In Part 1 of this two-part post, we discussed several contract clauses we’re seeing more frequently – one, the requirement to take your attrition allowance before the meeting dates, and two, losing your attrition allowance if you cancel, possibly paying the full rate. Today, we look at three others.
Service charge on retail versus a discounted price
If you’ve successfully negotiated a 15 percent discount on F&B, you’ll still pay the service charge based on the menu’s retail price. What? Did I read that correctly? So, on $100 of F&B, I’d pay $85 for the food and, with a 24 percent service charge, I’d pay $109 instead of $105.40.
There are two ways to look at this: Either the discount was only 12 percent or the service charge was 28 percent (when the contract says 15 percent and 24 percent, respectively).
One quick solution: Strike this line item and negotiate to keep it out. The service charge should be a function of price unless you’re negotiating labor as a separate line item, which would generally apply to off-premise catering but not hotel banquet services.
When F&B costs are a concern, and you need to be 15 percent below retail at your property, you may want to ask for custom menus based on your desired price points (the quality and quantity should remain reasonably the same but with revised menu items that reflect the price point). In this case, the service charge should be based on the custom menu price.
No comps based on pickup
This appeared consistently in almost any hotel contract back when the standard was one comp room per 50 paid room nights. In the not-so-distant years of low occupancy during the economic downturn, we saw comp ratios dip to 1/25 paid room nights, but more commonly 1/40.
Today, comps based on pickup are inconsistent from one contract to another and are considered a concession, not a standard. If you don’t see a comp ratio in your contract, write it in. It’s usually available for the asking.
Also, don’t buy in to the idea that your comps must be used during the room block dates or lost. Comps are earned as a legal consideration for revenue that your group generated. It’s your right to have the value of your comps applied to the master bill as a credit. Be sure the contract states the rate level for this.
New fees added after contracting/reduction of services
Unfortunately, this is becoming more common. Hotels come up with new fees or surcharges all the time. Some are easier to combat than others by adding a simple statement that no fees or surcharges may be charged to guests, or the group, that aren’t included in the agreement or later approved by the guest or group, or some similar wording.
Where we’ve seen some gross violations is the add-on of a fee, post-contract, which is in addition to the guest room rate, such as a mandatory historic preservation fee. Fees like this should be specifically addressed in your agreement, stating that no fees or surcharges, other than the rates and charges stated herein, may be required in order to occupy a guest room. This would exclude, of course, any increase in occupancy taxes or any prevailing rates after the cut-off or above the room block as provided for in the contract.
A similar but opposite situation is a reduction in service. A simple example is a reduction in the standard free Internet speed determined at the time of contract but later reduced to a lower complimentary speed (with an added fee to get it back to what was originally offered). I liken this to the food product that costs $1 for a 12-ounce serving but still costs $1 when the new, improved box holds only 10 ounces.
We all know that the environment changes rapidly. I hope none of us are naïve enough to think otherwise. The moral of the story is to expect and anticipate changes in contracts and in the hotel environment after the contract. Both change almost daily.
As hotels move forward with more automated services like remote check-in or similar technology-supported extras, we may begin to see transaction fees on top of the normal cost of service. Stay alert!
Let’s keep the discussion going. What are you seeing in new contracts that you’re having to address?