Hotel event costs that planners should be aware of

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, Sean Whalin (Co-founder and CEO of HopSkip) sits down with Barbara Dunn (Partner at Barnes & Thornburg LLP, representing groups) and Lisa Sommer Devlin (Devlin Law Firm, P.C., representing hotels) to discuss the most significant fees or costs a planner should be aware of in hotel contracts.

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!

Significant fees or costs a planner should be aware of in hotel contracts

TL;DR:

• The majority of planners today are using spreadsheets to help track costs between hotels.
  
• In a hotel contract, planners should look for additional add-on charges, such as resort fees, interest fees, attrition, and function space reduction fees are significant costs to review
• Occupancy taxes can vary by locality and should be considered when budgeting.
• Crediting the master account can be a way to offset fees
• Cancellation fees are likely taxable in most jurisdictions.
• Communication between the planner and the hotelier is key to getting the fullest picture of costs
  

Video Transcript:

Sean Whalin (00:00)

What are some significant fees or costs a planner should look out for in a hotel contract? Barbara, is this something you want to kick us off with?

Barbara Dunn (00:10)

Transparency is key, and I agree that fair and reasonable are also key. With that said, it's very important that planners really look at a contract, anew afresh. It's very easy in the course of a busy day, they kind of glance over provisions and you say, oh yeah, I know what that means, or I know what that says. It's particularly important nowadays not to say that on either side there's somebody trying to get one past the other, so to speak. More so in terms of really understanding the impact of the contract on the organization, an economic impact is obviously key, especially as you're evaluating the proposals that you get in connection with your meeting. Certainly, first and foremost, we all look at room rates, but are you looking at additional add-on charges to rooms, most notably resort charges?

Barbara Dunn (01:09)

Resort fees? The president addressing that in the State of the Union address, even elevated what a lot of folks talk about, whether it be the hotel or the airlines, or other organizations that are add-on fees. I think at the end of the day, while many of us have been talking about these types of add-on fees for a long time, in connection with energy and cleaning charges and kind of everything else, I think nowadays it's become custom to have bundled pricing, bundled things right that you might get. With that said, often what might be otherwise, what you might think is otherwise included in a room rate, be it the in-room coffee or the bottles of water, is now part of a bundled pricing or bundled package. That's not to say they're good, bad, and different. Every group is different. What I will say is that make sure you're clear on what that amount is, hopefully negotiating a confirmed amount. That way, it's not subject to change.

Barbara Dunn (02:12)

On that subject to change, make sure that the inclusions that come along with that price, that bundle, are not subject to change unless they're going to add new things. Getting our arms around it on both sides makes sense. I think when it comes to rooms, certainly, that's the thing. The other thing I'll note to you is that this isn't a hotel issue. This is just a general revenue taxation issue. Many of you are accustomed to occupancy taxes, but there are so many different types of taxes now that cities, counties, and states could impose on a person's hotel stay. Much of this is because you check out a hotel and you get a long Folio and you think it's just the one rate. This isn't something that the hotel can necessarily do anything about. If your folks are price sensitive, that might mean that adding in all those charges might make the difference between staying at this hotel and staying at another hotel.

Barbara Dunn (03:07)

That said, that might be an opportunity to try to negotiate a better baseline room rate just because, some of these things might be added on. So just one thought in that strategy. Credit master accounts. A fee to maybe set up a master account. Certainly, we're seeing more in terms of ways of deposits and other charges like that. Interest fees charges. Again, we've seen those for a long time as they relate to disputed master accounts. Something to think about too. Fees to reduce not only the room block we all know about attrition fees and the rest but function space reduction fees. That might be something many of you have thought about, but often can be the case if a group releases space. Because if the hotel can't sell that space, then there is a loss there. Making sure you understand whether there are fees there.

Barbara Dunn (04:02)

Of course, with regard to cancellation, certainly cancellation fees, taxation on room attrition fees, cancellation fees, it's a big it depends location-wise, you've got a check. However, I would probably add that in most instances, in most jurisdictions, the fees are likely taxable. That's a huge, broad, general statement. Obviously, you're going to want to check on that. We've all seen the trend from going for not taxable to probably swinging taxable because of the revenue needs of cities and locales and then some cities imposing destination fees and taxes and things along those lines. I think, bottom line, at least from my vantage point on the group side, the room rate is just the tip of it. Looking at what else the guest might experience, whether it's the guest paying for something or whether it's the group paying for something. To your point earlier, that transparency is really key.

Barbara Dunn (05:07)

No one wants unhappy surprises, and I know, least of all the hotel.

Lisa Sommer Devlin (05:11)

Folks, I agree, about transparency. Again, as I said, communication is the key. I'm a big proponent of keeping spreadsheets about things. It sounds silly, but every time you do something, you have your standard spreadsheet of what costs you incurred at hotel A, and next time you're talking to hotel B, you've got that spreadsheet and can say, okay, do you charge for this, do you charge for that? How much? The other thing is the communication part of it. I get so many contracts where groups trying to protect themselves and I get it says you will not charge us for anything not listed in this contract. Well, that's really kind of difficult for a hotel to do because when you're planning your meeting two or three years out and contracting for this, the hotel probably doesn't have a detailed program of what your events are. And what you intend to do.

Lisa Sommer Devlin (06:00)

How can they say we're not going to charge you anything until they know that you're going to be asking for uplighting in the ballroom or until they know that you're going to be asking for rigging or whatever it might be? The better way to approach that is to give the hotel as much detail as you can at the time of contracting as to what kinds of things your program uses so that to the extent possible, that can all be included or discussed or provided for in the contract. If you can't do that, then build into your contract that the parties will communicate and really sit down significantly in advance to discuss the details of those programs. That then the hotel can say, if this is the lighting you want, it's going to cost you X, Y and Z and then give you a time to say, we can't afford that, it's not in our budget.

Lisa Sommer Devlin (06:51)

You work together and say, all right, what we're going to do instead is instead of having this outdoor event that's going to include a lot of outdoor lighting expenses that you don't want to incur, we'll move the event inside where you won't have those additional expenses. Again, it's working together to figure out what each party can afford to do and how much it's going to cost. The hotel doesn't tack on these fees just for fun, it costs them things. I always kind of get a kick out of customers that want to be in a union hotel and then complain because pricing is so high. Well, that's because union labor costs are typically in most jurisdictions higher than non-union hotels. You've got to factor that in if that's important to your event, whether or not you're going to be able to afford all those extras that you want.

Lisa Sommer Devlin (07:39)

And again, communication is key. Know what you want, and communicate early. I'm often hearing from my hotels that they are very frustrated that an event is less than a month away and they still don't have all the meeting specs and that's very difficult. So get that communication out there. As to Barbara talking about taxes, again, that's always an interesting thing to me because hotels aren't going to charge you tax if they aren't going to pay it to the applicable taxing authority. That's not something they're going to put in their pocket. They're not going to say to you have to pay taxes on this just for fun. Oftentimes customers say, well, you have to provide written proof that these fees are taxable. Well, there isn't probably going to be a revenue ruling somewhere from the local jurisdiction saying that these fees are taxable. It's just a matter of that.

Lisa Sommer Devlin (08:30)

The finance department of this hotel knows and communicates with the local government authorities and the local government authorities say you have to pay these taxes. Again, it's not some conspiracy. They're just doing what they have to do. And I think Barbara is right. You should assume that most damages that you're going to pay are going to be taxable. You also need to be very cautious in your contract language in terms of what it says, in terms of things like your food and beverage, the minimum is $100,000. Well, does that include the tax, gratuity, and service charge, or does it exclude it? You can do it either way, but you need to make sure that both parties have an understanding of that because those are the kinds of things that can sneak up on you. That's why you should be having in your little spreadsheet that you're making notes about, okay, yes, my minimum is $100,000, but on top of that, I'm going to have a service charge, gratuity, and tax so that you can budget appropriately for those kinds of things.

Lisa Sommer Devlin (09:26)

Again, this should be a partnership. It should not be a surprise. The more information you can share with the party you're working with, the fewer surprises will be.

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.