The Attrition & Rebooking Puzzle - Further Explained

My last blog titled "Unsold Rooms Credit: Is a Hotel Obligated?" generated feedback and  further discussion. One reader addressed a particularly important issue:

When attrition kicks in and your contract requires the hotel to resell rooms and give the group credit, how do you prove that the hotel sold the rooms you did not use in your block? Let's say there are two overlapping meetings in a property, and each fails to meet their room block. The hotel then resells several rooms, but chooses to credit the other meeting and they are not charged attrition, but my group is charged instead. How does the hotel determine which group to credit, and more importantly, how do I prove that they could have credited me and not the other group?

This is a common question. The group and hotel agree to a liquidated damages attrition clause, with hotel agreeing to credit the group for any rooms resold. As is typical, in the reader’s example the “last rooms resold” are credited to offset the group’s attrition damages. When the group fails to meet its room block obligation and attrition kicks in, the group looks at the hotel’s resale efforts and questions whether rooms resold are being credited properly.

As usual, the keys to managing this scenario lie in the meeting contract. Here are some tips:

1) Draft an Attrition Clause that Works for You: Anticipate the effects of an attrition situation, and make sure that your contract addresses your concerns. Want the attrition clause to require the hotel to resell your group’s rooms (and apply your resale credit) before reselling rooms from other groups? Try to negotiate that into the contract. Should the first rooms resold by the hotel after your cutoff date be credited against your attrition charges, rather than the last rooms resold? While that isn't the norm, if a group doesn't request it during contract negotiations you have no chance of getting it in the contract.

2) Focus on Your Group’s Room Block, Not on Other Groups at the Same Property: As my previous blog article explained, a liquidated damages attrition clause is based upon pre-negotiated damages that the group and hotel agree are reasonable. There is no requirement that the hotel rebook rooms and give a group rebooking credit unless there is a clause requiring that. Further, it is irrelevant that another group at the same hotel may have also missed its room block unless you have a contract requirement that your group’s rooms are resold before any others.

Is it wrong for a hotel to “double-dip” and collect attrition damages from more than one group for the same rooms? This might seem wrong, but it’s not illegal in the context of liquidated damages. So focusing on the empty rooms of other groups is not a productive activity unless a group had the foresight to get the hotel’s agreement to resell its rooms first.

3) Include an Audit Clause, Then Use It:  Once attrition damages become an issue, both the group and hotel need to make sure the correct amount is charged. The meeting contract should include an audit clause allowing the group’s planner to visit the hotel after the meeting and compare records to be sure all group attendees are credited within the room block. Contrary to what some believe, there are no privacy laws preventing a reasonable audit of the hotel’s damages calculations.

Final Note: This blog is not “legal advice”; rather, it’s a discussion intended to make you think and draw your own conclusions. Legal advice can only be rendered after a discussion of your particular circumstances with an attorney competent in meetings law.

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