Availability in corporate contracts

Many hotels leave money on the table during the negotiation of new or renewal of corporate contracts by not paying full attention to the availability clauses in the contracts.

Controlling the inventory is a major concern for hotels to be able to maximize the room revenue in a hotel. Balanced availability controls in corporate contracts can help or hinder the hotels in maximizing room revenue.

Availability options

Both parties would like to achieve maximal flexibility in terms of availability. The customer would like to be able to book the corporate rate as long as there are any rooms whatever room type including suites available at the hotel. The hotel, on the other hand, would be able to close out the lowest corporate rates when the hotel can sell the rooms to higher rates.

Here are the four major options for availability.

Allotment

The customer (company) will be guaranteed a minimum number of rooms per day or per a specific day of the week based on their travel patterns. Since business transient bookings tend to have a very short booking window, the customer would like to keep at least a few rooms of the allotment for same-day bookings. If the customer will guarantee these same day bookings and pay for the rooms even if they remain empty, it would not necessarily be a good deal for the hotel. It all depends on the total demand in the city for those days. The value of the allotment for the customer is high in a high demand market and if the release of unsold rooms easily could be resold by the hotel, it could result in a higher rate for these released rooms.

In order to make a decision about allotments, the hotel has to have an accurate forecast as well as data about the uptake of the allotment from the customer over time and for specific dates or days of the week. This is the second least expensive for the customer provided that the customer can manage the allotment and not be forced to pay for not used rooms.

Positive impact for the customer through a lower rate. Positive impact on the hotel through a stable volume.

Last room availability

This availability status means that the customer can book the negotiated rate as long as there are any available rooms (including suites) in the hotel. This means that there are no guarantees that the customer will be able to book a room at the hotel as when there is an allotment. In this case, the principle is first come, first serve. There is some value for the customer in a normal demand market when the customer will most likely always be able to book a room at the corporate rate. In a high demand market, the hotel will most likely sell out and there will not be any rooms available to any rate. For the hotel, there will be days when the corporate customer book rooms to a lower rate that could have been sold to higher rates. This availability option is the most expensive for the customer.

Positive impact for the customer through access to availability on high demand days even if it is to a general higher rate.

Last room type availability

Most hotels have different room types that are priced differently. The hotel would like to sell each room type to the rate associated with the room type to be able to maximize room revenue. For a hotel, it is therefore important to be able to contract several room types instead of just one generic room. This means that when a room type is sold out, the customer will still be able to book, but only a room type that is still available at the rate for that specific room type. From the customer perspective, the business traveler does need the option to from time to time book a specific room type, so negotiated rates for a few room types would benefit the customer as well. This availability option is the second most expensive for the customer.

Positive impact for the customer with different options to different rates. Positive impact for the hotel to sell the right room type to the right rate.

Non-Last room availability

In this case that parties agree about a rate for one or several room types that will be available most of the time, but most likely not during high demand days when the hotel can sell the rooms to a higher rate. This availability option is the least expensive for the customer since the customer gives up access to available rooms during high demand days.

Positive impact for the customer through a lower rate. Positive impact for the hotel when able to close low rates during high demand days.

Can the hotel handle the complexity?

Even if there are only four major availability options this could be difficult to handle for hotels. It all depends if the central reservation system (CRS) and the property management system (PMS) can handle the various options. It could also be difficult to handle many corporate contracts with different options. It would take more time to load rates in the various systems as well as maintaining the all rates in all systems.

One option for the hotel is to set its own policy for availability in all its corporate contracts. The hotel will not be open to negotiating any availability option and only offer one of the four options. If the potential customer cannot accept the hotel availability policy for corporate agreements, there are most likely many other potential customers that would, and the hotel should solicit them instead.

Follow-up and reporting

Finally, how much and who benefitted from the availability option that was agreed in the corporate contract? Both the customer and the hotel would like to know so they learn how to negotiate a renewal of the contract for next year.

The customer would like to know

  •     How much did we save compared to not having a contract?

The hotel would like to know

  •     What was the net value of the contract compared to not having a contract?

Demand Calendar will help you analyze your corporate business both from the customer perspective and from the hotel perspective.