Understanding Room Block Attrition: What It Means, How It’s Calculated & How to Manage It Effectively

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When planning an event, one of the critical aspects to consider in your hotel contract is the attrition clause. Attrition is the penalty incurred when an event doesn't meet the contracted room block commitment. With fluctuating travel patterns and changing event formats in this post-pandemic environment, managing attrition has become even more challenging. Here, we’ll explore what hotel attrition is, how it’s calculated, why it matters, and strategies to protect your organization.

What is Hotel Attrition?

Hotel attrition refers to the financial penalty applied if a group fails to meet a contracted number of room nights. When booking hotel space, most contracts require a minimum number of rooms to be booked, and if that minimum isn’t met, the organization may have to pay damages. Attrition is crucial for hotels because it ensures a guaranteed revenue from large groups, which helps them manage resources and forecast business.

The challenge in managing attrition has only intensified in recent years. With uncertainty in attendance, organizations face difficulty in accurately predicting room requirements. Attrition penalties can lead to unexpected costs, so understanding and negotiating these clauses is critical.

How is Attrition Calculated?

Attrition can be calculated in several ways, and it's essential to understand these variations before signing a contract. Here are a few common methods:

1. Daily Contracted Block: Some hotels calculate attrition by comparing your daily room pickup to the contracted block each day. For instance, if you contracted 100 rooms on a particular day but only filled 80, attrition fees could apply for the remaining 20 rooms, regardless of how well you performed on other days.

2. Cumulative Room Block: In other cases, attrition is calculated based on your total room block across the entire stay. If you contracted 500 total rooms over a three-day event, and you only picked up 450, you’d be penalized for the shortfall of 50 rooms.

3. Percentage of Anticipated Spend: Some hotels may calculate attrition based on a percentage of your anticipated dollar amount. For example, if you contracted $50,000 in rooms revenue, but your room pickups only contributed $40,000, you might have to pay damages based on that $10,000 shortfall.

While attrition clauses may look similar across contracts, they vary significantly. Post-pandemic, many hotels are offering flexible percentages, often ranging from 80-90% of the room block, and some even include “stepped” reductions. For example, you might be allowed to reduce the block by 10% two months out and another 5% a month before arrival. However, if any adjustments are made to the room block, you could be responsible for 100% of the remaining commitment. These nuances underscore the need to review and negotiate every clause carefully.

Why is Attrition Important to Hotels?

For hotels, room revenue is a crucial income stream. Unlike food and beverage (F&B) minimums that often have slimmer profit margins, room revenue has a higher profit margin, sometimes reaching 70-80% of the room rate. Hotels invest in staff, resources, and supplies to accommodate groups and expect a return on that investment. Attrition helps protect this anticipated income by holding organizations accountable for their contracted commitment.

Why is Projecting a Room Block So Difficult?

Projecting room blocks has become increasingly complex post-pandemic. Here are some reasons why:

1. Historical Data May No Longer Apply: With travel and attendance patterns changing, historical booking data may not accurately predict future attendance. People may be less willing to travel for events or may book shorter stays.

2. Changed Event Footprint: Many organizations have altered the day pattern or month of their events, or even reduced the overall footprint in response to member needs and hotel availability. This shift could mean that an event draws a different audience or fewer attendees, complicating room block estimations.

3. Cost-Consciousness: Budget constraints have made attendees more price-sensitive. They may be more likely to consider alternative accommodations, shared rooms, or cut their stay short to save costs.

What Can You Do to Mitigate Attrition?

Managing attrition requires proactive strategies and effective communication with hotel partners. Here are several best practices to reduce risk and ensure favorable terms.

1. Negotiate an Organization-Friendly Contract

When negotiating your hotel contract, include housing audits and other clauses that protect your organization. A housing audit allows you to verify room pickups and ensure that rooms booked by attendees under different rates or outside the block are counted toward your total. This can help reduce your risk of penalties.

2. Request Regular Hotel Reports

To stay informed about your booking pace, ask for weekly reports from the hotel starting 3-6 months in advance. These reports allow you to monitor booking trends, spot potential issues early, and make adjustments if necessary. Where possible, ask for the hotel to track and share with you on these reports your projected attrition each week. 

3. Proactively Track and Avoid Attrition

Consider implementing the following strategies before the event:

• Maintain Open Communication with Hotel Contacts: Stay in regular touch with your hotel team, escalating issues to the hotel general manager if needed. Early intervention can prevent last-minute issues.
• Conduct Pre-Event Housing Audits: Ask the hotel to audit your registration list against their rooming list to ensure attendees booked under your block. If any attendees are booked outside your block, request to have them moved into your block.
• Contact Registrants Without Housing: Reach out to attendees who registered but did not book rooms. They may be planning to stay elsewhere, but some may book with the hotel if reminded.
• Communicate the Importance of Booking in the Block: Share with attendees the benefits to them and the organization when they book inside of the group room block and the potential negative/financial consequences to the organization if they don’t.   
• Coordinate with “In Conjunction With” Groups: If other groups are meeting in tandem with your event, coordinate to include their rooms within your block as a sub-block.

4. Monitor Daily Onsite

Once the event starts, request daily updates on room occupancy and address any issues immediately. If no-shows or last-minute cancellations occur, quick action can help reduce the impact on your block.

5. Negotiate Before Leaving the Hotel

If your room pickup is close to the attrition threshold, address any concerns with the hotel before departure. This is similar to not liking your meal at a restaurant and then asking for a refund once it’s been fully consumed. Once you’ve left the property, it will become more challenging to adjust terms.

6. Explore Partnership Options to Offset Attrition

In some cases, hotels may be willing to work with you to reduce attrition penalties. Options may include:

• Waiving Attrition: In rare cases, hotels may waive attrition altogether if they have otherwise met occupancy goals, you’ve met/exceeded other contracted minimums, and/or you have an established relationship with the hotel, its team, or the brand more globally. 
• Reduced Penalties: The hotel may agree to reduce the attrition percentage, potentially cutting your responsibility in half.
• Spending Attrition on F&B: Some hotels allow groups to offset room attrition by increasing F&B spend, which can add value to your event. But due to a smaller profit margin on F&B, this requested amount may be higher than your projected housing attrition. 
• Post-Event Audit: Never underestimate the value of a post-event housing audit where the hotel once again compares your final registration list to their in-house guest list. You might be surprised how many additional room nights you pickup depending on the volume of your onsite registrations. 
• Future Bookings: You may also negotiate to cover attrition by committing to a future event at the hotel. This strategy can foster a positive relationship and help both parties meet their goals.

Final Thoughts

In today’s environment, attrition is an unavoidable aspect of event planning — whether in the form of room blocks, F&B minimums, or other financial penalties. But careful planning and proactive management can significantly mitigate the associated risks. By thoroughly understanding the terms, closely monitoring room blocks and projected F&B spends, and maintaining open communication with your hotel contacts, you can protect your organization from unexpected penalties and create a successful event experience.