Hotel contract negotiations: Save money and add value to your event
It goes without saying that planning a meeting or event is no easy task. Whether it’s a seminar with several dozen participants or a convention expecting upwards of 50,000 in attendance, the logistics involved can be daunting to even the most organized among us. Every step of the way, the goal of providing an excellent attendee experience must be kept within budget constraints, so finding places to save or ways to reduce your financial liability is key.
Hotels make excellent venues for events; they’re essentially one-stop shops when it comes to meeting space, accommodations, and networking or dining events, plus they often come with an on-site coordinator to assist planners with catering options, AV setup and more. Because of their convenience, hotels can come with a hefty price tag, but familiarizing yourself with the process of hotel negotiations can help you save substantially.
Most hotels will have a standard contract that they customize for each client, and this is where your two biggest money saving tools – attrition and concessions – will come into play.
Attrition refers to the amount of variant in a contract that may be permitted before some type of penalty is incurred. Attrition clauses inform both parties what the impact and expectations are should the variant fall short of the commitment.
Most commonly, attrition applies to blocks of rooms. When a group commits to a block of rooms with the hotel, there is an expectation that the group will fill those rooms, or the hotel will incur a loss (because they have taken those rooms out of inventory and they can’t be resold). Attrition clauses clearly set the expectation of what will happen if the group doesn’t fill the block of rooms.
Hotels typically give groups allowable attrition – a percentage of the room block that doesn’t have to be filled – before the group is required to pay the hotel a penalty. The penalty is often calculated based on room nights, but it can also be calculated a number of other ways as well, such as room revenue. Regardless, the contract should clearly stipulate how attrition will be calculated. For example, if a group had a total room commitment of 200 nights and 20 percent allowable attrition, their minimum number of room nights they would be required to fill would be 160 room nights. If the group only actualized 100 rooms, they would be required to pay the hotel as a penalty the difference of 60 room nights at the group rate (example $189 + tax), for a total of $11,340 + tax.
Negotiating a favorable attrition clause is important to groups so that they can minimize their financial exposure should their meeting not yield the attendance they were expecting. Most hotels are agreeable to 15 or 20 percent allowable attrition. Regardless of the attrition rates, groups must analyze their room block history and keep track of expected attendance in order to come up with a room block size that will allow them to meet their commitments.
There are additional clauses that can be added to the contract to help reduce attrition exposure:
§ Negotiate for cumulative attrition instead of day-by-day; this gives groups far more flexibility, since it’s based on overall pick up.
§ Include an “around the block clause,” which stipulates that any rooms booked outside the block by meeting attendees count towards pick up.
§ Arrange for early departure fees to go towards attrition.
§ Include a clause that waives attrition on any night that the hotel sells out.
Concessions are generally low- or no-cost items that a hotel is willing to provide a group based on the size, scope and value of the event to the hotel. They can include special pricing, discounts or complimentary items provided to attendees.
All groups, regardless of size and scope, should have a realistic “wish list” of items outlined in their RFP for the hotel to consider when developing their proposals. This is especially important, as the meetings industry is no longer a buyer’s market – with an increase in demand for hotel space, organizations should expect to see higher room rates and meeting expenses, and concessions can add additional value to your meeting without the price tag.
When developing a list of concessions, groups should consider items the hotel would be able to provide at little to no cost to them that will benefit the group’s bottom line. For example, complimentary internet in the meeting space costs little to the hotel, is a benefit to attendees, and it would normally be a large expense for the group. Just remember, while its common practice to negotiate concessions, always be realistic and fair—you may not get everything you ask for.
Other common concessions include:
§ Complimentary guest rooms (often one complimentary room per 40 room nights picked up)
§ Complimentary room or suite upgrades
§ Discount on menu pricing
§ Discounted AV
§ Reduced resort fee
§ Waived meeting room rental with food and beverage minimum
§ Free Wi-Fi in meeting space and/or guest rooms
§ Two-week cut off for reservations
§ Discounted parking
§ No handling fees for shipping
§ Complimentary VIP airport transportation
§ Group rate extended three days pre/post meeting
§ Five to 10 VIP amenities
§ Staff rate rooms
With a combination of favorable attrition rates and concessions, a planner can save thousands of dollars on an event without cutting corners on attendee experience. For assistance in negotiating hotel contracts and making the most of your budget, reach out to AOE today.