For clients who frequently require accommodation for travelling employees, having a well-negotiated travel policy that factors in hotel pricing rates, will translate directly into measurable savings for your business. While Worldgo has access to exclusive globally negotiated hotel rates, it’s important to understand how hoteliers set their room rates, as well as what they mean, so you can work with your travel manager to develop a high-performing travel policy.
Broadly speaking, there are four distinct types of hotel rates available at any given time.
- Best Available Rate (BAR)
A popular revenue management technique used by hotels around the world, Best Available Rate is determined by expected room demand as influenced by local events, time of year etc. As such, this rate fluctuates nightly and represents the best non-negotiated rate available at the time of booking. BAR is sometimes referred to as Best Unrestricted Rate (BUR) and Best Flexible Rate (BFR).
- Last Room Availability (LRA)
Under LRA, a special client rate has been pre-negotiated with the hotel for all rooms in a specific category group. Therefore, any room that falls within that category up to and including the last room available, will be priced at that predetermined rate.
- Non-Last Room Availability (NLRA)
NLRA is an agreement between a hotel and client whereby the negotiated rate is available to travellers only at the discretion of the hotel. This means that during peak periods, hotels can block NLRA rates and charge a higher rate to maximize revenue.
- Dynamic Pricing
Dynamic pricing is simply a discounted rate off the BAR rate. For organizations that reach a certain room night volume, a fixed discount can be negotiated with the hotel. Under this pricing structure, the discounted rate fluctuates in line with BAR fluctuations.
The Benefits of Contracted Hotel Rates
If your business is a high volume accommodation user, you may be eligible to negotiate a contract rate. While volume targets and spend thresholds vary with local market conditions, generally speaking, if your organization produces 100 room nights per annum, you can negotiate a contracted rate. In certain key global markets, such as New York, minimum room night commitments can be as high as 500 before a hotel will extend contracted rates.
Once a contract is in place, the hotel will offer your firm a rate based on LRA or NLRA. Which rate the hotel offers is based on a variety of factors including volume commitments, market conditions etc.
While LRA is usually a premium rate, it ensures last room availability at your predetermined contact rate within that room category. If your agreement is based on NLRA, the nightly rate may be lower than LRA, however, if the hotel becomes fully booked this rate will be closed out and you’ll be subject to the BAR rate at the time of booking.
With an endless array of third-party websites, you might stumble across a cheaper last minute rate. Before booking through these channels, it’s important to understand the benefit of using your contracted rate, even though it may be more expensive.
Firstly, booking online doesn’t count towards room night targets for your organization. So while booking through a website may save you money in the short run, over the long run, you are diminishing your firm’s ability to garner even better-negotiated rates. Secondly, contracted rates have built-in flexibility ideal for business travellers such as 24 hour or same-day cancellation. Finally, if you’re meeting is cancelled unexpectedly, online rates will often be non-refundable leaving your business on the hook for extra travel expenses.