It's a seller's market in the hotel industry. After taking a nosedive after 9/11, the major statistical measurements of hotel performance — occupancy rates, average daily room rate, and the all-important revenue per available room () — are all projected to be up significantly in 2006 and to increase even more in 2007, creating a tougher climate for planner-hotel negotiations in several ways.
Room-Rate Roller Coaster
Gone are the days when a planner could assume that once the room block was filled, the hotel would continue to offer additional rooms at the group rate. Hotels now insist on the ability to charge “prevailing” rates for rooms within a block after the cutoff date. For one planner, this meant that the $224 per-night block rate shot up to $429. To avoid this, planners should try to negotiate that hotels must accept reservations at the group rate after the cutoff date on a space-available basis.
Higher F&B Minimums
The trend toward using cumulative food and beverage minimums, instead of the more traditional function-by-function approach, began long before the seller's market, but the figures continue to creep up.
While planners may benefit from an F&B minimum (to allow flexibility in planning functions), they should also be wary, since such minimums are often based on total room block occupancy, without allowance for sleeping room. This could mean that the planner might have to, in effect, pay twice as much if attendance slips. It's smarter to seek a minimum spending number that is easily achievable. I would recommend one based on the number of attendees after attrition is figured.
Did You Say Meeting Space Rental Fee?
Lately, hotels are seeking to impose meeting room rental fees — often a significant cost — if a group doesn't fill its room block. This is in addition to paying for sleeping room attrition and failure to fulfill the F&B minimum requirement.
If a planner expects to get complimentary meeting space if a specific percentage of rooms is filled, there is no reason, in my opinion, why the hotel should charge for such space if the percentage is not met and the planner is paying for the unused rooms through an attrition fee. Another sign of a tight market: If you want a 24-hour hold on meeting space, you don't expect to pay for it, right? Not true today! Some hotels are charging even for that.
Many hotels have changed their force majeureclauses to permit meeting cancellation without liability only in the event that a specific event makes total performance “illegal or impossible.” That's a very restrictive standard; after all, it wasn't illegal to hold meetings after 9/11, and it was impossible to hold some meetings in New Orleans only just after Hurricane Katrina because the hotels were closed.
Planners should seek more flexibility in these provisions by (a) allowing for partial performance and not just termination if a force majeure event occurs, (b) defining the “triggering” events to include not just the named perils or other “emergencies” but also any event beyond the control of the parties, and (c) allowing the provision to be used not only if performance is “illegal or impossible,” but also if it is “commercially impracticable,” a legally recognized standard that essentially means “very difficult.”
James M. Goldberg is a principal in the Washington, D.C., law firm of Goldberg & Associates, PLLC. His practice focuses on representing associations, corporations, and independent meeting planners. He is the author of The Meeting Planner's Legal Handbook.