REBELS WITHOUT A CLAUSE

Meetings & Conventions: Planner's Portfolio April 2003
April 2003 PLANNER'S PORTFOLIO:

The Law & the Planner

By Jonathan T. Howe, Esq.


REBELS WITHOUT A CLAUSE

Some hotels are cutting attrition and cancellation clauses, but at what risk to planners?

When negotiating with airlines, no meeting planner commits his or her organization to filling X number of seats. Rather, they arrange a discount off the basic fare in hopes attendees will use the favored airline. In turn, the meeting planner might receive site-inspection tickets or other perks based on the group’s seat pickup. The planner has no liability for empty seats.

Today a number of planners are using similar tactics to book hotel rooms. Having been bitten by large attrition charges, they are no longer making commitments for rooms. Rather, they are letting the market dictate the pickup and letting hotels compete directly with each other in order to gain the heads in beds.

As an alternative to the usual contracted block rate, a small but growing number of meeting planners are asking hotels for a certain percentage off the lowest published room rate. In exchange, the planner will list the hotel and group rate in the conference brochure and expect attendees to book accordingly. But, planners are not accepting responsibility for any lack of room pickup.

Without a reserved room block, there is no traditional contract and no attrition clause. The new type of contract deals with rate discounts, meeting room rental and F&B, but without any responsibility put on the planner to fill beds.

THE CATCH
This kind of agreement gets you off the hook for attrition, but keep in mind there are other costs the group might incur by dealing in this manner. Without an established room block, don’t be surprised if the convention center hikes the rent and hotels charge for meeting space. They need to guarantee a certain amount of income from the meeting somewhere in the paperwork.

Also, what to do if attendees can’t get rooms? Surely, they’ll become upset and blame the planner. Furthermore, citywide programs might risk running into conflicting and competitive events at the same venue during the same time.

SAY IT IS SO
In some cases, hotels are taking the initiative to reduce risks to planners. Recognizing clients’ fear of committing to room blocks in anticipation of war in the Middle East or elsewhere, a few chains have pledged to eliminate attrition or cancellation fees this year. This is to entice meeting planners to book without the risk of paying the price if the event can’t take place.

But be warned: Simply signing a deal without attrition or cancellation clauses isn’t good enough. To avoid the charges altogether, the contract must include a statement that no attrition or cancellation fee will be assessed.

The clause must be very specific and allow the planner, should numbers not materialize, to go forward with reduced numbers or to cancel without any liability. If this is left unsaid, a court could find the lack of such a clause, coupled with an affirmative assertion of a room block, as a breach of contract resulting from the failure to pick up the rooms.

HERE TO STAY?
As major hotel partners back away from charging for cancellation and attrition, the market might stick to the traditional mode of booking rooms, rates and dates, rather than mirroring the more open-ended kinds of deals made with airlines.

Whether this is merely a temporary Band-Aid or a lasting approach to room blocks remains to be seen. What is clear is that a deal that sounds too good to be true probably is. If a hotel promises you won’t be taking a risk, always put that promise in writing.