Source: Robin Roth, Senior Contracts Editor, Conferon, Inc.
E-Specs: August 5, 2002

Could a hotel charge an attrition fee that amounts to more on any given night than the group had blocked on that night? Even though this sounds unfair, the answer is yes. It depends upon how the clause is written. If the clause is written solely on a total basis, as in "Group agrees to pay total room nights released above the allowed attrition multiplied by the applicable room rate as liquidated damages," that consequence could result.

The key to proper determination of attrition damages is that two separate calculations should be performed for each night, and the damages due should be the lesser of those two figures for each night. The daily figures are then added together for the grand total due.

For example, for each night, damages should be the lesser of these two options:

1. [Allowable slippage (80% of block) minus actual group pickup] X [Group rate X % of rooms profit (75%)]
2. [Total rooms in hotel minus out of order or comp rooms] minus [total occupancy, including group rooms] X [Group rate X % of rooms profit (75%)]

Add all nights together to determine final amount due. Any night where the group exceeds its block will be used as credit for other nights where there is a shortfall. Also, rooms picked up outside the block and pre- and post- room block rooms will be added to the total.

If the hotel calculates attrition damages on an aggregate basis or only performs calculation #2, it could arrive at more rooms charged for than group had blocked on a particular night. This is most likely to happen on the "shoulder" nights of the room block where a smaller number of rooms are blocked. The group should only owe the lost daily contracted room revenue profit for the applicable percentage of its room block or the un-resold room revenue at the hotel for that day, whichever is less. An attrition clause should clearly indicate that mitigation would be calculated on a nightly basis. Including the sentence "Group will not be charged for more rooms on a particular night than Group had blocked on such night." is one way to clarify the process.

(Note: This information is not intended to be "legal advice." A qualified attorney should be consulted to review all contract issues.)