Hospitality Contracts
(100 points)
Attrition clauses are commonly used in the hospitality industry for the purpose of avoid risking. In
the event a group fails to meet certain commitments, the hotel will require a payment amount to
make up for the loss of revenue. The amount due will be according to the terms set forth in the
related attrition clause.
Hospitality contracts for meetings, conferences, or other group events will typically contain
attrition clauses for both guest rooms and food and beverage sales. Guest room attrition is the
difference between the contract commitment for total room nights and the actual number of room
nights utilized. If you don’t “make” your room block, then you’re “in attrition.” Attrition clauses
provide for liquidated damages for the attrition. The group must pay the hotel the liquidated
damages amount for failing to sell the minimum number of room nights stated in the contract. The
contract may state the required minimum sales as a total revenue amount rather than a number of
room nights.
Food and beverage attrition is the difference between the actual food and beverage covers paid for
or the total dollar amount spent on food and beverage and the number or formulas agreed to in the
terms of the facility’s contract. Like the guest room night attrition clause, it will provide for
liquidated damages that must be paid to the hotel in the event the cumulative food and beverage
sales are less than the minimum amount agreed.
Allowable attrition used to describe the amount of leeway a hotel allows if the group does not meet
its minimum room or food and beverage amounts. For example, if a group is required to pick up
at least 80% of its room block under the terms of the contract, the hotel has provided for 20%
allowable attrition.
EVERY CONTRACT IS DIFFERENT, YOU MUST READ THE TERMS CAREFULLY.
Example
ABC Corp is holding a meeting at XYZ Hotel. Some of the terms of the contract between the two
parties are as follows:
• XYZ Hotel will hold the following block of rooms for Group’s use (“Room Block”):
Date Type No.
03/01/2021 Single/Double 125
03/02/2021 Single/Double 125
Total room nights 250
• XYZ Hotel is pleased to confirm the following room rates for this group: $189 per night.
• If the total cumulative room nights of ABC Corp’s pick up is less than 80% of the Room
Block, ABC Corp will be responsible for a Guestroom Attrition fee equal to the difference between the total of room nights used and 80% of the final guestroom nights blocked,
charged at 70% of ABC Corp’s Contracted Room Rate.
Explanation of the ABC/XYZ Attrition Clause:
If 200 (80% x 250) room nights are not sold in connection with the ABC Corp meeting, an
additional fee (referred to in this contract as a Guestroom Attrition fee) will apply pursuant to the
attrition clause.
If only 175 room nights were picked up (or sold), the fee will apply. It is calculated as follows:
• Required Pick up (80% x 250 = 200) – Room Pick up (175) = 25 room nights
• Payable at 70% of contracted rate ($189) = $132.30
• Amount due (25 x $132.30) = $3,307.50
Thus, ABC Corp will have to pay XYZ Hotel an additional $3,307.50 under the Attrition Clause.
Note that in this example the attrition fee clause states that the fee will be based on a percentage
of the contracted room rate (70% in this case). Not all attrition clause include a reduction for the
room rate in the calculation. Remember to read the clause carefully since every contract is
different.
Problems
1. ABC Corp decides to hold its 2024 conference at the H–Town Hotel. The attrition clause
and related terms of the contract between the parties follow:
• Event Dates: January 5 – 6, 2024
• Guest Rooms: This Agreement ABC Corp (“Customer”) and H–Town Hotel (“Hotel”)
applies to the following block of guest rooms (the “Room Block”):
Jan. 5 Jan. 6 Totals
Traditional Guestroom 70 70 140
Attendees Room Block Total 70 70 140
• Total Guest Room Night Commitment: Customer’s total Guest Room Night
Commitment is 140.
• Rates: Hotel will provide the confirmed guest room rates below for the Room Block
(the “Rates”):
Attendees Room Block:
Rooms Single Rate Double Rate
Traditional Guestroom $110 $110–3–
• Attrition:
ABC Corp (“Customer”) agrees a loss will be incurred by Hotel if Customer’s actual
usage is less than 80% of the Guest Room Night Commitment.
If Customer’s actual usage is less than 80% of the Guest Room Night Commitment,
Customer will pay, as liquidated damages and not as a penalty, the difference between
80% of the Guest Room Night Commitment and Customer’s actual usage, multiplied
by the average group room rate, plus applicable taxes.
How much will ABC Corp owe H–Town Hotel under the attrition clause if they have 35 attendees,
each staying both nights?
2. Bartender’s Association Conference at Highball Hotel. The Bartender’s Association
Conference is to be held at the Highball Hotel. Some of the contract terms are as follows:
• XYZ Hotel will hold the following block of rooms for Bartender’s Association’s (“Group”)
use (“Room Block”):
Date Type No. of Rooms
05/24/2023 Single/Double 150
• Highball Hotel will provide single/double rooms at the Room Rate of $100 per night.
• The Anticipated Room Night Revenue shall be defined as the total Room Block of 150
room nights at Room Rate of $100 = $15,000*
• Highball Hotel agrees to allow for a 15% reduction in the Anticipated Room Night
Revenue, provided that you make a written request for that reduction between now and 60
days prior to your arrival date. At the conclusion of the meeting, we will subtract the room
revenue derived from your meeting (excluding revenue derived from pre and post program
stays) and the amount of any permissible attrition you have taken from the Anticipated
Room Night revenue set forth above.
[*sometimes the attrition clause sets out the requirements in total revenue amounts, rather than
room nights, as it does in this problem]
One February 28, 2023, the Bartender’s Association delivers to the Highball Hotel a written
request for a 15% reduction in the room block, which reduces the Anticipated Room Night
Revenue to $12,750 ($15,000 * 15% = $2,250; $15,000 – $2,250 = $12,750).
(a) If the Bartender’s Association has 100 actual attendees at the conference, how much (if
any) will they owe for the attrition fee? Show your calculations.
(b) What would the Bartender’s Association owe as the attrition fee if they did NOT request a reduction in the room block in advance
