LUCRATIVE HOTEL BOOKINGS DUE FOR A COMEBACK

Long term contracts are going to be a key revenue generator for hotels and a money-saver for group buyers, in a time when bottom lines are contracting

- KEN SHANLEY

From ‘secret menus’ to ‘coupon codes’ that unlock special savings, everyone is currently looking for a deal. However, before the internet made it possible to scour millions of data points to mine these hidden gems, one really did have to ‘know a guy, who knew a guy’ to get deals at hotels.

That is unless they qualified for a long-term contract (LTC) or ‘corporate rate.’ Before, I explain why this type of booking is poised for a comeback, let’s go back to basics – what are long-term contracts?

The concept of long-term contracts is simple; a hotel, or chain, offers a guaranteed room rate to guests from a particular company or agency, in exchange for a negotiated minimum number of rooms, at a discounted rate, within a fixed period.

There are pluses and negatives for this type of booking for hotels. The benefit is obvious: guaranteed income in a challenging market, no matter how situations, like COVID-19, affect demand.

The downside: when the market is stable and demand is high, room rates increase. But if a property has already locked themselves into long-term contracts, that minimises the number of rooms that they can sell to leisure travellers who are willing to pay full price for their stay.

To show you why this type of booking is going to be a key revenue generator for hotels today (and a money-saver for group buyers, in a time when bottomlines are contracting to unheard-of levels), it is important to understand the history of long-term contracts.

BACK TO THE FUTURE

Once upon a time, corporate rates were pretty easy for almost any company to negotiate and their use was policed generously, if at all, by hotels. Anyone with the right business card could access deeply discounted room rates for their business or personal use.