What is Attrition/Shrinkage and How to Avoid Fees?
What is attrition?
Attrition percentages are negotiated in the hotel contract between the hotel and the meeting planner with the goal being to estimate the most accurate room block possible between the two organizations. It’s beneficial for the hotel to have all rooms booked and it’s great for the conference to have high attendance with rooms booked. So, when negotiating your contract, this is a clause that will be important to both parties.
Attrition describes the amount of hotel rooms you must book within your contracted hotel room block to avoid penalty. The attrition penalty is usually the difference between the rooms you booked and the attrition limit. For example, if you sign a hotel contract for 100 room nights and your contracted attrition is 80%, you are required to book 80 room nights (or 80% of the total), or you will have to pay a penalty.
What is hotel shrinkage?
Hotel shrinkage is the opposite of attrition. It is the allowable percentage or number of room nights not booked that the hotel allows without penalty. Using the example above, when booking 100 room nights and the attrition percentage is 80%, the shrinkage is 20%, or in this case 20 rooms. Shrinkage is not as commonly used.
A few types of attrition clauses
Percentage of the total room block is often used in contracts. This is when the hotel requires a specific percentage of the room block to be booked or you must pay a penalty. This is the example we used about with the 100 room nights and the 80% attrition level.
A stair-step method is where you work with the hotel to allow a release of rooms by specific dates. In incentive locations, like the Caribbean, they ask for high attrition percentages (like 100% or 90%) because they know that they can book those remaining rooms with leisure guests if your group does not actualize the room nights. In this scenario, a stair-step method would be best for both parties. Once you release rooms, the hotel can then resell them to leisure guests with enough lead time and you are no longer responsible for those released room nights.
An example would be: if you booked 100 room nights in March of 2020 for a conference in March of 2021, but know that you’ll have a good idea of who is coming by July of 2020, then you could put July 2020 as your first release date for room nights. Normally, we try to keep to a total attrition level of 80% so we offer 5% release in July and then maybe another 5% in October and then a 10% in January. This allows the hotel at least 30 days to book leisure guests for the rooms released in January.
How to avoid attrition fees?
- Know your conference attendance and booking history. This will help guide you to the most accurate room block needs
- Negotiate the lowest attrition percentage you can get
- A lower attrition number is always preferred by the meeting planner, but from the hotel perspective, they also want to know that your business is solid and will fill their rooms. So, if the piece of business you’re bringing to the hotel is not a great piece of business, they may require a higher attrition rate. A good example of this is if you are requesting a large amount of meeting space, but a low amount of hotel rooms. This is a less attractive piece of business to a hotel; therefore, they may request higher attrition. See our other post on why hotels might not want my business.
- Keep an eye on your registration numbers. If your registration is starting to slow and you have a large room block to fill, this is when you need to reach back out to your hotel to start working on solutions. Can you possibly give up some meeting space back to the hotel and negotiate releasing some of those rooms back to the hotel? Keep in mind, that a contract is a contract. A hotel may not allow you to change or amend a contract, so accurate planning and a positive relationship with your hotel team is key to avoiding fees.
- An audit or grip clause is beneficial to have in your hotel contract as well. This clause requires the hotel to compare the conference registration list with the hotel bookings to see if any guests booked outside the block and were perhaps not recorded on the pickup report.
- Cumulative vs non-cumulative room blocks are also an important way to avoid attrition penalties. It is important to make sure that your attrition is cumulative. For example, if you have 100 rooms each night on Monday, Tuesday and Wednesday for guests to stay for the conference (300 total room nights), but you only have 70 rooms filled on Monday, Tuesday and Wednesday, but those 70 guests come in a day early and stay a day late, then your total room nights would be (70+70+70+70+70=350). If you negotiated these rooms to be cumulative, you would still hit your room block numbers. If your contract has non-cumulative room block, then you would be paying a penalty you would have 30 room nights unfilled on Monday, Tuesday and Wednesday, regardless of the nights booked pre and post.
- We also recommend verbiage in your contract that states if the hotel is sold out, then attrition will be not applicable for that night. It seems reasonable, but if it is not in writing, then it’s hard to fight for this.
As I am sure you can see, knowing your guests and their booking history will really help in avoiding attrition fees. The more accurate you can be in planning, the happier you will be, the happier the client will be and the happier the hotel will be for your conference. It’s a win-win if we can get those pesky estimates accurate!
Attrition in the time of COVID-19
Attrition during COVID-19 has been an interesting predicament. Normally, we would say a contract is a contract (as mentioned above); however, because this has been an unprecedented issue for both hotels and meeting planners, our advice is to utilize your hotel relationships wisely and find a solution that is fair and equitable for both parties. Doing so can ensure the success of future conferences.