Underwriting a 112-key select service where 40% of room nights come from one contract

Looking at a select service property where the P&L looks clean until you get to the segmentation report. Two crew contracts, both energy sector, are 41% of room nights at a negotiated rate of $78 against a transient ADR of $121. Occupancy is 71% and RevPAR is $86, so the contracts are what's holding the occupancy up while dragging rate down.

Both contracts are annual with 30-day cancellation on the customer side. Seller's position is that the contracts have renewed four times and the operator relationship is strong. My position is that I'd be paying a cap rate on income with 30-day duration and no renewal obligation, and the correct treatment is to underwrite the property at what transient demand alone supports, which pencils out to occupancy in the low 50s and RevPAR near $63. That's a 27% haircut to NOI and it puts my value roughly $3.4M below ask.

What I can't figure out is whether that's overly conservative to the point of being useless as a bid, or whether there's a middle treatment that prices the contract risk instead of erasing it. Has anyone structured this with an earnout tied to contract renewal, and did the seller actually accept the mechanics? I'd also want to know how lenders treat contract revenue in a debt yield test, because if the lender underwrites it at 50% credit my equity requirement changes even if I win the price argument.