Meeting Mentor Magazine

December 2018

Cover Story

When and Why Hotels Renegotiate Rates

It’s become a common scenario: Your group booked an event a few years ago when times were good and it was a seller’s market, but now the prevailing rates have dropped. Will the hotel renegotiate your contracted rate? The answer is: maybe.

Remember that a hotel contract is like a futures agreement. You contracted to buy hotel inventory at a date in the future at a stated price. When that date arrives, you are obligated to buy those room nights at the agreed rate whether the prevailing rates turn out to be higher or lower. The hotel is not legally required to lower the rates just because the market has changed.

However, if you can convince the hotel that reducing the rates will actually help its bottom line, you may be able to get the hotel to agree. Here are some reasons why a hotel might agree to reduce rates:
•    Getting guests to stay at the hotel. If the contracted rate is so high that attendees will choose another nearby hotel, it makes sense to reduce the rate to fill the rooms.
•    Filling rooms within the room block. If prevailing rates at the hotel are well below the group rate, attendees may reserve outside the block. The hotel will have an empty group room block and reduced opportunity to sell rooms outside the block to other guests. While there is a variety of steps a group can and should take to require attendees to reserve within the block, if the group has not done so, reduced  rates may encourage attendees to reserve within the block.
•    Generating ancillary revenue. Virtually every guest spends money at the hotel in addition to the room rate. Whether it is room service, cocktails at the hotel bar or a cabana rental at the beach, these important ancillary revenues are not generated when rooms sit empty. Or, if rates are perceived to be too high, attendees may rein in other spending.
•    Helping RevPAR. One of the most important statistics in the hotel industry is revenue per available room. Filling more rooms at a lower rate may help that statistic more than filling fewer rooms at a higher rate.

Remember, the hotel is not obligated to reduce rates, but if you can convince it that doing so will ultimately help its revenues, you may be able to convince the hotel to renegotiate. — Lisa Devlin is an attorney who has represented numerous independent and chain hotels in contract negotiations


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About ConferenceDirect
ConferenceDirect is a global meetings solutions company offering site selection/contract negotiation, conference management, housing & registration services, mobile app technology and strategic meetings management solutions. It provides expertise to 2,500 corporations and associations through our 325 Associates globally. www.conferencedirect.com

About MeetingMentor
MeetingMentor, the leading publication for senior meeting planners, is circulated to the clients, prospects and sales associates of ConferenceDirect, which books more than 3.87 million room nights. www.meetingmentormag.com

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