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by By Amita Patel | February 01, 2010

Even during the best of times, hotel room attrition penalties are one of the most challenging issues a planner can face. With the economic downturn making it harder than ever to predict attendance, attrition fees can make or break a budget.

Hotels charge an attrition penalty if an event or conference uses fewer hotel rooms than were reserved in the signed contract. In short, if all the rooms you reserved for your event weren't used and paid for by attendees, your organization will be expected to make up the difference.

But attrition penalties can be mitigated -- or even avoided altogether -- by following some simple guidelines.

Negotiate Well When negotiating the contract with the hotel, be conservative with your room estimates; it's easier to ask for additional guest rooms than it is to have them released.

• Negotiate a clause that allows you to reduce the room block on designated dates without penalty.
• Have your legal counsel review the contract before you sign.
• Review the pre-arrival
block periodically. If reservations are coming in slower than historical data indicates, plan a course of action to boost activity; e.g., offer discounts/incentives to attendees who sign up by a certain date.
• Communicate with the hotel if reservations continue to be slow, so the property can release the rooms for resale.

Soften the Blow Thinking your agreement through in advance will save you grief on the back end. Negotiate up front to pay damages on profit, not gross revenue, in the event you do have to pay penalties.

Your contract also should include the right to an audit. This signals to the hotel that you will be aggressive about receiving credit for all revenue received. Agree on how the audit will be conducted and what specific items are your responsibility. Specify that your organization will receive credit for such elements as cancellation/no-show penalties and early departure fees.

Other contract options to consider:

• Base attrition on the total number of guest rooms booked for the duration of the event, not rooms reserved for each day. For example, if you have a block of 50 rooms per night for a four-day event, this counts as a cumulative 200-room block.
• Extend the cutoff date to 14 days out, rather than the industry standard of 30, if occupancy is below an agreed amount (e.g., 80 percent over the dates of the event).
• Ask the hotel to honor the group rate even after the cutoff date and until all of the rooms in the block are sold (potentially even up until the date of the event, if there are still rooms available).

Never pay damages before carefully confirming that the hotel occupancy data matches your own figures.

Offer Incentives Attendees often stay at other nearby hotels because they perceive they are getting a better rate. During a recession, such leakage tends to escalate, leaving your organization holding the bag for guest room nights, even though you might meet your overall attendance goals for the event.

Attendees might get a better room rate elsewhere, but it's up to you to ensure that they get a better deal within the room block at your designated hotel. Some ways to encourage attendees to stay at the designated hotel:

• Offer special incentives such as a lower registration fee by packaging the hotel room with the event registration fee. For example, if your registration fee is $400, offer a $250 registration fee to those staying within the block.
• Let attendees know the importance of staying at the designated hotel. Delegates often don't realize that hotel room blocks help keep event costs in check.