Negotiation webinar presenter Robyn Mietkiewicz of Meeting Sites Resource, answers meeting planner questions about contracts to improve Strategic Meetings Management.
1. Are there any differences that you could note in negotiating with European hotels? I've found that they are less likely to have the same attrition clauses as U.S. hotels. Would you say this is common or not?
Clearly there are many unique challenges to planning, negotiating and executing international meetings. Typically, attrition and cancellation clauses vary by both country and hotel, and generally are in the 10 percent room reduction range. Of course we still suggest guaranteeing 80 percent of your room block and doing the math to calculate on profit vs. revenue. Many international contracts include sliding scale attrition (use it or lose it), which we do not recommend.
2. As far as reselling rooms, what is an appropriate occupancy percentage for a "sell-out?” Is it appropriate to ask for history over the event dates? For example, if a hotel's average occupancy over the event date is only 75 percent can they expect me to pay attrition if they are not 100 percent completely sold out?
You are correct that a resell clause is essential for all contracts. In a seller's market, the hotel is expecting 100 percent occupancy to be "sold-out." However, we suggest language in the contract stating if a hotel achieves 95 percent occupancy, there are no attrition or cancellation obligations to the group. Hotels typically do not use historical occupancy as a benchmark, thus, we recommend 95 percent occupancy. We request hotel occupancy reports by night over our meeting dates once the event has actualized.
3. Can you explain in greater detail why a sliding scale is not a wise decision?
Often sliding-scale attrition offers 10 percent room reduction at 45 days and 5% percent attrition at 30 days, for example. The challenge here is that many planners do not know their final attendance that far out, and if they don't take advantage of the 10 percent and 5 percent, they cannot use it. Thus, we suggest guaranteeing 80 percent of the block, right up to the day of your meeting, which provides flexibility, and avoiding losing your room reduction opportunity.
4. Can you explain profit versus revenue a little bit more?
First, it's important to point out that as buyers, we want to be good partners with the hoteliers and offer fair and balanced contract performance terms. Hotel chains and independents on average make 78 percent gross profit on sleeping rooms and 38 percent gross profit on group F&B, thus in the event of performance, we prefer the hotel earn the same amount of revenues as they would had the group fulfilled. As an example, if you cancel your meeting 60 days out, if the hotel charges say 75 percent on F&B, this is a windfall since they have purchased no food and their actual real profit percentage is much lower.
5. Do you work with the hotel audit department or your primary hotel contact for the audit?
The hotel audit is most effective when working with your hotel sales contact and CSM. The audit process includes requesting a computer-generated occupancy report over your meeting dates, omitting any rooms out of service or under renovation, providing the hotel with a registered participants list to cross reference against all in-house guests over your meeting dates, capturing any pre and post room nights regardless of rate, and verifying any room blocks contracted to other groups over your meeting dates (remove their room block/attrition from the equation).