Minimizing Attrition Impact: It’s All in Negotiation

Every meeting planner knows the situation – you come to the attrition clause in your contract and a flurry of questions race through your mind. Will you really be able to meet your room minimum? Should you accept the hotel’s timeframe and rate or should you ask for more? If so, how much? Since every hotel seems to handle attrition slightly differently, negotiating rates can be a daunting task. However, when this little clause can easily cost your company thousands of dollars, negotiating becomes a vital part of meeting planning.

Avoid the Problem Altogether

Of course, in a perfect world, you would simply meet the minimum room requirements and wouldn’t need to worry about attrition rates. But instead of just crossing your fingers and hoping the rooms fill, here are some practical actions you can take:

• Be modest in your calculation of the number of rooms needed. It may be tempting to over-predict a larger number of rooms in order to receive lower rates. However, if you are unable to fill those rooms, the discount you would have received will get swallowed up in penalty fees. Instead, reference hotel numbers from past events to help you establish a realistic number. As you do so, keep in mind the variables that may boost or decrease attendance such as location, time of year/seasonality, or day of the week.
• Urge attendees to book with the conference hotel rather than trying to find cheaper rates elsewhere. Let them know the important bearing this has on the event. For further incentive, offer discounts on registration if attendees book with the hotel where your meeting or conference will be held.
  PRO TIP: Be sure to include this special offer in all of your marketing materials – on your website, printed materials, social media, etc.
• Don’t forget the value of marketing. If your event has not been properly advertised, attendance will most likely be lacking. To encourage early registration, advertise the cutoff date for special registration rates. This will help you better gauge attendance and allow you to adjust your room block while there is still time.
  PRO TIP:  Give yourself as much time as possible to effectively market and promote.  In the same respect, budget appropriately for marketing efforts.

Ask About Timeframe

Even with a cautious approximation, the number of rooms needed often won’t come into focus until just before the event. Some hotels will allow a certain percentage of rooms to be dropped without penalty a month or two before the event. Typically, a larger adjustment is permitted further out and only a small amount as the event nears. See if the hotel will work with you on this and extend the larger percentage closer to the time of the event. If the hotel doesn’t allow for any reduction of the room block, ask if they would allow a reduction provided you make the change by a certain date.

Define Your Terms

Once you have an idea of the number of rooms needed, you can work out the fine print regarding meeting your room minimum. It may seem simple on the surface, but make sure you are considering all the various factors.

• Occupancy vs. Availability of Rooms Ratio
  If you’ve contracted all of the hotel’s rooms, this number shouldn’t include rooms that are under maintenance. Be sure to check you are not paying for rooms that aren’t even available! Likewise, ask what the highest occupancy percentage typically is. If it is in the 80% to 90% range, ask for that to be considered a fulfillment of your contract rather than 100%.
• Cumulative Room Counting
  There is nothing like discovering later that certain discounted rooms don’t count towards your minimum room number. Ask that all rooms be counted on a cumulative basis, not per night.
• Filled by Resale
  Remember that some of the rooms left empty by your group will be resold by the hotel. Add a clause that you won’t be responsible to pay attrition on rooms that were ultimately filled. If the hotel doesn’t agree to this, you should at least be able to get a further discounted attrition rate for these rooms.

Negotiate Rates

In the event that your rooms aren’t filled, it is important that you have the attrition rates clearly defined in your contract.

For starters, find out how many empty rooms you will be responsible for by asking the attrition rate. The rate is typically between 80% and 90%. Use other big budget items such as amounts you plan to spend on food and beverage or AV equipment to negotiate lower attrition rates.

From there you can discuss the cost per room. Most hotels will propose your group’s average room rate. However, you can usually obtain a slightly lower rate by asking instead for the run of house rate. More importantly, rather than paying the full revenue of a room ask to pay the average profit made per room. Since the hotel will save on utility and housekeeping costs, it makes sense that you would pay less for rooms that will stay empty.

If you are stuck with a big bill from empty rooms, remember that every penny counts! The hotel will typically extend a complimentary room for every 50 rooms booked. You may have already negotiated this number down to 40 or lower. If so, ask if this same rate could be applied for rooms that weren’t booked.

While you won’t see savings on this event, you can also salvage some of the loss by asking that half of your attrition fees be applied as a credit towards a future event. This is a great way to establish a long-term relationship as well as save a little on your next event.

Conclusion

The often-overlooked attrition clause can easily devastate your budget. It is natural, therefore, to feel some stress when negotiating your event’s attrition rates. However, by promoting your event, clarifying the timeline and rates, and asking for discounts you will be ready to enter negotiations with confidence.

Looking for professional assistance as you negotiate contract details for corporate meetings or incentive travel? We can help! Contact Gavel International for more information.

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Sources:
http://www.meetings-conventions.com/Resources/Planner-Basics/Back-to-Basics/How-to-Manage-Attrition/
https://www.smartmeetings.com/magazine_article/attrition-cancellation-keep-ball-court
http://www.meetingsnet.com/negotiating-contracts/8-ways-negotiate-fair-attrition-clause-both-sides-can-live
https://www.aventri.com/blog/successful-room-block-management-part-2-attrition