Why You Should Digitalize Your Contract Management

Article rédigé par Christine Ravanat – SVP Business to Owners – Accor, un de nos nombreux Talents Juste, qui partage avec nous son expertise !

Digitalizing the management of contracts is becoming increasingly common, and brings with it positive business impacts and key learnings that can be applied in any industry with a heavy reliance on contractual agreements.

The purpose of this article is to explain the benefits of digitalizing the management of contracts, in the hotel industry.

Here we will use the case of contracting between Hotel Groups and Hotel Owners, which usually translates into Franchise or Management Agreements, to the benefits of introducing digital in the contract lifecycle management. These benefits can include securing brand reputation, sustaining contracts as an asset, developing business and preventing risk and contract breach, while facilitating the everyday job of all Hotel Groups’ teams involved in the management of contracts.

To give an idea of what contract volume represents in the hotel industry: A Hotel Group such as Accor signs close to 500 Hotel Franchise or Management Agreements a year, opens a new hotel every day and handles over 40 000 hotel agreements worldwide.

What does contract management cover?

Contract Management is the activity ensuring efficient and systematic processing of contract creationimplementationstoragevariations and statistical analysis, certifying that each party complies with its rights and duties and therefore maximizing operational and financial performance, while minimizing risk.

What is a contract management process?

The contracting process for either Franchise or Management Agreements splits into many steps, with two phases – the contracting phase which takes place up to contract signature, and then the implementation phase, which takes place from contract signature.

The key players of this process on the Hotel Group’s side are the Legal, Development, Finance and Operation teams, and on the Hotel Owner’s side they usually are the owner themselves at the contracting phase and then their representative(s) at the implementation phase.

This below schema recaps the management of contract steps in a franchise or management agreement:

How can digitalization support this process?

Efficiently managing contracts relies on a proper governance, shared policy and clear responsibilities.

Introducing digitalization through a Contract Management System (CMS) is a way to streamline processes from end to end, secure contracts as an asset, cascade contract policies, accelerate decision making, sharpen contract knowledge, guarantee confidentiality and overall make the lives of contract players much easier.

A CMS can support management all along the contract’s lifecycle. Here are some examples:

1/ Support Contract Competiveness

A contract is competitive when it is negotiated in a reasonable timeframe, while including a highlevel of complexity and guaranteeing strong protection and compliance. What are digital inputs? Some examples:

  • Digital templates and clause menus for LOI and/or contract can support both local specificities and global policy implementation, such as ethics, security, brand standards or any other type of information a Hotel Group wishes to harmonize within countries or cross-regions.
  •  These templates are easy to adapt and can efficiently cascade the ongoing contract evolutions and policies, promote information sharing, while guaranteeing the right document frame.
  • Digitalization can support collaborative drafting; as several players are usually involved in that step of the process, as well as keep track of different versions.
  • E-signature is becoming more and more common in the industry and significantly streamlines the contract or amendment signature step of the process.

2/ Support Contract Storage and Analysis Capabilities

Contract data, clauses or content need to be easily and rapidly accessible by different players.

Here is how digitalization helps:

  • A CMS allows all the contracts to be stored in one single place, and links all the documents related to a specific owner together (contracts, amendments, emails, etc).
  • A CMS allows different local and global players to access contract information, and benchmark practices, ex: from one owner to the other, one country to the other, one year to the other, etc.
  • Once the contracts are stored in a CMS, then any data, clauses, terms or conditions can be easily searched, sorted and analyzed by local or global players.
  •  Reports can be automated on many topics, ex: fee conditions over time, lists of agreements with contract ending dates within the coming year, lists of contracts with exclusivity clauses, duration of contracts in different countries, etc.

3/ Support Contract Security and Confidentiality

Many players need to access contract information, but very few need to access the entire contract. Here is how digitalization enforces security and confidentiality:

  •  The Know Your Customer (KYC) policy can spread through the CMS for successful deployment in countries and the KYC files can be stored in the CMS.
  • The signature liability and delegation authority policy can be embedded in the CMT, in order to guarantee that the right people sign the right documents.
  • In order to secure the confidentiality policy, the access to the CMS can be restricted by player profile. Indeed not everybody is entitled to access any contract information, ex: defining who can access what contract scope (country, detention mode, owner, etc.), define who can search what type of information (conditions, clauses, etc.).
  • The CMS can be interfaced with other systems to push key data to specific departments, ex: fee and billing conditions pushed into finance systems, contract end-dates pushed into owner CRM systems, etc. This interfacing prevents too many players directly accessing the contracts in the CMS.
  • When stored in a CMS, contract consultation, contract downloading or contract printing can be tracked.

4/ Support Contract Handover

The handover refers to a key step, when the liability of the contract management transfers from the development teams (in charge of signing new hotel contracts) to the operation teams (in charge of operating the hotels). The better the transfer, the better the contract implementation.

Digitalization is instrumental in capturing and communicating the selected contract information required to properly operate the hotel.

  • A contract Rights & Duties Summary can be automated by the CMS, with only the information useful at the contract implementation stage.
  • The scope of information automated in the Rights & Duties Summary is a Hotel Group’s decision, and should contain useful information for operation, ex: owner’s details, hotel’s details, key dates (term, opening, expiry, termination, etc.), key terms (initial, renewal, etc.), fee conditions (franchise/management, sales & marketing, reservation, IT, loyalty, etc.), special terms (exclusivity clause, performance clause, etc.) and so on.
  • This Rights and Duties Summary can be pushed from the CMS to any other system used by operational teams, to guarantee proper communication and to avoid having them connect to several platforms.

5/ Support Contract Execution

Executing the contract properly guarantees sustainable brand reputation and business development. At this stage of the process, the focus is about making sure that each party implements its commitments. This requires a systematic follow-up to prevent any contract performance risk or contract breach.

Digitalization is a drastic way to ease the execution follow-up:

  • The above Rights & Duties Summary generated by the CMS is instrumental in sharing and cascading key information to all players involved in execution follow-up.
  • This follow-up can also be reinforced with the automated send of notifications and alerts on key coming dates, ex: business reviews, budgets, renewal, etc.
  • Reports can be automated and sent regularly on all risk topics, ex: list of contracts with exclusivity clause or performance clause.
  • Performance KPIs can be set and commitment status tracked (pending, executed, overdue) on any clause, ex: investment on the product, hiring of key positions, brand standard implementation, etc.

Enforcing a contract management culture

The contract volume consideration is in many industries a reason in itself to introduce digitalization in the contract management process. At one point it becomes a given that the partner relationship history cannot be placed in human memory only, and that proper governance, policy and process require the support of digital systems for the best interests of both the Hotel Groups and Hotel Owners.

By easily accessing relevant contract information, Hotel Group teams can fully master the relationship and better focus on business development. Consequently, Hotel Owners are reassured by the close contract performance follow-up, which builds loyalty over time.

Again, one conviction: the better the Hotel Group team’s experience, the better the Hotel Owner’s experience.

At a Hotel Group level, being able to easily access and analyze contract terms and conditions from different countries, period of time or partners is a powerful lever to spot best practices, break silos, understand local specificities and overall nourish a powerful contract policy and build a vision for contracting governance.

In an asset-light industry, where contracts are the main assets, enforcing a contract management culture is a priority. Digitalization is a powerful way to get there.

Christine Ravanat – SVP Business to Owners – Accor

Auteur de l’article : Juste

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