Is Your Contract Reciprocal?
It’s only fair, right? Wrong…..
Don’t kid yourself, hotels are a business and like any other business, they are in business to make money. Most standard hotel contracts are written to favor the hotel, protect the hotel and make as much profit as possible for the hotel.
You, as the client, need to ensure that your organization is just as protected as the hotel. Far too many people focus on the room rate and the concessions but there are many clauses in a hotel contract that are just as important.
* Attrition – if the hotel will only give you 10% allowable attrition, have the liquidated damages be based on lost profit as opposed to lost revenue. If the hotel will allow you more slippage, then you can accept lost revenue over lost profit. Ideally, you will get both the higher % and the loss on profit, not revenue.
* Cut off date – the more time you give the hotel to resell rooms you will not use, the better it is for the hotel. But what if your attendees are last-minute at making their reservations? Will the hotel offer your discounted rate past that cut off date or will your attendees be penalized for being late, and go book somewhere else? Now you are at risk of owing attrition, your comp ratio is reduced and the value of your business has decreased because your overall pickup is less that it should be.
* Cancellation – this is a biggie! If YOU cancel the entire event, you will owe liquidated damages to the hotel, usually based on a sliding scale tied to how many days prior to arrival you are cancelling. The dollar amount owed is to recoup lost revenue / lost profit that the hotel was forecasting. Now they have to try to resell those rooms and space again, possibly for a lower rate. But what if the hotel cancels on you? But wait……that never happens…..Oh yes it does!!!! It happens more than you think. So what does that mean for you and your organization? Is the hotel going to compensate you? Is your cancellation clause reciprocal?
So how do you know what is a fair percentage for allowable attrition? What is the average profit margin for a hotel? How do you negotiate a clause to protect you in case the hotel cancels your meeting? Let’s talk and I will explain it all to you….