Food and Beverage Performance Damages
In cases where a Food and Beverage Minimum exist in the
contract
Customer will pay any food and beverage damages that occur
computed at (agreed on percentage between 30 and 40%) of the shortage which
represents the industry standard for lost hotel profit. If Customer cancels a
function and the hotel is able to replace it with another function, the
resulting profit will be credited toward the damages owed by Customer. In
addition, if events are added in conjunction with the meeting, the resulting
profit will be credited toward the damages owed by Customer.
OR
Customer will only be required to pay 40% (exclusive of tax)
of the difference between the spend food/beverage and the Food and Beverage
Minimum in the event that Customer is unable to reach the Food and Beverage
Minimum. The 40% represents the lost profit which is an agreed upon amount that
is a reasonable estimate of the Hotel’s damage resulting from the failure to
provide banquet food and beverage revenue and that such payment does not
constitute a penalty.
As an example:
If the Food and Beverage Minimum is $30,000++ and Customer
only spends $25,000++ in food and beverage charges, Customer will be charged
$27,000++. No tax shall be payable on attrition damages unless required by
state law.
F/B Attrition = (Food & Beverage Min – Spent Food &
Beverage) = $30,000 - $25,000 = $5,000.
Lost Profit = F/B Attrition x 40% = $5,000 x 40% = $2,000
Total Owed by Customer = Spent Food & Beverage + Lost Profit
= $25,000 + $2,000 = $27,000.
Also the following clause placing an obligation on the hotel to make its best efforts to resell rooms plus apply those resold toward attrition may be useful to planners.
RESELL
The Hotel
shall undertake all efforts to resell any unused rooms and meeting space
and shall credit those sales against any attrition or meeting room rental
fees. The Group shall not owe any attrition or meeting room rental fees
if the Hotel resells the space or meets or exceeds its projected occupancy for
that particular period of the year. Furthermore, in the event the Hotel fails
to meet its projected occupancy, the Hotel shall assume the obligation of
demonstrating that (i) but for the Group’s attrition, the Hotel would otherwise
have achieved its projected occupancy for that period, and (ii) that rooms and
meeting space being reserved for the group were unsold. An audited statement of
actual guest room and meeting space usage for each day of the function shall be
provided to the group upon request. CLIENT NAME shall not pay for
off-line rooms or meeting rooms (being remodeled or not used for any reason).
