Event Contracts 2025: Attrition and Cancellation

Changing attendance numbers, questions about international travel, fluctuating pricing — these are just some of the factors causing planners to grapple with their attrition and cancellation clauses this year. It's natural to have questions, and Jonathan T. Howe, founder and president of Chicago's Howe & Hutton law firm and Northstar's longtime legal expert, shared answers in a recent webinar.

"Even if there were not attrition or cancellation clauses in the contract, what you would be facing would be a breach of contract if you don't meet your obligations under the agreement," he noted from the start. "It really becomes a risk-management issue, if you boil it down. You have that opportunity in negotiation to limit or restrict or determine what that risk will be, how much of it you're willing to accept. On the other side is how much the hotel or the venue is prepared to accept under the circumstances in the event of that failure to perform."

It all comes down to how you have negotiated the numbers in your original contract, he said.

Here are Howe's answers to some of the queries that came up during "A Deep Dive Into Attrition and Cancellation." Listen to the full CMP webinar here.  

Resort fees and cancellation

Are hotels counting resort fees as revenue, and including that revenue in cancellation fees?

Yes, they are, if they can get them — resort fees, convenience fees, whatever they want to call them — into the contract. My preference for cancellation and attrition, however, is to specify a certain dollar amount as opposed to a percentage of what you might have paid had the event gone forward. For instance, if the contract says your room rate is $200 and the resort fee is $40, and the cancellation room rate is $200 a night, they'd be giving you a break on the fee for this purpose.

But remember, the hotel is there to make a profit, and the profit comes from all sources of revenue. We're seeing the fees are going to be included in the cancellation or in the formula leading to what the attrition is going to be. That revenue manager is going to look at your meeting or event and make a determination of what should be dropping to the bottom line as profit. So you need to be sure to ask what the attrition or cancellation fee includes and negotiate from there.

Attendee numbers affected by federal government changes

How can planners protect national nonprofit clients whose attendees are state or federal employees and therefore might be subject to travel or funding freezes? 

Well, you're going to have to put it in your contract that if those people are suddenly confronted with a lack of a travel allowance, and it impacts the number of people who are going to attend your meeting, that you reserve the right to cancel or to maybe modify your block or to do something else to reduce that nut that you're going to be obligated to pay if they don't show up.

Is it possible to readjust numbers in a current contract when these political winds change attendee numbers?

That would be a renegotiation after the fact. Now, let me warn you of one thing here that's so important from a contract standpoint. So many times, we are suddenly in the position of renegotiating that contract, and we do a rider, or we do an addendum to the contract. We need to pay very careful attention to what we put in that rider, concerning the impact it's going to have. If you're reducing the block for purposes of attrition, then we have to make sure that we understand that the rider will have a ripple effect throughout the entire contract. And remember, the rider tends only to affect attrition, not cancellation or any other clause; those numbers might need to change, as well. And you also need to check what you've promised in other supplier contracts that are associated with the event.

Cancellation timeline

Is it reasonable to ask for different percentages for lodging and F&B at different timelines for cancellation, versus just a blanket amount?

For cancellation clauses, you always want to look at the type of property are you dealing with and allow for their issues. If it's a resort property, you know it's going to take them more time to rebook following a cancellation than it does if it's an airport hotel or a convention center hotel. And it is probably going to be a little more difficult for a convention center hotel than an airport hotel. A city hotel might be a little bit easier than a suburban hotel. It all depends on what the nature of the beast is when considering what the hotel is going to need from you, relative to notification, so that they can indeed redress the amount of loss, or reduce the amount of loss and mitigate it against what your initial commitment was.

When the hotel changes hands

A group booked a buyout of a property that the hotel then canceled, as they had been sold and now were doing a renovation. They simply refused to pay any damages. Are there any redress options in a situation like that?

That's called breach of contract, based on the fact that the hotel did not or refused to perform. The real question is, Whom do you enforce that contract against? Is it the new owner or is it the old owner? Look at the terms and conditions of the sale. Did the new owner take on the obligations of the property or did they just acquire assets? Your lawyer is going to tell you to sue the old owner for the breach, but maybe just to be careful, we're also going to sue the new owner, too. And so you have multiple defendants, and you hope that they can fight it out. 

But to hedge against those kinds of situations, you need a clause that covers the rehabilitation, remodeling or renovation of the hotel. What are the terms and conditions in that contract dictating what your rights and your responsibilities are in this situation? This also covers other issues, such as making sure that the property that you've signed up for still exists and in what state, and what happens if it's not there. Also, always having a notification provision in the contract requiring the hotel to let you know what's happening that could affect your event. The key element here is, what are your contracts providing, and what are you doing to anticipate what the problem would be? The contract is based upon negotiation. Both sides have to agree to what goes into it. You can't force clauses on them. So your negotiating skills really come into play here, being able to advance and minimize that risk modification or risk limitation.

Haggling over attrition

Why do hotels offer nightly attrition versus cumulative?

Let's think about that for a second. You have the option of looking at attrition from a cumulative, horizontal basis, or a day-by-day, vertical basis. Take this situation: You book 100 rooms for May 1, 150 rooms for May 2 and 100 rooms for May 3. That's 350 rooms. But your actual pickup on May 1 is only 50 rooms. Still, on May 2, you pick up 200 rooms and pickup the planned 100 rooms on May 3. You've picked up 350 rooms, right? But from the hotel's standpoint, it lost 50 rooms nights on May 1 that they can't resell. On May 2, those 50 rooms are gone. They're perishable. Even though 50 rooms were picked up on May 2, the hotel still is out revenue. Maybe I've filled 50 rooms that I might not have otherwise filled, and hopefully, from the planner's standpoint, you'll be able to count those. From an economic standpoint, though, the hotel hurts for May 1. It might have a little benefit from the pickup on May 2, but it's not obligated count that. So the bottom line for the hotel, they want to have attrition based on a day-by-day, a vertical basis. From the planner standpoint, you want to do it on a cumulative basis. Again, how good are you at negotiation?