ABC Corp is holding a meeting at XYZ Hotel. Some of the terms of the contract between the two parties are as follows:
• XYZ Hotel will hold the following block of rooms for Group’s use (“Room Block”):
Date Type No.
03/01/2021 Single/Double 125
03/02/2021 Single/Double 125
Total room nights 250
• XYZ Hotel is pleased to confirm the following room rates for this group: $189 per night.
• If the total cumulative room nights of ABC Corp’s pick up is less than 80% of the Room
Block, ABC Corp will be responsible for a Guestroom Attrition fee equal to the difference
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between the total of room nights used and 80% of the final guestroom nights blocked,
charged at 70% of ABC Corp’s Contracted Room Rate.
Explanation of the ABC/XYZ Attrition Clause:
If 200 (80% x 250) room nights are not sold in connection with the ABC Corp meeting, an additional fee will apply pursuant to the attrition clause.
If only 175 room nights were picked up (or sold), the fee will apply. It is calculated as follows:
• Required Pick up (80% x 250 = 200) – Room Pick up (175) = 25 room nights
• Payable at 70% of contracted rate ($189) = $132.30
• Amount due (25 x $132.30) = $3,307.50
Thus, ABC Corp will have to pay XYZ Hotel an additional $3,307.50 under the Attrition Clause.
Note that in this example the attrition fee clause states that the fee will be based on a percentage of the contracted room rate (70% in this case). Not all attrition clause include a reduction for the room rate in the calculation. Remember to read the clause carefully since every contract is different.
Problems
1. ABC Corp decides to hold its 2024 conference at the H-Town Hotel. The attrition clause and related terms of the contract between the parties follow:
• Event Dates: January 5 – 6, 2024
• Guest Rooms: This Agreement ABC Corp (“Customer”) and H-Town Hotel (“Hotel”)
applies to the following block of guest rooms (the “Room Block”):
Jan. 5 Jan. 6 Totals
Traditional Guestroom 70 70 140
Attendees Room Block Total 70 70 140
• Total Guest Room Night Commitment: Customer’s total Guest Room Night
Commitment is 140.
• Rates: Hotel will provide the confirmed guest room rates below for the Room Block
(the “Rates”):
Attendees Room Block:
Rooms Single Rate Double Rate
Traditional Guestroom $110 $110
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• Attrition:
ABC Corp (“Customer”) agrees a loss will be incurred by Hotel if Customer’s actual
usage is less than 80% of the Guest Room Night Commitment.
If Customer’s actual usage is less than 80% of the Guest Room Night Commitment,
Customer will pay, as liquidated damages and not as a penalty, the difference between
80% of the Guest Room Night Commitment and Customer’s actual usage, multiplied
by the average group room rate, plus applicable taxes.
How much will ABC Corp owe H-Town Hotel under the attrition clause if they have 35 attendees, each staying both nights?
