Most organizations know that if they use an outside meeting planner to negotiate a hotel meeting contract, that planner earns from the hotel a commission, typically 10 percent of the value of the sleeping room rates paid by attendees. But many organizations use in house planners, and their contracts typically make no mention of any type of commission, often because organizations assume that commissions are given only to outside planners. That oversight means leaving money on the table that the hotel is more than happy to keep.

What many people fail to realize is some hotels allow an organization using in-house planning staff to receive a 10 percent commission on the price of the rooms, although it may be labeled in the contract as a rebate. But to get it, you must specifically ask for it and be willing to drive a hard bargain.

Why do some hotels give the rebate? One reason is that the sleeping rooms are already priced on the assumption that the group is represented by a planner whose only form of compensation is the hotel commission. If a group uses a staff planner, the hotel could conceivably remove any built-in “padding” that covered the commission. But the more likely scenario is the hotel keeps the rate of the rooms the same and pockets the commission, unless the group is savvy enough to ask for that money. After all, the hotel knows that unless its rates are way out of line with other similar properties in the area, a group’s attendees are likely to come to the meeting and use the rooms at the property.

So, in many cases, the equivalent of the 10 percent commission is already built into the rate of the rooms and is “up for grabs.” If there is no outside meeting planner and the group doesn’t remember to ask for that money, the hotel will just keep it.

Other Rebate-Related Issues

So the next time your organization negotiates a meeting contract using a staff planner, be sure to ask for a 10 percent rebate on the room block. If the hotel agrees to the rebate, the next issue you may face is the hotel attempts to insert a contract clause requiring your organization to inform all attendees about the room rebate. It is not entirely clear why some hotels try to insert such a clause into contracts, especially since there is no law requiring attendees to be told about commissions, rebates, concessions, and similar arrangements. In any case, you should object to any clause requiring the disclosure of commissions and rebates because the contract is a “package deal” that contains a lot of financial give-and-take between the parties, and those terms are none of the attendees’ business.

On the flip side, some hotels are so thankful for any new business that they are willing to put in contracts a clause stating that the price of the sleeping rooms has not been inflated to cover any commission or room rebate. In other words, the hotel will promise that you are getting its best price and that the price would have been the same even if you had not asked for a commission or rebate.

While such a clause is hard to prove or disprove, it is nevertheless nice to have in the rare event that the contract details somehow leak out and the attendees discover a room rebate was paid to your organization.

Ben Tesdahl, Esq., is an attorney concentrating in nonprofit, corporate, tax, and contract law, including meetings and convention law. He is with the law firm of Powers, Pyles, Sutter & Verville, P.C., in Washington, D.C.

Originally published May 1, 2010

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