Hotel Contracts – What You Need to Know {part 2}

Hotel contracts can be tricky.  For today’s Office Hours, I thought I’d tackle some frequently asked questions.  If you missed last week’s Office Hours – we were talking about Standard Hotel Clauses.

Question #1 – FOOD & BEVERAGE

I have a 300 person meeting and plan on having 2 breakfasts, 2 lunches, 2 am/pm breaks, and a welcome reception.  The hotel is offering me a $65,000 food & beverage minimum.  Is that good?

Answer: The simple answer is that’s great, but the answer that you really need to hear is that it’s completely unrealistic that you would spend that little.  

• That equates to $108.33, not including your tax and service for each day.  Of course, this is based on where you are hosting the meeting, but average pricing for a continental breakfast is about $28-$34 (before tax and service),
• average pricing for breaks is about $15++ (++ means you need to add the tax and service).
• Lunches average about $38-$54 (before tax and service).
• You could go nuts on a welcome reception, but for giggles, let’s say you have budgeted $65++ per person.
• I added everything on the low end ($28 breakfast+ $15 am break + $38 lunch + 15 pm break) and I’m already at $96++.  I haven’t added the reception yet.

Some hotels like to entice clients with a low F&B minimum, but that can really get them in a pickle.  I would much prefer to give my clients a realistic F&B minimum and negotiate a discount on the total F&B.

Question #2 – PAYMENT SCHEDULE

In my hotel contract, the hotel is proposing a payment schedule in the contract, but my finance team wants it modified.  Will the hotel do that?

Answer: You can absolutely ask for the payment schedule to be modified in your hotel contract.  There are some instances that the client wants to front-load the deposits because of how their budgeting works.  As long as you are upfront with the hotel, they are definitely willing to work with you.

Question #3 – CANCELLATION

The cancellation in my hotel contract is crazy – is there any flexibility with this?

Answer: Yes! I always modify the cancellation in my hotel contracts.  Sometimes the hotel accepts my changes and sometimes they come back with an additional modification.  Personally, I don’t like to pay cancellation on F&B less than 160 days out.  Menus haven’t been decided.  No food has been ordered.  Many hotels will tie everything together as Anticipated Revenue and I like to split it up.

Question #4 – ATTRITION

I don’t understand attrition, what does it mean?

Answer: When you have a contract for an event and it includes a room block, the hotel is expecting a certain amount of revenue from the F&B and the Room Block.  For easy math, let’s say you have a room block of 100 rooms at $150 per night.  The hotel is anticipating the room revenue to be $15,000.  Now you could pick up your entire block or go over it, but the hotel wants to protect you and themselves.  They don’t want rooms to sit empty because that is money out of their pocket.  Typically they will offer a 10% attrition.

If it’s cumulative, that means the hotel looks at the entire span of the block and the client has to pick up 90 rooms.  They won’t be charged for the 10 rooms they didn’t pick up.

Where it gets tricky is if the attrition is per day.  Per day means that they will look at each night and you can drop 10% of the rooms each night.  You might have met or gone over your block as a whole, but if one night is short, you could be in a position to pay for those nights.  Yes, that’s a bummer! Thus the reason why I push really hard for cumulative attrition.

Question #5 – ++

What does ++ mean?

Answer: I mentioned ++ in the first answer.  When you have a food & beverage minimum, you need to pay tax and service charge.  Sometimes the service charge is taxed and other times it’s not.  You need to ask your sales contact.  But if you have a F&B minimum of $65,000 and the tax is 9% and the service charge is 24%, the total estimated spend is really $86,450 (with the service charge not taxed) or $87,854 (with the service charge taxed).

Here is the deal, everything is negotiable, and don’t be afraid to negotiate.  I know what is important to my client and those are the things that I really push for.  It’s a give and take and the bottom line is you are creating a partnership with the client and the hotel.

Have any other burning questions or a topic you’d like covered?  I’d love to hear from you.  Leave a comment below.

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