In a bad economy, organizations that plan large meetings become more concerned about paying attrition damages because they were unable to fill enough of their room blocks. But what if the stars align and a group can more than fill it? While most groups would consider a completely full room block to be a good situation, this can occasionally lead to hotel contract disputes.
Most hotel contracts state a room-block size and indicate a special group rate for that block that is lower than the normal rate. While the contract will normally detail what happens when the block is not filled by the cut-off date, the contract is often completely silent on the issue of what happens if the room block is filled or exceeded prior to the cut-off date.
Where a contract is silent, some hotels will voluntarily continue to honor the group’s room rate as long as there are rooms available as a gesture of goodwill towards a meeting group. However, in cases where hotel rooms are in great demand and hotels can afford to charge very high room prices for the few remaining rooms on a particular date, a
hotel may not be willing to continue honoring the group rate after the room block is filled. Why? Because the hotel is missing out on significant profits on those remaining scarce rooms that it could easily sell to the general public at a much higher price.
In one such instance, meeting attendees who desired a reservation after the room block was filled were considered to be beyond the scope of the contract and were charged the hotel’s current seasonal rack rate, which happened to be triple the group’s contract rate.
Contract and Negotiation Strategies
Where a contract is silent, it is unclear under general contract-law principles if the hotel has to honor reservations that exceed the room block and charge no more than the group’s special room rate. The best solution is to address the issue in the contract so that there will be no misunderstanding.
But if a contract signed several months ago does not address this issue and the hotel refuses to honor the group rate once the room block is filled, there are still several options that might give those making late reservations a chance to enjoy a lower room rate.
First, there are almost always some group cancellations and no-shows that will occur between the cut-off date and the starting date of the conference. So, ask the hotel to track any cancellations made by attendees with a reservation in the room block and put those canceled reservations back into the room block, instead of releasing those rooms into the hotel’s general inventory.
Second, even if the room block is filled as a total raw number, ask the hotel for a rooming list and see if the block is filled each night. If a particular night of the block reservation is not filled, then the group can argue that the hotel has a contractual obligation to continue taking group reservations at the special group rate for at least those nights where the block is not filled.
Finally, most groups reserve a certain number of staff rooms at the hotel, so one option is to find an inexpensive alternative hotel in the area and move all of the staff to that facility, thereby freeing up staff rooms at the headquarters hotel for those people registering for the conference late.
By thinking outside the box and working cooperatively, the hotel and the group sponsoring the conference should be able to accommodate most attendees wanting the group room rate after the block has filled — a win-win situation for everyone.
D. Benson Tesdahl, Esq., is an attorney specializing in nonprofit, corporate, tax, and contract law, including meeting and convention law. He is with the firm of Powers, Pyles, Sutter & Verville, P.C., in Washington, D.C. He can be reached at 202-466-6550 or at [email protected]. Tesdahl wishes to thank Fred Mitzner of Conference Direct for his assistance with the topic in this column.