CLAUSE: How Low Can You Go?

“Hotel will not offer any sleeping room rates lower than the negotiated Group rates over Group meeting dates unless the lower rate is extended to all room nights in the Group room block. This clause shall not apply to special negotiated ongoing corporate rates.”

EFFECT: Keep Your Options Open

This clause has been proposed and used by some groups in an effort to minimize the risk of having group attendees book outside the block. The rationale is that if group attendees have no enticement to book outside the block, they will pay the group rate and stay in the group's designated hotel.

Unfortunately, this is not always so. This clause may have the unintended effect of driving group attendees to book at other hotels outside the group block. This is bad for the hotel and for the group. Hotels offer different rates for comparable sleeping rooms as a means of practicing yield management. That is, the hotel's goal is to fill all sleeping rooms at rates that allow them to cover costs and yield an overall target profit margin. If attendees decide to stay at other hotels to get lower rates than the group rate offered at the hotel, the hotel may fill fewer sleeping rooms. The group also loses out because it is not able to get credit toward pickup for attendees who stay at hotels outside the group block. The better way to accomplish this goal is through the use of an audit clause. (We will explore audit clauses in an upcoming issue.)

Tyra W. Hilliard, Esq., CMP (tyra.hilliard@gmail.com) is a meeting industry attorney and assistant professor of event and meeting management, The George Washington University, Washington, D.C.