Contract Clauses

If you have ever wondered how to book a hotel for a group or a meeting, it all starts with the hotel sales contract.  The purpose of a hotel sales contract is to put in writing all the terms that will define the roles between your company and the hotel you choose.  There is no standard or global contract for group travel or conferences.  However, most hotel companies address the same topics in their contracts, although the wording and terminology may fluctuate slightly from a Marriott, to a Westin or to a resort location.  On this page, we will address many of the common clauses used in hotel sales contracts and we will do our best to explain the purpose of each one.  Our lawyer said we can do this, but we have to remind you that this information is not legal advice, and our explanations may not apply to your contract.

Attrition, Performance

Attrition and Performance are interchangeable terms, and both refer to one of the most confusing clauses for Meeting Planning customers.  At the core of the clause is the concept of risk.  When you sign a contract with a hotel, you are locking in a specific number of rooms at a specific rate, for specific dates.  That means the hotel promises not to sell those rooms to anybody else, even if Disney World opens a new theme park across the street and Mickey Mouse fans from all over the world are clamoring to get rooms at your hotel.  In order to accept that risk, the hotel makes you promise that they are actually going to get paid for most of those rooms, even if only half of your guests or attendees show up.

In most cases, a hotel will make you promise that they will be paid for at least 80% of the rooms you contracted, however, in some high demand locations, they could seek a 90-95% guarantee.  The implications of this clause for meeting planners is that if you block 100 rooms, and only 70 rooms get sold, the hotel is going to expect you to write a check for the cost of 10 rooms.

Attrition and Performance is often confusing to meeting planning customers because, for starters, there are two different names that both mean the same thing! And secondly, some hotels have very complicated formulas for calculating when and how to charge for Attrition related fees.

Concessions

Concessions are the extras, freebies, upgrades, bonuses and goodies that get negotiated into a hotel sales contract. Concessions can also be exceptions to normal hotel policies. When negotiating hotel sales contracts and discounted group hotel rooms, there are many extras you can ask for from free suites and meals, to frequent flier miles and spa treatments. We once even negotiated the addition and construction of a playground for a Client!

Commission

This is how your meeting planner or travel agent gets paid. Just like in the real estate, insurance and recruiting industries, hotels get most of their group business through professional agencies or brokers. It is a regular and accepted practice for a hotel to pay those agents a percentage of the revenue the hotel earns from the customers that agent brings to them. A common myth is the belief that hotels will increase their prices to account for the cost of the commission. In most cases this is not true. Hotels that are accustomed to working with groups and meetings, build the cost of commissions into their operating budgets and establish rates that will ensure they earn the profit they need, even when paying commission. In effect, you are paying hotel rates that include agent commissions, whether you use an agent or not. Here at VenueQuest, we prefer that you do use an agent.

Rebate

Some meeting planning customers feel that they should earn a financial reward for bring group business to a hotel or city, and they are often correct. In those cases, a Rebate can be negotiated into a contract. Typically, a hotel rebate is a fixed dollar amount per room sold. So, if your conference generates the sale of 100 rooms for 3 nights (300 roomnights), you might get a rebate check for $3,000.

Cut off date

This is a very important clause which must be detailed in every hotel sales contract. As mentioned in the Attrition paragraph, a hotel sales contract ensures that the hotel will hold rooms for your group and not sell them to anyone else. However, a day must come when they will no longer hold those rooms. That is the hotel cut off date. After the hotel cut off date, the hotel no longer promises that rooms will be available for your attendees, and no longer promises that the rate you contracted will be offered to new reservation requests. A best practice is to encourage all your attendees to make their travel plans prior to the hotel cut off date by confirming a reservation in their name at the hotel. In most cases, we see hotels continue to offer a group rate, right up until arrival. But after the cut off date, this decision rests solely with the hotel. Most hotels will ask for a cut off date 30 days prior to the main arrival date. However it is not uncommon to negotiate a shorter time frame.

Food and Beverage Minimum, F&B Minimum

Food and beverage minimums only apply to hotel sales contracts that also require meeting space. Most commonly a food and beverage minimum is reflected as a flat dollar amount, which is the total spending the hotel requires from your group on catered banquet functions. In most cases, the F&B minimum does not take into account individual spending by guests at restaurants, coffee bars and room service, nor does it include the event organizers catering related service charges or taxes. Food and beverage minimums are often quoted in lieu of meeting room rental fees. For example, if you want to use the entire ballroom at a hotel on Friday night, they might charge you $4,000 rental, or require that you buy at least $4,000 in food and beverage.

Force Majeure, Impossibility, Acts of God

Force Majeure hotel clauses supercede the group cancellation clause, also discussed on this page. The clause allows for a penalty free cancellation of the entire meeting in the event of any manner of worldly events beyond the control of the meeting planner, attendees or hotel. All Force Majeure clauses are different and include provisions for different scenarios. Consider the outside influences that could wreck your meeting: natural disasters, terrorism, government regulation, labor strikes, etc.

Group Cancellation

Similar to attrition and performance, the group cancellation clause can be confusing and should be clearly understood. Group cancellation applies to the cancellation of the entire scheduled event. This usually only happens in extreme cases. It is not uncommon for Group Cancellation clauses to require that a group pay for all the rooms and food the group WOULD HAVE used, if they had held their meeting. VenueQuest can advise you on best practices to minimize cancellation fees, but the best defense is to contract your meeting carefully and plan for success.

Individual Cancellation

Individual cancellation refers to the cancellation of a guest room reservation. After you have signed your hotel sales contract, your attendees will need to make reservations for themselves with their specific arrival and departure days. Inevitably, some attendees will have to cancel their plans at the last minute. This clause stipulates when they can cancel their hotel room without incurring any fee’s, and what fees will be charged if they cancel to late. Typical ranges can be anywhere from 6:00 PM on the day of arrival, all the way back to 3 days prior. In some special circumstances, resorts may apply an even longer cancellation period.

Group Rate

Any contract for a discounted block of hotel rooms will use a group rate, and often there can be different group rates for different categories of rooms. This is the discounted hotel room rate, the hotel promises to hold for attendees from the time the hotel sales contract is signed, until the cut off date. Group rates are usually lower than the rate offered to individual travelers.

Meeting Space

A meeting space clause should only be used when meeting space is required for a booking. Your hotel sales contract should specify all the days and times on which you need meeting rooms, and what those rooms will be used for (ie: meetings, breakfast, storage, office, registration, etc). VenueQuest always attempts to make a hotel commit to naming specific rooms for each function. When this is not possible, we do require that a minimum square footage be guaranteed.

Reservation Method

Once you have established a room block and signed a hotel sales contract, the individuals attending your event will need to make reservations for their visit. Each attendee will have their own set of requests, so a hotel requires an individual reservation for each person. These reservations can be made in a number of ways.

Rooming List

This is usually the case when all the rooms are being paid for by one entity, as with a corporate training meeting. The meeting planner provides the hotel with all of the guests contact information, and details on when they will arrive and depart, and also what requests they have made for their room. This method can be challenging for the coordinator and we recommend hiring VenueQuest Meeting Management services for this process.

Individual Reservations

By either online reservation, phone call-ins, or through a third party application, each attendee manages their own reservation. The easiest solution is a directed online reservation site where attendees can make reservations directly into the room block for the conference they are attending.

Hotel Room Block

The contracted hotel room block is the number of rooms held by the hotel for a group on any given night at an agreed rate. This is the foundation of the contract, because it details the start and end dates for all attendee’s, and confirms the discounted hotel room rate everyone will pay. Once the hotel sales contract is signed, the hotel will take the contracted rooms off the market, making those hotel rooms off limits to any other customers until the cut off date.