Meetings & Conventions: Attrition - May 1998
As hotels pile on the penalties, planners fight
BY DAVID GHITELMANJ
udy Bunasky has been a corporate meeting
planner for more than 20 years. In that time, she never had to pay
a single hotel attrition fee. But last year Quorum Health Group,
the Brentwood, Tenn.-based health-care company where Bunasky is now
meeting services manager, was slapped three times with charges for
failing to pick up its room block.
Did Bunasky break a two-decade record of filling every room
block she's ever booked? Hardly. But in the past, hotels would
inform her well in advance if her group was failing to fill its
block - and penalties were never enforced. Now, attrition charges
are showing up on her master account with no warning.
"There used to be a discussion during the pre-con meeting," she
says. "We might offer to book another meeting at the property. This
isn't happening anymore."
Last year's attrition fees, all for meetings of 50 to 75
attendees, ranged from a $2,500 charge the company paid to an
amount "close to $5,000" Bunasky was ultimately able to erase with
a promise of future business.
The crackdown has made it increasingly difficult for many
planners to book meetings with confidence. Bunasky's office, for
instance, plans approximately 300 meetings a year for Quorum. Many
are non-mandatory educational seminars, putting Bunasky in much the
same predicament as association planners, who must make educated
guesses about how many attendees an event will draw. In the
ever-volatile corporate arena, the typical group may even have
trouble accurately anticipating group size six months in
Not Too Hospitable
Many planners complain attrition clauses are a sign the hospitality
industry is losing sight of the need to be hospitable. "I sense
tension where there wasn't tension before," says Karen Durkee, CMP,
president of Durkee & Associates, an Atlanta-based independent
meeting planning firm with a largely corporate clientele. "It's
almost as if you're buying a used car."
Not long ago, the greatest problem a group faced when a
gathering went under-attended was embarrassment. Now, embarrassment
can be the least of its worries. Over the past decade, most hotels
have begun to require that nearly all groups include in their
contracts an attrition clause - essentially a promise to pay for
unused rooms if the organization fails to fill an agreed-upon
percentage of the rooms it has reserved.
When these clauses started to appear in contracts, they were
little more than threats. Hotels didn't expect to collect the
money, and planners never envisioned they would be required to pay
it. Over the past five years, however, hotels have increasingly
been enforcing attrition clauses. And during the past two years,
they have been extending them to include not only sleeping-room
charges but food-and-beverage expenses and meeting-space rentals as
Nobody likes them. For meeting planners, "they're kind of
scary," says independent planner Durkee. "I understand them from
the hotel's point of view, but they're hard to justify to our
And trade show organizers "feel that the hotels are trying to
cover their losses at our expense," says Edward Conrad, president
and CEO of Atlanta-based SEMCO Productions, which organizes
Metrade, a 2,500-exhibitor medical device show.
They've meant headaches (and business) for lawyers. "I think
attrition fee provisions are the worst-written part of most
contracts," says Barbara Dunn, a Chicago-based associate attorney
with the law firm of Howe & Hutton, Ltd.
Even some hoteliers are less than enamored of them. "I think
attrition is such an ugly word," says Kristy Sartorius, director of
hotel sales at the Wyndham Anatole Hotel in Dallas.
Do you have to take it? Not necessarily - or at least not
without first trying to minimize your risk. Many experienced
sources say planners need not meekly accept what the hotels offer.
While attrition clauses may be inevitable, most hoteliers are more
than willing to modify them - or at least talk about modifying
Rules That Bend
Although the presence of an attrition clause is "standard operating
procedure," says Diana Voto, New York City-based national director
of sales for Omni Hotels, the content of the clause "depends on the
piece of business."
At Marriott hotels, it's "not mandatory that every single
contract have an attrition clause in it," says Susan Hodapp,
Washington, D.C.-based brand director for Marriott Hotels, Resorts
& Suites. Whether an attrition clause finds its way into a
contract, she says, "really depends on the nature of the business
and the time of year."
At the heart of the attrition clause is the room block - the
number of rooms a hotel agrees to set aside for a group. (And
usually attrition clauses are not an issue for meetings with fewer
than 50 attendees.) If the group fails to rent a specified amount
of this block - generally 80 percent - the hotel will require the
organization to pay for the unused rooms.
Sometimes, the percentage is highly negotiable. "I've seen
everything from 80 percent to 95 percent," says attorney Dunn.
"There is no hard-and-fast rule." Sometimes, it isn't negotiable.
At the Wyndham chain, the attrition percentage is a set-in-stone 80
percent.A CLAUSE IN YOUR
What does a good
attrition clause look like? The Framingham, Mass.-based Society of
Independent Show Organizers drafted a model clause (adapted below)
for its members. But it might be a bit optimistic, particularly for
smaller groups. Think of it as an initial bargaining position,
suggests Henry Schaffer, a Chicago-based partner in the law firm of
Howe & Hutton, Ltd. "It's essentially a first lob over the
net," says Schaffer, who helped SISO write the clause. (And, of
course, this sample should not substitute for competent
1. In the event that the Producer's room block pick-up
falls short of expectations, the Producer agrees to pay a room
rental fee based upon the following sliding scale:Pick-up 75%-100%: No fee.Pick-up 50%-74%: Fee is 50% of the guest room rate for
each room not sold.Pick-up less than 50%: Fee is 70% of the guest room rate
of rooms not sold.
2. The Hotel has an obligation to mitigate the damages by
making a concerted "best" effort to sell all rooms within the block
prior to selling rooms outside the Producer's block.
3. All rooms used by persons attending or working at the
Event will be counted in the room block. These include, but are not
limited to: all cancellations billed ("no shows"); all persons who,
for whatever reason, do not receive the Producer's rate (e.g., late
reservations, corporate rates, etc.); all persons
4. There will be no attrition fee whatsoever if the Hotel
is 95% sold out at anytime during the Meeting Dates.
5. If the Producer exceeds the Block, 50% of the revenue
of those excessive block rooms will go to offset all charges to the
Master Account and/or other fees and expenses.
In contrast, at properties managed by Westin Hotels and Resorts,
the percentage varies from city to city. San Francisco's Westin St.
Francis works with a standard (but negotiable) 90 percent. At the
Westin La Paloma in Tucson, it's 95 percent. The reason for the
difference, explains Jill Wien, the St. Francis' national sales
manager, is that San Francisco can more easily resell excess rooms
to business travelers and tourists than the Tucson resort, which
relies primarily on vacationers.
Often, particularly for associations that block rooms years in
advance, attrition clauses allow for periodic (typically annual)
adjustments to the size of the block, usually accepting reductions
of 10 percent or less.
The number of rooms for which a planner must pay attrition also
is negotiable. Suppose a group with a room block of 100 is
obligated to fill 80 of those rooms, but only sells 75. The hotel
will most likely say the group owes attrition on 25 rooms - the
size of the room block minus the number of rooms actually used. The
planner, however, should push for a contract that says the group is
responsible for only five - the number it had to reach to avoid
attrition charges, minus the number it actually filled.
Complicating the issue is the growing tendency of hotels to add
other factors - such as food and beverage and meeting space - to
the attrition clause. Food-and-beverage attrition can involve
either (or both) of two scenarios. One holds a group to a number of
agreed-upon food functions. For example, if the group schedules two
dinners, three lunches and three breakfasts for a meeting and then
decides to go off-site for one dinner and cancel a breakfast, it
may still have to pay at least some of the cost of the functions
In another form of food-and-beverage attrition, some properties
are requiring groups that fail to meet the agreed-upon percentage
of their room block to pay at least some of the cost of meals that
weren't served to attendees who didn't attend.
And then there's meeting space attrition, often tied to room
pick-up. A group that had its meeting rooms comp- ed may be
required to pay for this space if it fails to make its room block.
This particularly rankles planners. "Let's say you have a room
block of 800 but only use 700 rooms," says Chicago-based attorney
Jeb Mandel. "The hotel may want to charge you for meeting space,
but if you had started off with 700 rooms, what deal would you have
gotten? The meeting rooms and function space probably would have
"You have to be very careful not to be double- or triple-dipped.
You don't want to end up paying multiple penalties on the rooms you
didn't pick up."
Meeting in the Middle
On the plus side, attrition clauses function as a reality check.
The threat of paying for something their organization may not use
may help planners move their corporate bosses or association boards
- as well as themselves - toward greater accuracy (and modesty) in
projecting the size of a meeting.
"Attrition clauses have forced meeting planners to be more
professional," says Jacy Hanson, director of meeting services for
the Alexandria, Va.-based American Diabetes Association. "They have
forced them to understand how important getting an accurate meeting
"They've made our senior people more aware" of the need to view
meeting needs realistically, adds Deborah Richardt, CMP, director
of meeting services for the New York City-based American Lung
On the negative side, many planners feel that, by adding food
functions and meeting space to the attrition equation, hotels have
gone beyond wanting to share risk fairly with meeting groups to
forcing groups to shoulder all the risk themselves.
There are two reasons hotels have upped the attrition ante,
according to Kim Zeitlin, a partner in the Washington, D.C., law
firm of Zeitlin & Buonasera. One is the booming economy.
"Hotels have been operating at unheard-of occupancy rates," he
says, "and there's been practically no development in the
full-scale hotel market."
Another factor: The 1986 tax reform, which forced hotel owners
to use their properties to earn a profit instead of shelter income.
"There's been a shift from an emphasis on hospitality to an
emphasis on yield on investment," says Zeitlin. "The owners feel
now that they're essentially in the real estate business, and the
real estate happens to be a hotel. 'Location, location, location,'
has become 'yield, yield, yield.'"
The result, some planners complain, is not just financial
threats, but strained relationships. "Over the last year, what's
going on between hoteliers and planners has become increasingly
adversarial," says Mary Beth Kraus, director of convention programs
for the New York City-based Modern Language Association. The money
managers, she charges, "are clashing with the culture that had
existed within the hospitality industry, with what the hospitality
industry is supposed to be."
Others contend the current environment makes for better
business. "Attrition clauses have moved people away from signing
contracts based on friendship," says the diabetes association's
Hanson. "And those of us who understand attrition have gained a new
respect from hotel salespeople."DAMAGE CONTROL: HOW TO
LIMIT YOUR LOSSES
You may not be able to
avoid signing an attrition clause, but you can make the process
less painful. Here are some tactics for taking the sting out of
Get good history. The most reliable
predictor of what you will do in the future is how well you did in
the past. (See "Post-Convention Reports," page 53.)
Use the national sales office. These
salespeople are more likely to know you and the value of your
business, and also to care about retaining your group as a
Go for the total. The clause should
cover a percentage of total room nights, not the number of rooms
you pick up each day. And be sure those who arrive before the
meeting or stay on after are included.
Tally up the F&B. Have the hotel
consider the total dollar value of your food-and-beverage spending,
rather than simply the number of meals served or food functions
held. If you do have a shortfall in attendance or have to cancel a
function, upgrade the menu and serve filet mignon instead of
Consider hotel catering. If you cancel
an on-site function and take it off site, let the hotel catering
department bid for the meal; you probably won't pay attrition if
they have a chance at it.
Buy time. Arrange to make the final room
block adjustment as close to the meeting as possible, and no more
than 11 months out. This way you can look at the numbers from your
last annual meeting before you make a final obligation on your
Budget for attrition. One day, no matter
how cautious you've been, you will be slapped with an attrition
charge. Plan on it.
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