by Jonathan T. Howe, esq. | November 01, 2004

Over the past few months, we’ve heard many meeting planners complaining of higher service fees creeping into hotel contracts. Charges that used to be around 18 percent are now 20 percent; 20 percent has snuck up to 22 percent.
    The only reason these fees are getting so high is because hotels figure they can get away with it I’ll guarantee the extra service and gratuity funds are not going to the service personnel. This has become a hidden profit center for the hotel.
    By dealing with this issue up front, as the contract is decided, you will avoid the sticker shock of receiving a master bill at the end of the meeting that is much higher than you anticipated.

Before the Event
Planners should look out for the higher percentages and negotiate them down. For instance, if the hotel insists on levying a 22 percent service charge for your F&B events, indicate your willingness to take your attendees off-property for any special dinners you have scheduled if the percentage isn’t lowered to a number you find more palatable.
    In another example, the hotel might insist that you pay a hefty percentage for room setups. But if you are bringing enough people to the property to receive free meeting space, the setup should be free, too. We always put this in our contracts. On the other hand, if you decide to change the setup, the hotel has the right to charge you.

Out In the Open
The real problem here is hidden charges. What the meeting professional needs to do is make sure all fees and gratuities are spelled out, and specify that the contract allows for no additional charges.
    One way to avoid hidden fees is to indicate the meeting’s costs will not exceed a specific dollar amount. Thus the costs must be disclosed in dollars and cents, rather than percentages, or you won’t pay. Don’t sign a contract that merely says the hotel is entitled to “taxes and related hotel charges.” Have all items spelled out.
    For example, specify typical charges resort fees, gratuities to housekeepers, bell services, newspaper delivery, prepaid gratuities, taxes, high-speed (or, for that matter, low-speed) Internet, etc. and what exact services you expect to receive for that money.
    Also, you should put in writing that the room rate covers all attendee costs, including service fees.

Food and Beverage
When catered events are charged to the master account, there can be several unexpected results. What is the amount of the gratuity? Does the gratuity truly go to the servers and kitchen staff?
    At the state and local level, service charges are subject to sales tax if the money goes to the facility and not to the staff. So, in the case of an 18 percent service charge, you might have to add, say, 7 percent in sales tax onto that service fee.
    However, if the money truly goes to the staff that worked the event, in most states these dollars are not subject to sales tax.

Hotels Must Profit
In all fairness to hotels, when negotiating fees, planners need to realize that everything from taking a reservation to forwarding a phone call costs the property money. The key element while ironing out the contract is to make sure these costs are built into the room rate.

    Good contracts help to define the legal responsibility of not only the planner and meeting host but the attendee to cover those costs. Disclosing all fees and their specific dollar amounts should be the way business is done. There should be no post-event surprises.

Jonathan T. Howe, Esq., is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at [email protected].