Welcome to the third article in our recent series, Full-time Insights for the Part-time Planner. We’re going to talk about understanding attrition clauses in hotel contracts and how to get the best deal from your hotels.
If you are booking group rooms for a small number of meeting attendees, you can skip the hotel negotiation altogether by booking small room blocks — as well as meeting space, catering and presentation equipment — in a single online purchase instead.
For more complex meetings that require contract negotiations, an important aspect is your agreement with the hotel on the attrition clause.
The attrition clause
A contracted room block guarantees your group rate and availability while also putting into place restrictions that protect a hotel’s financial interests. The attrition clause is the percentage of your room block that you are required to fill by the cutoff date, which is typically 30 days out.
After the cutoff date, unsold rooms will incur charges equal to the negotiated rate times number of contracted room nights.
It’s a common misconception that attrition doesn’t apply to hotel rooms released after the cutoff date. Once the cutoff date has passed, the hotel has the right to put any unsold rooms back into general inventory for sale.
If a hotel has low occupancy, however, they may be more flexible with this cutoff to give guests the opportunity to book more rooms at the negotiated rate. The shorter the cutoff date, however, the greater the chance a group could fall into attrition if pickup — how well the block is selling — is low. As a result, the hotel doesn’t have the opportunity to resell the rooms to the general public.
Both planners and hoteliers want to prevent attrition on a room block. Planners want to avoid the fees associated with not properly filling the block prior to the cutoff date. Hoteliers want to gain the auxiliary revenue, such as food and beverage sales, that comes along with an occupied hotel room.
1. Define how your attrition will be measured.
Hotels manage attrition based on how it has been written into the contract. Per-night attrition is counted by rooms sold per room night, whereas cumulative attrition is based on the overall room nights sold during the course of your event.
Let’s say you need 10 rooms per night for three nights. Depending on the attrition percentage, in this example we’ll use 10%, per-night attrition means you would have to sell nine rooms per night for all three nights. Cumulative attrition means you can sell 27 room nights out of the 30 by having more rooms picked up on certain nights than others.
You should also ask the hotel whether rooms booked outside the room block will be counted toward the total of rooms sold.
It’s common for more than a third of group attendees to make reservations outside of a room block. Getting credit from the hotel for these bookings is a time-consuming process involving a manual audit of names that many hotels are reluctant to offer.
2. Negotiate a higher attrition percentage.
In a healthy economy, attrition percentages may range from 10% to 30%, depending on your agreement with a hotel. During the pandemic, by contrast, many hotels waived attrition altogether. As the economy recovers and groups return, hotels may be less flexible.
You can also negotiate a resale option to require the hotel to try to sell any leftover rooms. This option works best with hotels that run high occupancies. In other words, if the hotel has 80% to 100% occupancy and you fall into attrition, you may not be charged because the hotel has resold those rooms.
For example, if you end up with 50 rooms in attrition on a particular night but the hotel only had 30 rooms in inventory left to sell, the hotel should charge only for those 30 rooms rather than the full 50.
3. Request a room block review.
Include in your contract the right to conduct a room block review by a certain date. For example, about a month before your cutoff date, you can ask the hotel for this review to evaluate pickup.
The hotel runs a report according to all of the different rate codes that apply to your group. These reports can help you decide whether to release rooms or add to the block if rooms are selling well.
Depending on the needs of both parties, sometimes the hotel will accept the reduced block and base attrition on the lower number. This only happens in the case of a negotiated review where both sides have agreed on different terms.
Note that if, after a room block review, you decide to release a large number of rooms from your room block, the hotel may also require that you release a similar ratio of meeting space. Be sure to discuss any expected space-to-rooms ratio during the contract negotiation process.
Depending on supply and demand, if you need to add rooms to your block you may not always get the same group rate. If demand in the market is high, revenue managers may not be able to extend the same discounted rate as initially contracted. That’s why it’s important to consistently review pickup and understand trends as best as possible to achieve the best savings throughout the process.
4. Use a reservations platform to manage attendee housing.
The easier you make it for guests to book in the room block, the better chances you’ll have to prevent bookings outside the room block, as well as monitor your pickup rates in real time.
Using a platform such as GroupSync Optimize gives group guests the ability to make and manage their own reservations on a unique, event-branded website. GroupSync Optimize provides real-time reporting on an easily accessible dashboard so that both you and the hotel can check pickup at a glance.
A housing solution also eliminates the need for a rooming list, which saves you an enormous amount of time that you can spend on other details.
5. Send the room block link to attendees well in advance.
A housing solution is only as good as how early on guests receive the link to book their reservations.
Many group guests want to book their hotel at the same time as they book their flights, which they often do weeks, if not months, ahead of time to secure the best rates. The sooner they have access to the online room block, the more likely they will make their reservations well in advance of the cutoff date.
Another reason to give plenty of notice is to gauge how quickly your room block sells. If you have strong pickup early on, you can add rooms to the block before the hotel runs out of inventory or has sold enough to charge you a higher rate. The closer you get to your event dates, the more expensive rates will be.
Negotiating a hotel contract doesn’t have to be intimidating. With the right information about the process, you can enter into the discussion prepared and empowered.