Cover Your Bases: Understanding hotel contracts

You have a few hundred 9- to 11-year-olds, and their families, traveling to Columbus, Ohio, in early April for an indoor pitching clinic. Unfortunately Mother Nature has other ideas and a freak spring ice storm is forecast for the weekend. The good news is that your event is indoors; bad news: onethird of your kids can’t make it due to hazardous travel conditions. Your hotel rooms have been booked for months, but now your participants may not be eligible for refunds or your organization may be on the hook for the unused rooms.

Depending on the terms of your contract, you may not be responsible for any fees despite these lastminute cancellations. So understanding contract terms is key to navigating these challenges, which could potentially sink the financial success of your sporting event, let alone leave participants unhappy and unwilling to return for future events.

Most likely the two most important terms to understand are force majeure and attrition.

Force majeure is a contract clause that frees the property and/or you from any contract obligation in the event of an unforeseen circumstance beyond the control of the parties. Situations include terrorism, riots, acts of God, extreme weather and such; events that prevent people from attending your event.

Attrition refers to a percentage of service that goes unused. Most often it refers to the number of hotel rooms, but can also include meals/catering/beverage services, event space, etc. The attrition clause is typically stated as a percentage, with 85 percent being common. Attrition plays out as following: You contract for 100 rooms, however, only 80 rooms are booked by the cut-off date. With an 85 percent attrition rate you are responsible for the cost of those five rooms or a fee, as stated in the contract. With attrition, be specific on how the rooms can be booked, so that you get credit no matter how your event participants book. Provide the property with a list of participants to make sure you are getting credit for everyone who has booked.

Other key contract details include cut-off dates and mitigation. How is the hotel expected to handle breaches of contract in regards to issues like attrition and force majeure? Are they required to try and rebook unused rooms?
Many hotels and venues use attrition to help mitigate loss due to groups overbooking and under delivering.

To fully protect yourself, work with the sales manager of the hotel and be up front. The attrition is designed to help the hotel maximize the space and rooms, but also hold the client accountable for their numbers; as many times concessions are made based on anticipated revenue for a group.

So how can event planners manage attrition issues through the contracting process? Understanding your event based on prior years is the best way to do this. If you can track your group’s lodging needs and spend from prior years, it will provide you with more leverage during the contract process. It will also help the property understand your needs.

From a legal perspective, all of the above should be clearly outlined in your contract, including a specific section outlining what the attrition is, what the attrition is on, as well as total liability of the group including damages.

Mark Maciolek, an attorney at Murphy Desmond, S.C., says hotels and other event spaces want contracts in place to be able to predict occupancy and revenue. Event planners want contracts to guarantee that appropriate space will be available for the events they are planning.

If an event planner doesn’t meet the terms of the contractual agreement, they could be subject to certain fees, the amount of which generally depends on the contract.

“There should be a separate clause that addresses specifically what happens in the event of attrition,” Maciolek says.

“Generally, commitments to room and space have date deadlines.  Get as many deadlines as possible in the contract to buy yourself time for various attrition rates.”

Despite the most well thought and detailed of contracts, issues can still arise that can negatively impact your event. Cancellation insurance can provide the final piece of insurance needed to produce a successful event as stress-free as possible.