Negotiate Defensively

To be a successful buyer in today's meeting/convention industry, you must negotiate defensively. If you are questioning whether it's worth it to spend extra time to negotiate the fine print, remember this: If you ask the other side for something before the contract is signed, it's negotiating. If you ask for something after the contract is signed, it's begging. It's much better to ask for favorable details while you are on the negotiating side.

The following are five tips for planners when drafting an attrition clause.



1. Base Damages on Lost Profit, Not 100% of the Lost Revenue.
Lost profit is defined as gross revenue minus variable expenses. Hotels track profit and loss separately in each revenue-producing department. In order to know whether a damage clause is asking for too much or too little, you have to know what percentage of revenue represents lost profit to a hotel.

2. Guest room attrition should be based on a combine "per night" and "cumulative" basis.
Analyze each night of the group's stay to see if the room usage meets the minimum required based on allowable attrition. On the nights guest room usage exceeds the minimum, the overage should carry over cumulatively to subsequent nights so that it offsets any nights the group is under the minimum.

3. Define "sold" and "sold out."
"Sold" rooms should be defined as rooms occupied by paying guests, rooms comped to a group or individual, or rooms billed to other groups or individuals, for the purpose of figuring attrition, cancellation, no-shows, and/or early departures. "Sold out" should be defined as the hotel's total inventory minus off-market and sell-last rooms. Off-market rooms include rooms being repaired, renovated, and/or comped. Sell-last rooms include rooms held for last sale to members of a hotel's preferred guest program. Consider stipulating that suite parlors don't count.

4. Account for "sold out in advance" situations.
Meeting sponsors should not be responsible for any attrition if the hotel represents itself as being "sold out" to anyone attempting to make a reservation prior to arrival or check-in, and when no additional reservations will be accepted on one or more nights of the group's in-house dates. When this occurs, the attendee who's turned away will make a reservation elsewhere. The fact that the hotel may open up and have rooms to sell later over the group's in-house dates is not something the meeting sponsor can control and should not be held responsible for it.

5. Anticipate changes in the economy and provide for revisions to the contract.
If the economy changes substantially after the contract is signed, the contract should allow the meeting sponsor to revise its attendance and room block projections without limits or liability. In this industry, where the terms "partnership" and "win/win" are thrown around like rice at a wedding, it is unrealistic for hotels to disallow meeting sponsors to adjust future room blocks in proportion to economic changes without liability.

With attrition being such an important issue, September's column will feature five more tips for planners. Look out for it.