Last Room Availability Rates could cost companies millions

Tuesday, 25 July 2017 00:05 - - {{hitsCtrl.values.hits}}

Research from CWT Solutions Group, the consulting division of Carlson Wagonlit Travel, shows a 5% gap between the perceived and actual value of Last Room Availability rates.

For a company that spends $ 20 million with their preferred hotels, that could amount to $ 1 million.

When companies have negotiated Last Room Availability (LRA) rates, which are often higher than Non Last Room Availability (NLRA) rates, they have the right to buy a room at their contracted terms and prices even if the hotel only has one room left in that category.

For companies without a negotiated LRA clause, and only Non Last Room Available rates, it’s at the discretion of the hotel as to what price they sell the last rooms.

“Last Room Availability rates have been the gold standard for hotel agreements since the 1980s, and no one has ever really questioned that. But we have now looked into this in great detail and it seems like the gold has lost some of its shine,” said Eric Jongeling, Director, Hotel Solutions. “Our research shows between 5% and 11% differences in some markets so travel managers should bear this in mind when negotiating global rates.”

The key findings of the research, which analysed 7,300 hotel bookings in 2016 across 97 countries, revealed that:

· There is a 5% gap between perceived and actual value of LRAs. This can translate into millions lost each year for corporations on misperception of the value of LRAs.

n44% of hotels charge a premium for including an LRA clause.

n12% chance that the traveller will not be able to stay at their contracted rate – even with an LRA rate.

nMultiple hotels in a target market negates the need for an LRA clause.

nThe perceived value differs considerably between premium and economy hotels and between cities.