by Jonathan T. Howe | May 10, 2019

During the last year or two, the market pendulum has swung relative to contract negotiations. Requests to negotiate the details of clauses, until recently often granted, are now being turned down regularly. A prime example is attrition clauses, and the new terms are bound to cause troubles for planners. 

Filling Room Blocks

In the past, attrition fees were based on the pickup of a cumulative number of room nights over the course of an event, so if you didn't fill the hotel on Tuesday, an overabundance of attendees on Wednesday could make up the difference. Today, many hotels are insisting that attrition be calculated on a day-by-day basis. So if you don't make your numbers on Tuesday, you will be hit with an attrition charge, no matter how many people overflow your block on Wednesday.  

Again, not so long ago, when a guest room was occupied, it reduced the number of rooms subject to attrition or cancellation. Today, if the room is occupied by one of your attendees, regardless of how they made the reservation or how much they paid, it is considered part of the room block. But if it is occupied by someone not in your group, yet is used in mitigation of your attrition clause, credit is given only for room-revenue generation at the rate the person paid, a disadvantage to the planner if that rate is noticeably less than the contracted rate.

Sometimes, as well, rooms must be reserved in the block to be counted, with no credit for attendees who stay at the hotel but do not book through the block.

Also previously, rooms picked up after the room block's cutoff date generally were made available at the convention or group rate and counted for purposes of concessions and room-block requirements. Today, if a room is available after the cutoff, its rate will be at whatever might be in force at the time and might not be counted for concessions and block obligations. 

Mitigation of Loss

Hotels once were required to make a best effort to mitigate their potential loss for both attrition and cancellation, and no moneys were due until after the event date and the hotel had calculated its actual occupancy. Now, if you cancel, the fee is due at the time notice is given, requiring a substantial cash payment up front, even if the host eventually gets that money back.

Also, where mitigation of damages once was required, it now is harder to obtain. Today most states call for strict enforcement of liquidated-damages clauses that do not require any mitigation. Some jurisdictions, however, require a "second look" to be sure the damages are "fair, reasonable and not a penalty."

Where mitigation is required, negotiate how it is calculated. A hotel might be willing to give credit only when all available rooms are sold; better to have a formula in the contract for the allocation of sold rooms, short of a sellout.