Alison Guillot
Hotels are handling countless business transactions every day. Responding to the booking inquiries of short-term guests, long-term guests, and even transient guests requires adept organization and management – usually via a Hotel Management System. However, there is another guest demographic that is often handled separately – negotiated rate groups.
Negotiated rate groups (or volume contracts, as they are sometimes known) have high revenue potential but are managed more haphazardly, meaning hotels are failing to capitalize on potential earnings. Bookings with a volume contract should be given the dedicated service that a loyal customer deserves, and it starts with proper management.
What are Negotiated Rates/Volume Contracts?
Volume contracts, or negotiated rates, are special lower rates secured by large groups, offered in return for dedicated and frequent use of that specific hotel. The choice phrasing depends entirely on which side of the operation you work in. Hotel operations consistently use the term “negotiated rates” while sales folks typical refer them as “volume contracts.” Regardless, negotiated rates are common for large corporations who book in large volumes, and other regular business travelers.
Offering a deep discount might sound impractical, but the volume of business usually more than makes up for the pricing difference. There are other perks to doing volume contracts. First, they are more predictable, as most large groups will travel and book blocks of rooms in the cities they frequently do business in. Additionally, the advanced notice allows a hotel to drive demand and increase the value of remaining rooms.
How to Prospect Negotiated Rate Contracts
Start with your best resource – you! Examine the data from your property management system (PMS) and try to identify trends. You’re looking for consistent bookings for a certain number of rooms per week and per month for a given period of time.
If you’re not having any lucky internally, reach out to companies that have headquarters in your city or near your property. If there is high traffic coming in either customers, prospects or regional employees there is a need for negotiated rates.
Odds are good that they have or are looking to have a negotiated rate contract, so being proactive might be enough to seal the deal. If they already have a volume contract in place, it would be wise to get an idea of their predetermined rate, so you can better spec out your next volume contract.
As you continue to land volume contracts, make sure you’re tracking key data points. Identify need periods, points of contact, accounts and tasks for these guests. Personalized service shaped by the needs of the account will only improve your standing with the client. It will help you better serve your current negotiated rate accounts, and land more in the future.
How to Manage Negotiated Rates
Selecting rates for volume contracts will vary slightly from client to client. It will depend on their budget, the volume of bookings they are committed to, and the demand for rooms from general transient guests. Start by working with your revenue management team to pinpoint a pricing structure that works for your hotel.
It is key, however, that you strike the right balance of discounted and regular rate business. There is a science to mixing in the right amount of negotiated rate and public rate bookings. Correctly computing revenue displacement will be essential to offering the proper rate.
We suggest implementing a revenue management system that will help with overall hotel revenue operations including budgeting forecasts and identifying the appropriate volume contract rate.
Managing Negotiated Rates is Essential for Optimizing Your Business
All sales and catering solutions by Amadeus enable negotiated rate management functionality. How is your organization managing negotiated rate contracts? We’re happy to talk about the innovative solutions available to help you get ahead of your competition. Contact us now to learn more.
