Sourcing Academy

Rebates

Rebates in Hotel Contracts

In this video, you’ll learn what rebates are in hotel contracts and why hotels are sensitive to making sure the group discloses the rebate to their attendees.

Overview

A rebate is typically a set dollar amount that’s part of the hotel room rate. Often, it’s paid or calculated on a per night basis, although sometimes you do see rebates based on a per reservation basis.

Group Perspective

Rebates can be a technique by which the group can offset some of their meeting expenses within the hotel contract for use in other areas.
It’s important to understand what that dollar amount is
Hotels often want groups to disclose the rebates to their attendees and it’s always a good idea for the group to let attendees know that a portion of their room rate will go back to the organization to offset costs.
Often commissions and rebates coexist in a hotel contract. Often commission is a portion of the room revenue. In other words, the rebate is subtracted from the group’s room rate before commissions are calculated.
Bottom line, rebates can be a very effective tool to generate additional revenue but there may be other concessions that groups could seek in hotel contracts. Which may have more benefit to the group long term as well

Hotel Perspective

Hotels are very sensitive about rebates
The rebate is usually added on top of the negotiated group rate. And that can be a problem in this time when people are rate sensitive and the internet allows people to find other available rates so easily. If the rate is artificially inflated to include a rebate, it may mean that people aren’t interested in booking within the official group room block, leading to attrition claims and then the hotel is told, ‘Well there are the people reserved outside the block,’ because the rate was too high. And the hotel’s response is the rate was too high because you wanted us to add a rebate.
From the hotel’s perspective, they would much rather have the group add whatever the value of the rebate is to their registration fee.
Hotels prefer groups to educate their attendees about those costs that are involved in the event.

Tip: Communicate to your attendees, it costs money to have the shuttle bus taking everybody from the hotels to the convention center or whatever the case may be.

Build that into the registration fee and then you don’t have those rebates.

If you do think a rebate is necessary, it is very critical that it is properly disclosed. Depending on the state law that applies, if a portion of the room rate is being paid to the group sponsoring the event and it is not disclosed to the person who’s paying that rate, it could be considered commercial bribery.
Since commercial bribery law varies from state to state, but since most major events have people coming from all over the country, you don’t want to be in a position of trying to evaluate what state’s law might apply and who might make claims.
From the hotel’s perspective, they’re most likely going to put in a clause saying, ‘That if there’s a rebate or a commission, that it is up to the group to determine the extent to which they have to disclose that and to make that disclosure if it is required.’
Again, the preference for hotels would be to have the rebate simply added to the registration fee. But if not, that disclosure is a key element.