What is the meaning / definition of Negotiated Rate in the hospitality industry?
Companies that regularly use a particular hotel naturally seek a more competitive or economic prices for rooms, meeting rooms and exhibition spaces. Although this may sound bad for business from a hotel’s point of view, if the company in question makes regular bookings, the shortfall in revenue can be made up overall across a trading year. Therefore it is often in a hotel’s interests to negotiate rates with companies and organisations. The simplest way to do this is to integrate a Negotiated Rate option into a hotel’s overall pricing structure and strategy.
The key to making a negotiated rate option a success is to adopt a flexible approach to it. That is, for businesses, no rate is permanently fixed, and different rates can be negotiated for different companies.
You may have noticed by now that negotiated rates, generally speaking, are special rates not usually offered to the public (i.e. individual guests, couples and/or families who pre-book or seek to book rooms for the night as walk-in customers or short-stayers). No, a negotiated rate – which will be lower than the normal rate – is intended as an incentive for companies and organisations to always stay at a particular hotel, year after year.
At hotels, the most common customers of this kind are usually from the Corporate Sector. Having said that, hotels around the world can also achieve increased revenue through negotiating rates with company chains and airlines. Like corporate clients, these allow their employees to book rooms at a special rate on business trips. When doing so through a hotel’s distribution channel, access is controlled through rate access codes.
So, when it comes to setting a negotiated rate, it is usually a win-win situation for everyone involved. But that is not to say that hotels should negotiate rates in a casual manner, and without being sure to protect their own interests throughout the entire negotiation process. Hotels should offer negotiated rates contracted under certain requirements and conditions, which are agreed between the hotel and the interested companies.
- Rack Rate
- Net Rate
- Negotiated Rate