What is a Hotel Group Contract Template?
What is a hotel group contract template?
We have learned a lot from having handled thousands of group room contracts. This blog series of articles is our way of updating our readers on our best practices. A hotel group contract template may be a standard form used by an organization, company or association intended to be filled out and signed either by the lodging establishment itself or by a travel agent or company to the place that the group is traveling, such as hotels. A hotel group contract template can be referred to as a "sample group contract with a hotel" or a "hotel contract sample for group bookings or business." Essentially, it is a form of contract between the hotel and the group soliciting rooms for their members. The basic premise is that the group will provide the hotel with several rooms and/or suites to accommodate their guests in exchange for the hotel providing certain amenities , such as room discounts and/or complimentary spaces for group meetings, etc. The contract template is a document that allows both parties to have the accommodations necessary for the reserved group. In some cases, the hotel may provide some or all of the group members with discounted price rates and/or discounted group member accommodation prices. Using a hotel group contract template may be beneficial for both the hotel and the group utilizing it. The template allows for a clear and concise agreement regarding room space, rates, time limits, amount of rooms necessary and the number of guests in the group. It also allows for both parties to plan ahead of time for any necessary remarks and provisions that they may need to make for each other.
Hotel Group Contract Components
Regardless of whether your hotel property has a pre-existing group contract template or the group is dictating the terms, the contract should contain 10 specific components:
- Room Block Allocation Room block allocation specifies how many rooms are being booked by the group. It is wise to set a minimum and maximum. The minimum amount discourages a group from squeezing the hotel for the best room rates on the backs of smaller room blocks; while the maximum gives the hotel an opportunity to sell rooms in a sold out situation.
- Pricing Structure Most often, room rates are set for the life of the agreement but it is possible that the rates include windows where pricing can be amended. Language can be added to specify that the rate is based on a room block of a certain number of rooms and that the rate will increase at certain levels.
- Pick-Up Thresholds In order to fulfill its room block and realize its rate, it is wise for a hotel to include a pick-up threshold to ensure that the group actually fulfills its block. Without such a provision, a group may be incentivized to book excess rooms to get the best rate, knowing that it can cancel rooms with impunity to realize the discounted rate.
- Cancellation Policy Cancellation policies vary dramatically by property, with most requiring cancellation outside of 30 or 60 days. But, particularly with larger groups, flexibility is often required. You can build in cancellation polices and cancellation windows for your group clients.
- Termination for Cause A few conditions under which a hotel can terminate a group contract for cause include: (1) failure to fulfill the room block, (2) failure to release rooms within the window set forth above or (3) non-payment.
- Attrition This is a complex issue that arouses a great deal of emotion as attorneys and hotels try to define what is just and reasonable. Generally, hotels want 5-10 percentages points of attrition, while groups insist that such a demand is unreasonable in light of today’s economic climate. Additionally, many groups do not want to incur any attrition fees or an additional expense if the hotel realizes a pick-up of less than said thresholds.
- Damages for Breach Similarly, when litigating over breach of contract, attorneys are split on damages. Most group cancellation disputes center on the unwinding of the contract. While some courts will allow consequential damages, most require the aggrieved party to enforce the contract unless there is no adequate remedy at law.
- Rooming List Requirements Groups should specify when they are required to provide the rooming list to the hotel. Most often, it is 30-60 days in advance.
- Communications For large groups, multiple communications between the group and the hotel will be required. The agreement should be explicit about the expected timeline for communications.
- Applicable Law This provision requires that if litigation does arise, the parties will go to the applicable court in the applicable state. Often, groups will request the state where they are located.
Advantages of Implementing a Hotel Group Contract Template
For both the hotel and the clients, the use of a standardized contract template has two significant advantages: efficiency and clarity.
Efficiency
The use of a standard form hotel contract template for pricing, concessions and other essential terms allows for negotiation around the points of difference from the standard form. No longer will there be a debate about base attrition, for example – hotels are still in the process of adopting a standard clause, let alone multiple clauses using different terminology. If a hotel is negotiating pricing or clauses with the same group four times a year anyway, why not provide a standard form template for the client to negotiate around? It saves time for both clients and hotels – which translates to savings to the clients as well, both in money and in time spent on negotiations with the hotel.
Clarity
As attorneys, we always appreciated the thoughtfully considered interpretations of a standard hotel contract template. The greatest value of a standard form contract is in its ability to memorialize what was the intent of the parties. Although each hotel may have a different set of issues with the same customer, the contract template can provide clarity as to the intent of the terms. A well-crafted contract template should avoid ambiguity by using language that has been customarily approved by the parties. If you have been given a template that is contrary to your expectations, simply ask for a different template.
How to Edit a Hotel Group Contract Template
The process of customizing a hotel group contract template begins once the organization or group manager has determined the particulars of the event, such as the dates, duration, and any specialized requirements. A good contract template should have flexibility to accommodate various types of contracts, whether for a large annual gathering requiring multiple hotel nights and room blocks, or a small university seminar lasting one night in one building.
The contract template should include sufficient blank spaces to allow for an adequate description of the event venue, times it will take place, number of attendees expected, and activities within. It is important that the group planner fill out all spaces in the template, making sure to include details about the group that tailor the contract to their needs. For example, if the group will be having a series of seminars throughout the hotel, the planner should be able to specify how many attendees will be in a session, along with additional information.
The contract template should also have sufficient blank spaces for addendums. For example, if there will be food and beverage requirements at the hotel during the stay, the planner should be able to include meal counts, location of service, dates, types of meals, times, costs, and so on. The ideal contract should have a food and beverage addendum that allows the planner to specify these requirements. There should also be additional blank sheets available, which will enable the planner to include addendums for other items, such as a master bill, guest services, audio-visual capabilities, transportation, and any other relevant details. It is critical to provide full details of the event at hand to the hotel in a clear, concise, and accurate manner.
This is not the time to try to save space. It’s better to have too much information in a contract than not enough, because you may very well need every detail later on. The group contract template should also be flexible with respect to when the hotel needs to get back to you. Many hotels require that a contract be returned within a certain time frame—generally 24 to 48 hours. This time span is often unreasonable. After all, if you are sending out eight or 10 potential contracts, how can the hotel possibly take the necessary time to refer to earlier events held by the group in question? Instead, the hotel should be allowed enough time in the contract to properly research events and make comparisons, and then get back to you with either a counterproposal or a green light.
Common Errors when Drafting a Hotel Group Contract
One of the most common mistakes made when signing a hotel group contract is not asking the right questions. Probably for fear of sounding dumb, or because it seems so obvious, we often forget to ask the hotel if the room rates include the "resort fee" or "destination fee" that resorts and hotels are starting to charge. This seemingly minor detail could dramatically increase what you thought your group would be spending on sleeping rooms. And, what about that $25 per person additional charge for breakfast – is that the room rate? Is it all day or just breakfast like at a Marriott. The same questions apply for lunch . How about the complimentary (included in the package) breakfasts – are they buffet or sit down meals? Any difference, you say? Well yes, it could mean the difference between a $6 continental breakfast at a Holiday Inn and a $30 sit down breakfast at the Four Season. The same goes for media packages – AV – audio/visual – how many technicians are included in the package or are they extra. It’s the small details that add up and make or break your budget. And, what about the 18% service charge and tax – is that ever clear or explained in the contract? And, do these apply to each item separately (i.e. room rate, breakfast, lunch, media, breaks, etc.) Or, do they only apply once at the bottom line?
Legal Aspects of a Hotel Group Contract
The legal aspects of hotel group contracts are numerous and complex. Key considerations include jurisdiction, dispute resolution, and compliance with hospitality law.
Jurisdiction refers to the authority under which a party to a contract is subject to the laws of a given government. This means if you accept a contract under Hawaii law and the company that owns the hotel is registered in Idaho, any disputes will likely be covered under Idaho law.
In some disputes the remedy may lead to litigation. As discussed above, many hotels are governed by sophisticated forms of contract and dispute resolution requirements. Thus, the potential for resorts that employ national reservation networks and also employ sophisticated reservation systems can lead to the need for careful determination of how to approach any dispute.
Further, it is important to confirm that the contract complies with all hotel related laws and regulations. Employment, health, liquor license, and licensing issues must be considered.
Negotiating Hotel Group Contracts
Even more challenging than interpreting terms in hotel group contracts is the task of negotiating amendments. A common misconception is that hotel group contracts are non-negotiable, but in fact they are no different than any other type of commercial contract, and their success is entirely dependent upon the value of what each party is receiving. To the extent a hotel group contract does not give you clear value for what you are giving the hotel, then there is certainly room for negotiation in order to achieve the best terms for both parties .
Hotels generally start with restrictive terms because most planners have signed a version of this contract before and have no other choice but to accept the terms, but as they say—"the squeaky wheel gets the grease." Even the most unfavorable terms can be adapted to suit both hotel and group needs with a little persistence. In our experience, the best negotiating strategies are as follows: