Successful event professionals know that even the best-laid plans can change—attendance fluctuates, cancellations arise and budgets must stay flexible. That’s why attrition and cancellation clauses are essential components of event contracts.
Here’s how they work:
An attrition clause protects the venue or service provider when the client falls short of the agreed-upon usage, such as booking fewer hotel rooms or meals than originally planned. It ensures the provider is compensated for the shortfall.
A cancellation clause, on the other hand, outlines the financial obligations if the event is called off entirely. It sets clear terms for how much is owed based on when the cancellation occurs, helping both parties manage risk and recovery.
When carefully crafted, these clauses protect both planners and hotels, shielding planners from overcommitment while providing vendors with the financial security they need to hold space and allocate resources.
Joshua L. Grimes, Esq., president of Grimes Law Offices, LLC, emphasizes that attrition clauses are vital—and negotiable. For starters, when estimating your room needs, Grimes cautions, be sure to consider the current economic climate and recent federal policies that are directly impacting travel spending and meeting attendance. Financial uncertainty and government-imposed travel restrictions might deter attendees, making accurate room block estimation more critical than ever.
“Failing to account for continued uncertainty might lead planners to overestimate room block needs, which can result in large attrition bills,” Grimes says.
What to Expect in Negotiations
Negotiating lower room block requirements and flexible attrition amounts can be challenging, but securing adaptable terms is particularly important right now, when government policies are being updated on the regular. “Groups need flexibility before they feel comfortable committing to a contract,” Grimes explains.
Attrition and cancellation terms should be discussed early in the process. “Planners have the most bargaining power before signing a meeting contract; later, venues might refuse room adjustments or demand more concessions in return,” Grimes notes.
Event profs, here’s what to know to make attrition and cancellation clauses work for you:
Attrition Clauses: Managing Shortfalls in Attendance
When booking a hotel room block, you commit to filling a certain number of rooms. The hotel holds those rooms, expecting revenue in return. But if fewer guests book than expected, attrition fees compensate for the hotel’s lost revenue.
Attrition is expressed as a percentage, determining how much of the room block must be filled before damages apply.
For example:
- You reserve 100 rooms, and the hotel allows 25% attrition without liability. If 75 rooms or more are booked, no penalty applies.
- If fewer than 75 rooms are booked, you’ll owe an attrition fee for the unfilled rooms below that threshold.
Attrition fees are typically structured as liquidated damages, meaning both parties agree in advance on the financial impact rather than reassessing actual losses. Negotiating reasonable terms can prevent excessive costs.
Negotiating Terms of Attrition Clauses
To protect your budget and allow for flexibility, consider these negotiation strategies:
- Lower the required percentage of rooms before attrition applies. Instead of committing to fill 85% of your room block, ask for a 75% threshold.
- Require the hotel to credit revenue from resold rooms toward attrition fees. If they resell unused rooms, you shouldn’t be penalized.
- Limit fees to actual lost profits—usually around 70% of the nightly room rate—rather than inflated liquidated damages that include unnecessary service fees.
- Set scheduled dates to review attendance pickup with the hotel. If expectations shift, agree on room block adjustments before damages kick in.
- Calculate fulfillment of the room block over all nights of the event, rather than per night.
- Ensure attrition damages are the hotel’s exclusive remedy. This prevents additional compensation demands beyond the agreed-upon fee.
Cancellation Clauses: What Happens If an Event is Called Off
Cancellation clauses define the financial impact if an event doesn’t happen. The penalty depends on timing—the closer to the event date, the higher the fee, since the hotel has less time to fill the empty rooms.
Most hotels use a tiered fee structure based on when cancellation occurs:
- 90+ days before the event = approximately 50% of expected room revenue
- 30-90 days before the event = 70% of expected room revenue
- Fewer than 30 days before the event = 75% of expected room revenue
Anticipated F&B revenue might also be charged if cancellation occurs shortly before the event, Grimes notes. Additionally, cancellation damages shouldn’t apply in a force majeure situation—where unforeseen circumstances prevent the event from proceeding.
Negotiating Terms of Cancellation Clauses
To avoid excessive fees, ask for the following:
- Cap fees at estimated lost profits instead of 100% of room revenue.
- Require hotels to resell rooms and deduct resold revenue from cancellation damages.
- Negotiate favorable percentage tiers—opt for 60% rather than 70% of expected revenue.
- Delay cancellation fee payment until after the original event date. This avoids upfront financial strain and allows adjustments based on rooms resold.
- Request that damages be waived if you book another similar event at the same venue within 12 months.
More Ways to Avoid Paying Attrition or Cancellation Fees
Beyond negotiating contract clauses, planners can proactively reduce financial risk:
1. Right-size your room block.
- Consider event history and external factors affecting attendance to avoid overcommitting.
2. Encourage early bookings.
- Offer discounts for attendees who reserve hotel rooms by a set date.
- Require deposits on hotel reservations to ensure commitment.
- Communicate reservation deadlines clearly to boost early commitments.
3. Monitor reservations.
- Track booking patterns early to spot potential shortfalls.
- Negotiate review dates with hotels for room block adjustments based on registrations.
4. Maintain open and frequent communication with hotels.
- Provide realistic attendance projections.
- Seek to renegotiate terms if numbers shift significantly.
- Ensure hotels make efforts to resell rooms before enforcing damages.
Remember, attrition and cancellation clauses aren’t penalties—they’re essential agreements that ensure both planners and venues remain financially secure when expectations shift. By securing fair terms, planners can protect their budgets, maintain flexibility and ensure successful events—even when plans change.
