Did the most recent contract you received from a favorite hotel look just like the one you received last year? Or did some things change? In this seller’s market, rates increase and we’re seeing multiple changes in hotel contracts. You may be forced to think about at least some of them on the next go-around. Let’s look at a couple attrition clauses that might cost you.
Attrition allowance only before the meeting dates
This isn’t new, but it was seldom seen in the United States until recently and is much more common in Canada. This provision requires groups to decide 30 or 45 days in advance, for example, whether to request attrition allowances of 5 percent, 10 percent or 15 percent at pre-determined intervals.
I tend to disagree with calling this an attrition clause. It’s really the opportunity to reduce your room block in advance, based on your projected pickup. It has the distinct disadvantage of losing your attrition allowance if you choose not to take it. A traditional attrition clause calls for calculations at the end of the event.
RELATED STORY: Facing attrition
This advance attrition allowance is especially problematic for groups whose attendees historically register inside of 45 days. It’s a “damned-if-you-do, damned-if-you-don’t” proposition.
If you take the option and later need the rooms, they might not be available or available only at much higher rates. Either way, your attendees might have to stay elsewhere. If you don’t take the option, your attrition allowance goes away, and attrition is calculated on the original room block. It’s a roll of the dice unless you know that your group history is as predictable as the day is long. And, if it were that predictable, an attrition clause would be relatively unimportant.
Here’s how to address this:
- Negotiate for a traditional attrition clause with attrition determined at the close of the event. Don’t forget to have attrition calculated on lost profit versus lost revenue.
- If a traditional clause is not an option, consider how the guest room pickup will be calculated to determine attrition. The hotel’s main concern should be your peak nights. So, ask that attrition be calculated only on peak nights, that any rooms blocked on shoulder dates, where you might have just a few rooms each night, will not be used to determine the starting room block total. Be sure you get credit for rooms picked up on those shoulder dates, rooms paid in excess of the block on any date, early arrivals/extended stays and earned comps. In essence, this unconventional method is like asking for some allowable attrition to be calculated at the end even though you are using the advance method, but it represents a compromise that both parties may be able to live with.
- When the contract is written, consider reducing your block and negotiating leniency on rates after the cut-off date if you can reasonably predict that the hotel occupancy will be low based on the dates, pattern and hotel history . That should be an easy sale. If it is forecast to be high, keep your block up, and be sure you’re getting credit for resold rooms and all rooms reserved by your attendees regardless of rate and reservation timing. You should be doing this anyway!
RELATED STORY: Mission: Avoid attrition
Losing your attrition allowance if you cancel
Flip a coin. Sometimes you see this, and sometimes you don’t. This clause says if you cancel the meeting, you lose any slippage consideration given as part of the overall contract. You’re now responsible for the entire block, possibly at the full rate.
When faced with this, keep in mind that your original commitment was never intended be more than the original block, less any slippage amount, less any allowance offered by the hotel or negotiated by you to base damages on a lost profit percentage versus lost revenue.
You could spend the best part of a day negotiating percentages for attrition and damages, or simply negotiate whole dollar amounts that you’d be willing to pay on a sliding scale with damages increasing as the date approaches. That said, don’t forget to base your numbers on the same parameters discussed above, and include credit for resold rooms based on profit replacement, not revenue replacement.
RELATED STORY: How to cancel meetings with diplomacy and tact
Let’s keep the conversation going. What do you see in new contracts that makes you lose sleep?