There's not much worse than winding up a successful meeting only to find that the hotel is claiming your group did not fulfill its room-block requirements and is demanding damages. What is worse is when the hotel also refuses to give the group credit for attendees who booked rooms outside the block. But this is a common scenario, and the stakes can be high.
A first step in avoiding attrition problems is to include a provision in the hotel agreement that allows the group to adjust its room block without penalty up to a certain date before the meeting. Here is a sample provision:
Reduction of Room Block. Prior to [insert date], ABC Group may reduce the room block from time to time, without penalty, by up to __% by providing written notice to Hotel. Thereafter, the room block may be revised only upon the mutual written agreement of ABC Group and the Hotel. Under no circumstances shall the Hotel unilaterally reduce the room block without ABC Group's prior written consent.
Secondly, you need to have a guarantee that your room pickup will include all rooms that are used because of your event.
The agreement should specifically state that all rooms occupied or paid for by the group's attendees will be counted, including:
All cancellations billed (no-shows);
All persons who did not receive the group rate for whatever reason, e.g., late reservations, corporate rates, or bookings via the Internet or a travel agency;
Any rooms picked up outside the official dates;
Any complimentary or discounted rooms or suites;
Individuals holding guaranteed reservations for whom the hotel was unable to provide sleeping rooms.
Secure the right to cross-reference the hotel's guest room list with your registration list to determine whether you have received credit for all attendees. The agreement should require the hotel to provide a statement, including first and last names, arrival/departure dates, and room rate, for everyone staying at the hotel during the meeting.
If the hotel won't mail such a statement, the group should at least have on-site access to it.
Attrition fees should only be based on a shortfall from the “guaranteed” portion of the revised room block, taking into account all of the group's attendees at the hotel. In addition, the hotel should be obligated to mitigate its damages by reselling unoccupied rooms, and you should clearly state that any attrition fees will be calculated on the basis of the hotel's lost profit, not lost revenue.
The difference between lost profit and lost revenue is critically important. Here is some suggested contract language:
In the event ABC Group picks up less than ___% of the room block, as revised, ABC Group will pay the hotel, as liquidated damages, its lost profits, which shall be calculated as ___% of the lowest rate available over the official dates for each room not reserved, up to the number of rooms representing ___% of the room block, as revised. Attrition shall be calculated on a cumulative basis, and not on a nightly basis. Hotel will undertake all commercially reasonable efforts to resell such rooms and will credit that revenue against the liquidated damages in an amount not to exceed the full amount of such damages.
Good luck.
Jed R. Mandel is a partner in the Chicago-based law firm of Neal, Gerber & Eisenberg, where he heads the trade and professional association practice.