrive.
It is time for a fairer approach that respects both sides while fostering a healthier, more adaptable business environment.
If you love hospitality and are eager to improve our industry, then come along to our next conference The Art of Hospitality that talks all things hospitality, hosted in January! Learn more and get your tickets here
https://www.tickettailor.com/events/thehospitalityheroltd/1247485?