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Deposits & Credit

How to Structure Your Hotel Event Deposits and Credits

In this video, you’ll learn about how to approach your event deposits with your hotel partner. Learn about what it means for a planner to have a master account with a hotel, how to structure your deposit schedule with your hotel partner and why getting your hotel partner to agree to accept your deposit be placed into an escrow account might be difficult.

Overview

  • Establishing credit at a hotel so that they don’t have to make a deposit, or they don’t have to pay in advance for the master account charges. Deposits are used to pay for all or a portion of event prior to the event taking place.

Group Perspective

  • It’s not uncommon for groups to establish credit at a hotel so that they don’t have to make a deposit or they don’t have to pay in advance for the master account charges.
  • However, credit is tough nowadays across the board, so it’s not unreasonable for hotels to ask for a credit application from the group sooner than later after the contract has been signed.
  • Even if the group has had established credit with that property before. The other thing to be mindful of as well are deposits. Many groups are accustomed to not paying deposits when you have established credit. And yet, deposit schedules are becoming more popular.
  • The better solution is to have deposit schedules that both parties can live with and understand where that money is going to go and what’s going to happen with it.
  • Deposit schedules can be a point of negotiation for the group

Tip: One strategy groups might consider is whether they are willing to pay more deposits closer upfront versus right before the meeting, and you might get an edge in negotiating concessions.

Hotel Perspective

  • If a contract can’t go forward, due to a true Force Majeure, of course, those deposits do need to be returned.
  • When a hotel gets a deposit from a group, it doesn’t keep it in a separate account. It uses it to fund its cash flow and its operations.
  • Hotels are going to be very reluctant to place the deposit in an escrow account (meaning set aside and held for application only to that group’s account).
  • Reason being,
    • If the money is put into an escrow account, that means the hotel can’t use that money for its cash flow which will make operations very difficult.
    • There’s also a cost for having an escrow account
  • When you have an escrow, it’s required under the law that you have an escrow agreement that describes:
    • Where the money will be placed?
    • What interest will be paid?
    • Who gets the benefit of that interest?
    • Who controls when the money is released or not released?
      • all kinds of other factors.

Tip: Look to negotiate the dates on which the deposits are due, Hotels are willing as well to negotiate on deposits.