Source: Robin Roth, Senior Contracts Editor, Conferon, Inc.
E-Specs: December 9, 2002

In today’s softened economy, many hotels are looking to wholesale and online distribution channels to help sell their available inventory. At some hotels, rooms available through these channels are often available at rates lower than the contracted group rates. There are measures that can be taken prior to contract signature to help prevent this situation.

Make sure that rate protection clauses are negotiated into the contract. If future rates are not yet confirmed, specify a formula that spells out how the rates will be determined. It should use at least two of these three factors: percent off rack rate, percentage increase per year, or Consumer Price Index increase per year, and the final rate should be the lowest of the benchmarks used. There should be a clause protecting rates from deals being offered to the general public and a clause ensuring that rates are not higher than those offered to similar groups.

If your group is occupying more than 50% of the hotel’s rooms, consider the following clause:

Lowest Rate – If Group’s pickup is not a cause for Hotel to offer a rate lower than the contracted group rate (Group must pick up 80% of its room block), Hotel agrees that the Group will be guaranteed the lowest rate in-house over the meeting dates. Exceptions include negotiated volume corporate business and/or government accounts, airline crew rooms and other similar agreements. This guarantee applies to rates made available to the general public, either through the hotel reservation department, 800-reservation service, or any online distribution channel. Should a lower rate be discovered, the Hotel agrees to either offer the lower rate to all of the Group’s attendees or to have the lower rate removed from all distribution channels.

Lastly, it is very important to include a clause that gives credit for rooms picked up outside the block. Comparing the hotel’s in-house guest list with the group’s registration list can identify these rooms. Any room not coded to the group within the Hotel’s system can then be credited to the group’s pickup.

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