Regulation & risk
Attrition clause
Also written: attrition
What Attrition clause means
An attrition clause is a contract provision in group sales agreements that obligates the client to pay financial damages if they fail to fill a specified minimum percentage of their contracted room block or food and beverage commitment.
Formula
Attrition Fee = (Contracted Rooms × Minimum Commitment Percentage - Actualized Rooms) × (Agreed Room Rate - Variable Operating Cost Per Room)
How it is used
Hoteliers use attrition clauses to mitigate revenue risk when holding inventory for group business. Typically set at 80% to 90% of the original block, the clause defines a allowable slippage threshold. If actual performance falls below this baseline, the hotel charges the group an attrition fee—usually the agreed room rate minus variable costs like housekeeping, or net profit lost. Sales managers negotiate these terms alongside re-sell clauses and cut-off dates to balance risk management with competitive group pricing.
Worked example
A corporate group contracts 100 rooms per night for two nights ($200/night) with an 80% attrition clause (160 total room nights minimum). The group only utilizes 120 room nights, creating a 40-night shortfall. If the variable cost per room is $30, the hotel charges an attrition fee of $6,800 (40 rooms × [$200 - $30]).
Common mistake
Calculating attrition fees based on total gross room revenue rather than net lost profit can lead to legal disputes or unenforceable penalty clauses in court.
Attrition clause in our reporting
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