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New ancillary fees and what this means for your next meeting

Aug 27, 2021, 18:43 PM by Blair Potter
The race has begun for the return to profitability for hotels and other venues, with ancillary revenue and other “optional charges” a favorite.

The following information is from The New Legal Landscape for Event Contracts, a webinar recently hosted by the Event Leadership Institute featuring Joan Eisenstodt and Joshua L. Grimes, Esq., as well as original interviews. Learn more about ELI educational offerings.

Ancillary charges are not new, explains Joshua L. Grimes, Esq., of Grimes Law Offices LLC a veteran meeting industry attorney based in Philadelphia.

“What is new is that some hotels are now seeking to add anticipated ancillary revenue (AR) into a calculation of cancellation and attrition damages,” Grimes says.

Traditionally, AR was comprised of miscellaneous charges over and above rooms revenue. From non-group food and beverage to retail and activities, AR is a common term familiar to most planners. What’s new is optional AR being added to anticipated room revenue and other mandatory group expenses to determine cancellation and attrition damages. Basically, a hotel is saying: “We think an average guest is going to play golf, so we expect greens fees. A guest will drink in the bar and eat in the restaurant during non-group functions, so we’re adding all that AR into the total anticipated revenue and we want a percentage of that, too.”

“We’re seeing it more and more,” Grimes says. “Planners need to make sure these AR inclusions are OK for their group.

“If you signed contracts more than a year out, even without COVID, nothing would be the same for your meeting because pricing, staffing and conditions change.”

“Also, there are a few items that hotels used to provide for free that they now may seek to charge for, in addition to a resort fee,” he adds, citing daily housekeeping and use of the hotel swimming pool as examples.

Another new charge to be wary of, he cautions, is an “administrative fee” added to meeting room rental in addition to the many other existing and associated meeting costs. This administrative fee is fairly new at some properties, Grimes says, and it is levied in addition to existing service charges.

“Planners should look out for this charge and others when reviewing new contract proposals,” Grimes advises.

Meeting industry veteran Joan Eisenstodt, who helps large organizations negotiate contracts, as well as speaks for an industry she has led for many decades, says nothing is what it was pre-COVID.

“If you signed contracts more than a year out, even without COVID, nothing would be the same for your meeting because pricing, staffing and conditions change,” she says.

“Because no resort fee amenities are provided for an empty hotel room, there should be no resort fee charge on cancellation. The same goes for service charges.”

And if you're negotiating now for a new meeting, she adds, ask for definitions of what the hotel uses to calculate AR and how it applies to a “group like yours.”

“Is it based on the history of your group, or if ‘like ours,’ define what that means,” she says. “If the clause is in a current contract, find out what is and isn’t open for business (F&B outlets, room service, etc.) or will be for your meeting. Then ask for a calculation or try to negotiate removing this clause depending on where it is used and how. Depending on the type of your group, spending on AR may not even be realistic if the outlets aren’t open.”

Ancillary charges, in the context of calculating revenue from a meeting, are not customarily part of the calculation of AR from a group for purposes of cancellation or attrition damages because they are totally optional, Grimes says, citing revenue from the hotel bar, greens fees, spa charges and hotel gift shop spending as examples.

“There are several ways to calculate cancellation damages,” he advises.

What’s new, Grimes says, for planners today is the inclusions into the calculation of lost revenue that some hotels want to include.

“These inclusions can include optional ancillary revenues, resort fees and service charges,” he says. “Because no resort fee amenities are provided for an empty hotel room, there should be no resort fee charge on cancellation. The same goes for service charges.”

Planners not reading the fine print

While AR has been in contracts for more years than Eisenstodt can remember, she is increasingly concerned that once contracts are signed, many of today’s planners aren’t carefully and frequently re-reading them to look for changes made by hotels and venues, as well as question and spell out what the initial language means. While recently reviewing the website of a hotel where a client is scheduled to meet in 2022, Eisenstodt was surprised to discover a host of new charges.

“Not unlike the ‘resort’ or ‘hotel’ fees, but different and called a tax of sorts,” she says. “We don’t know yet how this will be factored in.

“Planners may gloss over the terms and conditions that are in the body of the contract, or in an agreed to policy document that may nor may not be made part of the contract. However, often it is mentioned and linked to a hotel’s website stating that they will allow changes to be made without notice,” Eisenstodt cautions, adding that this often happens because planners are simply not aware and with hotels short staffed, they probably assume planners are asking the right questions.

Make no assumptions about any terms or conditions in any contract, Eisenstodt advises.

“If you have, or even if you do not have a review provision, do something,” she says.

Eisenstodt advises planners to read hotel websites to look for current information on policy changes.

“And it’s not just AR—it’s all conditions,” she says. “People take terms and conditions for granted; feel ‘silly’ asking to define them and then define them in writing. But if an addendum or revised document needs to be negotiated and clarified, do it.”

Photo by Romain Dancre on Unsplash

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