• How the resell clause is worded depends on the bargaining power of the parties. A planner who could bring a large group back to the property will get more consideration than a small organization that has a much smaller block.
• The planner and the hotel should agree to make adjustments to the room block, comp-room opportunities and so forth at agreed-upon dates leading up to the meeting.
• Contracts only cover legal issues; relationship and PR issues are up to the people involved.
It happens. You contract for a block of 1,000 rooms and only 600 people are booked. Should you hold the meeting and pay a stiff attrition fee, or cancel and pay that price?
Both attrition and cancellation clauses are security blankets. Attrition compensates the hotel should the meeting's room pickup fall short. Cancellation clauses pay either the hotel or the meeting host for lost business if one of the parties has to pull out of the deal entirely.
Cancellation sounds like it would result in a stiffer financial bite to the planner, but that's not always the case. Sometimes, canceling the meeting is more cost-effective. This underlines the need for planners to review these two clauses closely before making a decision.
THE CLAUSES TALK
Before you seal a deal, it is important that your cancellation and attrition clauses mesh, and they should not provide an unfair opportunity to
either side. The contract should require the property to mitigate any losses it sustains, so your organization gets credit against any charges you are asked to pay.
For instance, both attrition and cancellation sections should have a resell clause, requiring that the hotel give your group credit for rooms it is able to fill with new business. But the wording here is important. The hotel might push to specify that new room sales won't be considered resales to be applied to the group's room block unless the hotel has filled all other available space. On the other hand, your group would benefit from having all new room sales applied to reduce your group's liability.
When negotiating contracts, also add provisions that will benefit both parties if you need to reduce the number of attendees, setting dates to review and readjust, if necessary. Hoteliers don't want you to cancel, and they should be willing to help rearrange the terms.
My firm once represented a hotel concerning a contract that allowed the planner to cancel a year out without liability. One year and one day before the show, the planner canceled, leaving a big hole.
Several days later, the planner called back and said, "If you drop your rates by X dollars and give me some perks, I'll rebook." I told the outraged director of sales to refuse.
Of course, some hoteliers have played dirty, too. Just after Sept. 11, one organization decided to go forward with its meeting, held in a property whose parent company was allowing groups to cancel without liability through Oct. 31. The program went on, but with substantially reduced numbers. The property still asked for a six-figure amount to cover attrition; had the event been canceled, there would have been no charge. The hotel ended up backing down to avoid a PR disaster.
Clearly, all parties should consider the legal right and the right thing to do before acting.
Jonathan T. Howe, Esq., is a senior partner of the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., specializing in meetings and hospitality law. Email questions to him at [email protected].