Ever find yourself baffled by legalese when negotiating a? You’re not alone. Here's a typical problematic clause— and expert legal advice about what you can do to protect yourself and your organization.
"Hotel will allow Group 10% room block shrinkage without any liquidated damage payment. For shrinkage over and above this allowance, the Hotel will require payment from Group for each unused room night at the confirmed group average rate plus applicable tax for your committed room block. Such charge will be added to and payable as part of your Master Account."
Effect: Ambiguity and Extra Expenses
There are several problems with this provision.
1. The language is ambiguous and calculation of attrition could be subject to different interpretations; for example, does the group owe damages up to 90 percent of the block or up to 100 percent of the block?
2. This clause requires the group to pay 100 percent of the room rate for each unused room rate. The law of damages says that the injured party should be able to recoup lost profits, not lost revenues. The reason—if the group pays 100 percent of the room rate for a room not used, the hotel actually makes more money on that room than if the group had used the room because the hotel does not have to have staff clean the empty room, launder the linens and towels for that room, nor replace the soap, shampoo, etc. The hotel’s expenses are less for an empty room than for an occupied room and the room rate is set based on expenses plus profit for an occupied room. The meeting planner should negotiate to reduce the damages to a level corresponding to lost profits.
3. The contract specifies that attrition damages include tax. Some states do not require collection of sales tax on contract damages, so unless the law requires it, the meeting planner should not agree to pay it. An additional 5 percent or more can really add up if attrition damages are already steep. If it is required by the state that the hotel is in, ask the hotel to provide proof that tax on damages is required.
4. The last sentence gives the hotel the right to charge the attrition damages as part of the master account. Because calculation of attrition damages is often disputed, attrition damages should be billed separately and the parties should agree in writing that no interest accrues until 30 days after any dispute has been resolved.
5. There is no mitigation or "resell" language in this provision. If the hotel collects attrition damages from the group for 50 unused group rooms and is able to resell 45 of those rooms, the hotel essentially gets paid twice for 45 of those 50 rooms! The group should add language providing for a credit against attrition damages for any sleeping rooms resold by the hotel.
Tyra W. Hilliard, Esq., is an attorney at Sumner & Associates, P.C., an Atlanta-area law firm that provides consulting and legal services to associations and meetings industry professionals. She also holds a Master’s degree in Tourism from The George Washington University in Washington, D.C. Prior to becoming an attorney, Tyra worked in the meetings industry as an association meeting planner, a hotel catering manager, and a convention and visitors bureau sales manager.
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Clause and Effect: Attrition