Source: Robin Roth, Senior Contracts Editor
E-Specs: March 23, 2005

Figuring out how much a group owes for attrition or cancellation can be unnecessarily stressful. Why? If the clause is overly vague, the hotel and group may disagree as to whether calculations are on a nightly or cumulative basis. If an attrition clause states "Group is required to utilize 80% of the contracted room block," how should that be calculated and which of the two methods is the best to use? If your contract contains a carefully crafted and detailed formula, the answer stands out clearly: both. The clause should convey that the process begins with thorough calculations for each night, and then those figures are added together for the cumulative grand total. This process will result in numbers that are most accurate, logical and fair, and backup documentation can be easily provided.

All relevant room revenue information should be entered into the calculations. For attrition, the group should receive credit if it exceeds the room block on any night. Those room nights should be credited to night(s) where the minimum commitment is not met. Credit should be given on a nightly basis for miscoded and relocated rooms and the overall cumulative total should include rooms picked up pre- and post-room block. For cancellation, if the clause calls for "one peak night," specify "first peak night" so that one specific night's room revenue is the clear intent and mitigation can be calculated for that specific night. For both attrition and cancellation, calculate resold rooms on a nightly basis after deducting complimentary and out of order rooms from the hotel's nightly inventory.

Beware of a trend that is developing towards a strict per night stance in certain markets that place major emphasis on weekend business. Hotels in those markets are using this tactic to maximize their room revenue on the popular weekend nights.

The issue of per night or cumulative also comes to play in another area of the contract. Use a sharp eye when reading the one per 50 complimentary rooms clause since the change of one word is easy to miss: Group will receive one complimentary room for every 50 occupied, revenue-producing rooms on a cumulative basis vs. nightly.

Ensuring that your contract clauses are written with detailed and accurate language will help you avoid disputes over interpretation later on.

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