HOTEL CONTRACT CASE STUDIES

CASE 1 — Is this Force Majeure?

The client booked a 3-day training conference at a hotel in Florida. Thirty days prior to the meeting, a competing hotel called to ask me if they could assist in moving our business from the hotel we booked. It was then that we got word of the situation through the grapevine. We contacted the hotel we had booked and they said they had to cancel our meeting (and it was a necessary action on their part). The hotel followed-up in writing as follows:

“Your meeting is being cancelled.

The hotel was shut down last week by local government authorities following the death of a hotel guest. According to the Force Majeure in the contract, the performance of the contract by either party is subject to government regulation or other conditions making it impossible to provide the hotel facilities.”

Here are excerpts from the actual agreement:

The performance of this agreement by either party, in part or in full, is subject to events or occurrences beyond their control such as, but not limited to, the following: acts of God, war, threat of war, government regulation or advisory, disasters, fire, earthquakes, accidents or other casualty, strikes or threat of strikes…or similar intervening cause beyond the control of either party making it illegal, impossible or commercially inadvisable… to hold the Convention at the Hotel or to provide services and other items outlined in this agreement by the Hotel. In the event of an occurrence of force majeure, as set forth above, either party may cancel this Agreement without liability to the other, except that Hotel shall refund to Group all amounts paid by Group.

Is this Force Majeure?

CASE 2 — Are attrition charges taxable?

Depending on which state you are in, the answer may be yes or no. The client in this Texas case did not meet the contracted room block and attrition damages were assessed by the hotel. When the invoice for attrition was received, it included Occupancy Tax of 15% (6% State and 9% Municipal). Based on our knowledge of Texas tax codes, we asked the hotel to remove the tax from the invoice. They responded by removing only the 6% state portion. We went back and asked for the other 9% to also be removed as well. After some further discussion, they removed all taxes from the invoice.

In Texas, an attrition or cancellation fee is not subject to hotel (occupancy) tax if the charge is less than the reserved room rate, such as a percentage or sliding scale of the room rate, as would be the case when the rate to determine attrition or cancellation damages is negotiated in advance as a percentage of the contracted rate.

So what about the 9% municipal portion? As of this writing, most municipal tax codes do not address the issue. In cases where no municipal code exists, the municipality defaults to State code.

For more information see Hotel Occupancy Manual Ch. 2, Tax Law and Policy.

CASE 3 — A significant overcharge

In this case, a hotel overbilled the client $3,200 related to attrition damages. Since I had negotiated the original agreement on their behalf, I knew we had an attrition clause based on a percentage of the booked rate. i.e. lost profit. The amount invoiced appeared to be too much. The invoice, however, went directly to the client and their accounting department had already paid it when the overcharge was discovered. In addition, the hotel had been lax about sending the group room pick-up reports, even though the information had been requested.

After pressing the hotel for the appropriate reports, we established in writing that there was an overcharge, due to the hotel not following the terms of the agreement. Our initial correspondence went unanswered. We continued pursuing the matter via telephone and e-mail, presenting the facts at hand.

In the end, the client received a check for $3,200

CASE 4 — Cancellation By Hotel

A planner signed a contract with a major brand hotel in Texas one year out. This was a new property scheduled to open a full two months prior to the group’s arrival. The hotel contacted the planner in advance letting them know the opening would be delayed by one week. Three weeks prior to the meeting, the planner was informed that the hotel would not open on time. It seemed apparent that the hotel breached the contract.

A consultation with attorneys revealed that the planner’s company had no recourse because liquidates damages would apply only to the party writing the contract (the hotel).  Why?  Because the contract stated the losses the hotel would incur if the event was cancelled, but did not establish any dollar amount or estimation of money the client would lose if the hotel initiated the cancellation. 

The hotel was instrumental in helping find rooms and function space for 1000 people. They did agree to pay for anything above and beyond what we would have paid for at their property, such as transportation between the hotels to the convention center.  This case turned out OK in the end, but only after a great deal of inconvenience, cost and aggravation.

A provision which spelled out the hotel’s obligations in the event of Cancellation by Hotel would have given the planner’s company the ability to ask the hotel to pay all direct expenses, and would have left no question as to the obligations of each party. This situation could have been much worse.

This was not a client of THE MEETiNG DEPARTMENT®.

Back to top.

Home | Services | About | Clients | Affiliations | Contact | SMM | News | Case Studies

THE MEETiNG DEPARTMENT® gratefully acknowledges that the outstanding photos used on this site are courtesy of: Mansion on Forsyth Park, Savannah, GA (Preferred Hotels & Resorts / Kessler Collection); Marriott Harbor Beach Resort & Spa, Ft. Lauderdale, FL; Kiawah Island Golf Resort; Kiawah Island, SC; KSL Resorts (Barton Creek Resort & Spa, Austin, TX); The Carneros Inn, Napa, CA; The Fairmont Chateau Lake Louise, Banff, AB (Canada); The Fairmont Palliser, Calgary, AB and The Rimkrock Resort, Banff, AB.