FOOD AND BEVERAGE ATTRITION

Meetings & Conventions: Planner's Portfolio October 1999
October 1999 PLANNER'S PORTFOLIO:

The Law & the Planner

By Jonathan T. Howe, Esq.


FOOD AND BEVERAGE ATTRITION

Well-drafted contract clauses benefit both planner and property

A long time ago, when I went to the store to buy a pair of Levi's, the big issue was what size I should buy, because they might shrink in the washing machine. Some friends had other ideas: They would buy the pants and sit in the bathtub, hoping the jeans would shrink to fit.

This may be a crass illustration of attrition, but it shows that negotiators on both sides are considering different angles. If you pick the right size to begin with, no changes need be made; if you don't, there may be consequences.

Naturally, when a contract is signed, both parties want the food and beverage guarantee to be met. But F&B managers want to be absolutely sure at the outset, while planners want to wait until the moment of truth to make the final commitment. If the fit is not right, the planner might have to pay for it in the form of attrition.

Although many planners don't like attrition clauses, they benefit both planner and property. Why? Because they set forth the legal obligations of the parties and clearly establish the limits of liability. Without an attrition clause, the organization could end up paying much more than the amount set in a well-drafted clause.

Attrition hits the group in three ways. The first is monetary. The planner's obligation in the contract is to buy a specific number of meals or to spend a specific amount of money on group food and beverage; the hotelier's obligation is to provide the service and the food. If the event fails to meet its numbers, the group must pay the difference between the guarantee and the actual amount (or a percentage of the actual amount).

The second way attrition is applied results in the loss of concessions the planner might have negotiated. Event space often is provided on the basis of the revenue brought into the property through guest rooms and catering functions, not to mention items bought at the gift shop. If the revenue does not come in, the hotel has the right to charge for services, such as bartenders, that normally would have been complimentary.

The third punishment deals with the hotel's right to reassign or reduce the space set aside for the group if minimums are not met.

WHAT'S IN A CLAUSE?
The salesperson, general manager and the management company are beholden to the owners to maximize revenue per available room, which means revenue from all hotel sources. They need a way to guarantee that money when booking a group, thus the need for the clause.

One of the key elements for meeting professionals to know before hammering out the attrition clause is how much revenue their meeting historically generates.

In the clause, planners should specify how much money the group will be spending on F&B instead of giving a head count. After all, you probably will not know food costs until six months before the meeting because prices fluctuate. You can always spend more than you put in the contract. The hotel won't mind.

The clause also should include a communication schedule and some elbow room for the planner. Establish review dates to discuss with catering where the group stands. If you work with a dollar-amount guarantee, write in some flexibility as to how the money may be spent. Although mitigation with food and beverage generally is more difficult than with rooms, where the planner doesn't pay attrition if the empty rooms are sold to another group, write in that F&B fees will be reduced if the catering event is replaced with other business.

Key advice: When you know there might be a problem, inform the banquet manager immediately. Some savings could be had, and you might be the beneficiary.

Jonathan T. Howe, Esq., is a senior partner in the Chicago and Washington, D.C., law firm of Howe & Hutton, Ltd., which specializes in meetings, travel and hospitality law.