A hotel contract primer

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May/June/July 2011
by Dean Miller

Q? The hotel we selected for our family reunion just sent me their “standard” contract, and it’s five pages long, single-spaced! Help! How do I make sense of all of the legal mumbo-jumbo? We’re not lawyers, and we hardly know where to start!

A! We’re not lawyers, either, and what follows is not legal advice, but rather, some common sense pointers for dealing with any complicated contract presented to you by a hotel or other service provider.

First, never sign any contact you haven’t read or don’t understand. If there are any items you don’t understand, ask the hotel representative to explain it to you. If you still don’t understand it, ask to have it explained again.

If that doesn’t help, ask to have it modified or removed.

Remember: virtually all contract terms can be negotiated. Your ultimate goal is a contract that clearly and plainly spells out, in detail, what each side in the transaction (you, the buyer, and the hotel, the seller) are going to do for each other (when, where, how much, etc.) and what the recourse or consequences will be, if either side fails to perform as specified.
There are some contract items that come up in most negotiations that you’ll want to be very clear about.

  • The basic contract. Many hotels have a “long” contract they use for large convention groups and sizable events. They also may have a shorter, less complicated contract for social groups such as reunions. Ask for the shorter, less complicated contract, if the hotel has one.
  • Your room block. In the contract, you are telling the hotel how many rooms you’ll need and when you’ll need them. Be sure the number you’re committing to is reasonable and based, whenever possible, on a factual number such as the number of rooms you utilized at a previous reunion, or the number of advance registration deposits you’ve received. Do not just make an optimistic guess, because “everyone told us they’re coming to the reunion this year!” When in doubt, be conservative. Even when not in doubt, be conservative!

You are far better off underestimating, rather than overestimating the number of rooms you’ll need. If you find later you’ll need additional rooms, the hotel will likely be willing and able to accommodate you. But, if you need fewer rooms than you expected, you may very well end up paying for empty rooms you don’t need!

  • Your concessions. Concessions are anything the hotel is promising to give you in exchange for your business, either for free or at a discount. Concessions should be clearly listed, and any charges clearly noted. They would include (among other items) your hospitality room, the room where you’ll be holding your banquet, suites you may be using, complimentary or discounted rooms you may be receiving, meals that may be included in your guest room rate (such as breakfast), and charges (if any) for parking, health club or pool usage, etc.

The hotel representative may have told you you’d receive this, that and the other, but if it’s not written in the contract, the conversation might as well never have taken place!

  • An attrition clause. The attrition clause specifies how much you owe the hotel if you use fewer rooms than you have guaranteed. Many hotel contracts contain a clause that calls for 80% (or 85%) attrition, which means that you agree to pay for at least 80% of the rooms you’ve guaranteed. In other words, if you guarantee 100 rooms and use 85, you would not have to pay the hotel anything additional, but if you only use 75 rooms, you would have to pay for five unused rooms (the difference between what you used (75) and what you guaranteed (100 x 80% = 80). This is a negotiable item, so you may want to ask for a lower attrition percentage.

Another option in exchange for a lower or waived attrition percentage is to agree to an earlier “cutoff” date (the date the hotel releases unused rooms from your room block for general sale).

  • A cancellation clause. This specifies what you will owe the hotel if you cancel your reunion, and what they will owe you if they decide to cancel your reunion, for whatever reason. A cancellation clause protects both you and the hotel. You may be able to get the cancellation penalty reduced, especially if you cancel far enough in advance to allow the hotel adequate time to try to re-sell your rooms. Again, this should be clearly noted.

Also request a cancellation clause that waives your penalties if you reschedule your reunion with the hotel within a specified time (usually a year). This helps both you and the hotel if you have to postpone your reunion due to unforeseen circumstances.

  • Insurance / indemnification. Many hotel contracts require groups to provide proof of insurance coverage. Having insurance for your reunion is an excellent idea, because it protects you from severe financial liability if one of your members has an accident. The cost of obtaining a three- or four-day insurance policy is usually reasonable, and can be included in everyone’s registration fee. Consult a local insurance broker or look for “event insurance” on the Internet for details.
  • Change of ownership or management. Hotels are frequently bought and soldoften accompanied by a change in the management company, and/or a change in the hotel’s brand or “flag.” You should request a clause in the contract that gives you the right to cancel your reunion – without penalty – if the hotel undergoes a change in ownership, management, or brand affiliation, and the new ownership / management is unwilling or unable to fulfill the terms of your agreement. You may never need to exercise this right, but it is an excellent idea to include it in your contract.

And finally, always remember that, as the customer, you have the ultimate choice where you hold your reunion. If a hotel is unwilling or unable to provide you with a clear, understandable contract that meets your and the hotel’s needs, look for another hotel that is more accommodating.

About the Hospitality Answerman
Dean Miller is national sales director for Visit Fairfax. He can be reached at 703-752-9509 or dmiller@fxva.com.

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