Contracts are the backbone of business operations, especially in the hospitality sector, where agreements often span years and involve essential services like energy, maintenance, services and technology partnerships.
Recently, I am dealing with a five-year contract with an electric car charging company. This agreement, despite being beneficial in principle, has proven costly, with expenses outpacing revenues in the region of 900%, yes that’s 900%.
As the new operator, I’m faced with attempting to renegotiating or exiting this agreement to ensure it aligns with our financial goals, and of course yes, its proving to be very difficult.
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, which in current headwind of business seems monthly!
While it’s understandable that contractors seek security and guaranteed revenues, overly restrictive terms can be excessive, and I would argue unjust!
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.
From Health & Safety to Human Resource and other Services led contracts, one would argue that these should never have such strenuous terms given they are people orientated, and should be more adaptable, technology, well a license to print money, and a simple on/off switch their end, seems to come with penalty or no get out clause.
In the hospitality industry, where agility is crucial, businesses must have the ability to adapt quickly. As a hotelier, we can get grief for a 24-hour cancellation policy if it snows, or someone is ill – it’s like we’ve committed a crime, when we say we won’t be able to sell that room, and our terms and conditions clearly state you must pay – but straight to Trip Advisor they go!
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 – we are open to conversation, there is a difference between up front costs, being spread over a period, but all too often this isn’t the case, I have an incident of being with someone 3 – 4 years, and demanding I give an 18 month notice period for services that over the 3 – 4 years was hardly used and was more of an “insurance” style service.
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.
I could do another whole blog on the wider issues of what if your member of staff has signed a contract in your absence? Let’s not go there today.
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 on 17th January in Chester! Learn more and get your tickets here: https://www.tickettailor.com/events/thehospitalityheroltd/1247485?
