How Meeting Planners Can Negotiate With Hotels in a Seller's Market

Here is how hotels have tweaked attrition terms to their advantage.

Hotels in North America don't do math like they used to. Meetings contracts used to calculate group room-night obligations cumulatively over the course of an event. So even if planners fell short of filling rooms on a peak night, if they exceeded the contracted bookings over the course of a three-day event, they could avoid paying attrition fees.

"As long as the customer achieved whatever percentage was assigned - 80 or 90 percent of the total, generally - they had met their obligation," says Brett Sterenson, president of Hotel Lobbyists, a conference site selection firm based in Washington, D.C. "That was an advantage for the customer - it gave them an out. But at the end of the day, the hotel was getting its money."

Today, however, thanks to industry consolidation and an unprecedented run of economic success, hotel companies wield a tremendous amount of negotiation leverage. Hoteliers are no longer willing to overlook those soft nights. Increasingly, contracts stipulate that attrition fees will be levied for each night that groups don't meet their numbers. "So you could significantly exceed those obligations for three nights, but if you fall short on the fourth, you're in trouble," says Sterenson. "It doesn't matter anymore by how much a customer may have exceeded their obligations on previous nights."

The topic is coming up often, say a number of independent planners. "It is a huge shift for groups to change their mindset from cumulative to daily," says one third-party meeting professional. "It depends on the group, but some will likely cut back on the number of rooms booked so they aren't left with unused rooms."

What's more, many hotels have changed the way they assess room-night obligations, says Jonathan T. Howe Esq., founding partner of the Howe & Hutton law firm. "It used to be if there was a head in the bed, you got credit," he notes. "Now the head in the bed is not going to be counted - it's how much that head in the bed paid for the room. Credit is increasingly based on what revenue was recovered, not whether the room was occupied." More often than not, those revenue goals - like room-night obligations - are being calculated by the day rather than cumulatively.