How to Structure a Contract for a Hotel Group Buyout
Last month I participated in a LinkedIn group discussion with a meeting planner who was seeking advice on how to structure a contract for a hotel group buyout. Like any hospitality contract question, there isn’t a “default” answer for group buyouts. The most important element for both meeting planners and hoteliers is to approach the event as a partnership, with a mutually beneficial contract and good pre-event communication.
Based on the strong feedback I have received from my answer, I’ve taken the liberty of sharing the question and my response in context on how to structure a hotel contract for a group venue buyout.
Group Meeting Planner:
Hi! I am in the process of negotiating a contract for a “virtual” venue buy out for a staff retreat. I say “virtual” because we’ll take 100% of sleeping rooms and all meeting space for our program but the outlets (restaurant, marina, etc) will remain open and available to outside guests.
Any tips/advice/clauses that I should include? I obviously want to protect the sleeping rooms, meeting space and full use of the resort for our use. However I also don’t want to get stuck with unused rooms/space if for some unforeseen reason our group size is reduced.
In my experience, a buyout is very much a partnership arrangement with your venue and no two events are exactly alike.
In your specific example, you are looking to ensure full exclusivity – rooms, space, facilities – and mitigate all of your risk at the same time. I see these as competing priorities and it may be necessary for you to evaluate the importance of each.
It may also be beneficial to understand that the venue is taking on risk as well. In allocating the totality of their facility to you, they “risk” the opportunity to sell to other groups/guests at a higher rate. They also “risk” lost revenues if your group size is reduced.
If exclusivity is most important to your group, it is absolutely reasonable to expect that the venue will ask you to fully guarantee all of your rooms and your banquet minimum, both with no attrition allowance. This should ensure full use of the facilities without interruption from other guests and ensure the expected revenues to the venue. (WIN-WIN)
If it is more important to mitigate risk from reduced group size, then I suggest working with the venue to establish a reasonable attrition allowance that permits the hotel to resell your unused rooms/space. The venue will mitigate its risk through resell and there would likely be other guests in the facility, but you will not be “stuck” if your attendance falls. (WIN-WIN)
A third alternative may be a bit of a blend. If the event takes place further out, perhaps the two parties would mutually review the anticipated usage and make adjustments to the room block/space hold based on reasonable assumptions. If the group is reasonably expected to be smaller, you could return some of the rooms/space without liability and allow the hotel to resell them. However, if your numbers are on target, you could ensure your full exclusivity. (WIN-WIN)
Again, the most important component of a buyout is partnership. Be confident that you have selected a true partner and you will ensure your mutual success.