During the last two weeks of the year, hotels are eager to close out the year on a high note. They may be making up for a slow summer, or just pushing to finish the year with a robust number of bookings. Either way, most hotels will be working feverishly to get as many groups on the books as they can.
If you have a contract that is due in December, you will clearly feel the pressure and might even be offered additional concessions or other favorable terms if you sign by the end of the year. Don’t let this added pressure get you into trouble. Continue to run through your internal approval processes, which should include a careful review of the hotel contract.
One often overlooked contract clause is the cancellation clause. We would all like to think it’s never going to happen, and most of the time, it doesn’t. However, when a cancellation occurs it can have a significant impact on your bottom line, as well as the hotel’s business.
But first, a word about lawyers. We’re not one. They’re smart and know far more than we do about the legal ramifications of certain clauses. With that said, a better understanding of the basic clauses may save you hours of work with your lawyer. So think of this as a cost-saving exercise!
Both parties want to do what they can to minimize the potential risk of cancellation. Just as with attrition, the timeline is important when negotiating the cancellation terms. The farther out your meeting, the more likely the hotel can resell your date to another group. Here is a typical cancellation clause for a group that is contracting one year out:
|Cancellation Terms||Cancellation Penalty|
|Contract Signature to 180 days prior to arrival:||50% of estimated guestroom revenue|
|179 to 90 days prior to arrival:||75% of estimated guestroom revenue and 50% of food & beverage|
|89 days prior to day of arrival:||100% of estimated guestroom revenue and 75% of food & beverage|
Hotels typically will have the most flexibility in negotiating the cancellation penalties for food & beverage. Asking them not to charge you a cancellation penalty until 90 days out might be a way to minimize your risk and still leave the hotel with enough time to replace your business.
There is always a remote chance that your meeting may cancel, so it’s good practice to ask your sales manager to include a re-booking clause in your contract. You should partner with the hotel to set a reasonable guideline for re-booking the meeting. Then, if your meeting should cancel, the re-booking clause outlines how your paid cancellation penalty can be applied towards a future meeting. In most cases the hotel will ask that you contract a new meeting within a given timeframe. If you can rebook your meeting within the hotel’s fiscal year there is a much higher probability to get most, if not all, of your paid cancellation penalty credited to that re-booked meeting.
Remember, your sales manager represents the hotel but should also be an advocate for you. There is a delicate balance between representing their client’s needs and making a smart business decision on behalf of the hotel. Everyone’s goals can be accomplished by maintaining a partnership philosophy from the initial proposal through signing the contract.
By all means, you can and should negotiate the terms with hotels before signing the contract. Just be sure to review the contract carefully, even if you’re pressured to sign it by the end of the year.
For more great meeting planning tips, visit our Resource Page. Our resource page contains a variety of Free Meeting Planner Guides to help with meeting and event planning.