Industry Experts

Rebates In Your Hotel Contracts

Learn what rebates are in hotel contracts and why hotels are sensitive to making sure the group discloses the rebate to their attendees

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The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

In this video, you'll learn what rebates are in hotel contracts and why hotels are sensitive to making sure the group discloses the rebate to their attendees.

Check out what Barbara Dunn (Partner at Barnes & Thornburg LLP, representing groups) and Lisa Sommer Devlin (Devlin Law Firm, P.C. representing hotels) have to say in Legalease With the Ladies- powered by HopSkip!

Video Transcript:
Rebates in your hotel contracts

Barbara: Hi, I'm Barbara Dunn an attorney that works with groups in connection with their meetings travel and hospitality contracts.

Lisa: And I'm Lisa Sommer Devlin, an attorney that represents hotels and resorts regarding group and convention related matters.

Barbara: And together, we're Legalease with the Ladies powered by HopSkip. Today's topic is focusing on rebates in hotel contracts. As an attorney that represents groups, I know that the cost of meetings can be very expensive for groups to put on. And often rebates are a technique by which the group can offset some of those expenses within the hotel contract for use in other areas. For example, rental of the convention center or transportation costs for attendees. It's really important though to understand what that rebate does and doesn't mean. First of all, a rebate is typically a set dollar amount that's part of the hotel room rate. Often, it's paid or calculated on a per night basis, although sometimes you do see rebates based on a per reservation basis.

So, first it's important to understand what the basis is. Second, it's important to understand what that dollar amount is. Again, typically it's a stated amount. And of course, most importantly understanding whether the rebate is included in the group rates that were noted above. That's going to be particularly important as well. Now hotels often want groups to disclose the rebates to their attendees. Now I know Lisa is going to speak about the importance of disclosing rebates to groups attendees. And from my perspective I advise my group clients to let attendees know that a portion of their room rate will go back to the organization to offset costs. I think that's a reasonable disclosure to make and I think individuals understand that as well.

But Lisa, I know this is an area in particular that the hotels are sensitive to - making sure that that disclosure is made.

Lisa: That's right Barbara. Hotels are very sensitive about rebates and there's several reasons for that. First of all, the rebate is usually added on top of the negotiated group rate. And that can be a problem in this time when people are so rate sensitive and the internet allows people to find other available rates so easily. If the rate is artificially inflated to include a rebate, it may mean that people aren't interested in booking within the official group room block, leading to attrition claims and then the hotel is told, ‘Well there are the people reserved outside the block,’ because the rate was too high. And the hotel's response is the rate was too high because you wanted us to add a rebate.

From the hotel's perspective, they would much rather have the group add whatever the value of the rebate is to their registration fee. And to educate their attendees about those costs that are involved in the event. People need to be told, it costs money to have the shuttle bus taking everybody from the hotels to the convention center or whatever the case may be. And build that into the registration fee and then you don't have those rebates. But if you do think a rebate is necessary, it is very critical that it is properly disclosed. That's because depending on the state law that applies, if a portion of the room rate is being paid to a third party in this case the group sponsoring the event and it is not disclosed to the person who's paying that rate, it could be considered commercial bribery.

Now again the law varies from state to state, but since most major events have people coming from all over the country, you don't want to be in a position of trying to evaluate what state's law might apply and who might make claims. And the bottom line is if you have to hide how you're making money, you probably shouldn't be doing it. So, from the hotel's perspective, they're always going to put in a clause saying, ‘That if there's a rebate or a commission, that it is up to the group to determine the extent to which they have to disclose that and to make that disclosure if it is required.’ Again, the preference would be to have the rebate simply added to the registration fee. But if not, that disclosure is a key element. Barbara?

Barbara: Yes, I agree with you Lisa on the disclosure point. One other thing to note - often commissions and rebates live together - coexist in a hotel contract. And often with regard to the commission which is a portion of the room revenue, so typically calculated on the room rate it's stated that the commission does not include the rebate. In other words, the rebate is subtracted from the group's room rate before commissions are calculated. So, that's another nuance to look for as well as you look at your hotel contracts. Bottom line, rebates can be a very effective tool to generate additional revenue. But again, there may be other concessions that groups could seek in hotel contracts. Which may have more benefit to the group long term as well as offsetting expenses for their meetings and events.

Thank you for joining us for Legalease with the Ladies powered by HopSkip. Please leave your feedback and comments below. We look forward to seeing you again soon.


The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

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