The Case of the Elusive Negotiated LRA Rate

By Neil Hammond, Partner

Nearly two years ago Steve Reynolds was explaining the benefits of his TRIPBAM technology to me at an industry event. At one point in the conversation, Steve casually mentioned that buyers are not using their negotiated LRA rates for about 40% of bookings. As that seemed high to me, I took the information with a pinch of salt and put this down to a bit of marketing hyperbole.

Fast forward to earlier this year at GoldSpring, when we began to detect that the hotel rate loading performance on many hotel programs was slightly lower than usual. In response, we developed an audit report to monitor actual bookings made by clients in comparison to the negotiated rates, to see if our clients were being adversely impacted. The results were rather surprising and revealed issues that went far deeper than rate loading problems.

The first thing we discovered was that across all GoldSpring clients, the negotiated rates usage for the 2017 programs ranged between 55% and 72%. Not only did this validate Steve’s claim, but also it confirmed the suspicion that many buyers have held in recent years that negotiated LRA rates are not being honored with the advent of more dynamic hotel pricing models.

When we dug into the results more deeply we concluded the following:

  • The results varied heavily by property and by market. Some properties saw very high, even 100% usage, while others were very low. The vast majority of those unutilized were LRA rates.
  • In 65% of the instances where the negotiated rates were not utilized, a higher rate was used (i.e. the negotiated rate was not available).
  • In 35% of the instances where the negotiated rates were not utilized, a lower rate was used (i.e. the negotiated rate was not competitive).

While this may not be news to many travel managers, how should you use this kind of information and address properties with low negotiated rate usage? Our recommendations include:

  • Consider not soliciting properties where this is an issue for the following year and save the sourcing effort
  • Consider a dynamic discount on these properties
  • Share the findings with the property or chain representatives to see if the rate usage problem can be resolved

Overall, what we have learned in recent months is that low LRA negotiated rate usage is indeed a problem, and that typical rate auditing methods are not sufficient for detection. With our newly developed audit report, we have been able to give clients a clear picture of what’s going on with their hotel program and arm them with the information needed to take the steps to correct issues as outlined above.

Is this something you’ve experienced in your program? We’d love to hear from you in the comments section below, or if you’re interested in learning more about our report and how we can assist you in optimizing your hotel program, please contact me directly at neil@goldspringconsulting.com.

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