< PrevNext > Flexibility on LRA & Same-Day Cancellation Can Drive Hotel Program Savings By HRS SVP Hotel Solutions North America Jonathan Hamblett / January 24, 2020 Share During 2020 hotel negotiations, HRS repeatedly came across a new trend. Corporate hotel programs that are willing to be flexible can derive actual savings from last room availability and cancellation terms.For one global technology company HRS works with, acceptance of greater-than-same-day cancellation penalties drove $1 million in negotiated savings! Across other companies, similar savings ranged between 1.5 percent and 4 percent, depending upon traveler behavior, scope of program, etc.How did we arrive here? It’s a combination of two factors:Client data made clear “industry standard” same-day cancellation and LRA were simply not necessary for clients in many locations. The analysis showed travelers were not cancelling in great numbers on the day of arrival, nor were they running into pricier LRA rate booking windows.During negotiations, hotels in more markets increasingly raised their challenge of having too many bookings with same day cancellation, thereby limiting their flexibility for higher-margin, close-in bookings. Yield managers on the hotel side crave these last-minute options, for all the obvious bottom-line reasons. So we asked hotels: If a company with sustainable volume and a track record of booking/cancellation behavior went from same-day cancellation to 24 or 48 hours, might they be willing to trade some percentage points on rate? Turns out they were. This was particularly true in higher-cost markets like Chicago, London and San Francisco.In cases where clients chose not to change their strategy, they are now able to ascertain a specific cost to keeping the “industry standard” in place. This math is vital as corporations consider pivoting hotel spend strategies in the face of changing economic climates, business performance, M&A activity, etc.How to Drive Incremental Savings via LRA & Cancellation FlexibilityHRS manages global negotiations for more than one third of the Fortune 500. This provides a unique vantage point on noteworthy trends, and a guideline of how companies can explore unique angles to uncover new potential savings. Here are some starting points:Even though rates for 2020 are loaded, you don’t need to punt on securing savings via these avenues. Hotels are eager to have more flexibility with their inventory. Depending upon location, they may be willing to negotiate mid-year or sooner. Don’t be afraid to ask!Be ready with your data. Know your traveler behavior and have your cancellation and LRA metrics validated. Be on top of regional benchmarks for property types in your program. Audit loaded rates in all booking channels so you know which suppliers best adhere to negotiated terms. Then, create your strategy. If you can, don’t be hard core about LRA and same-day cancellation. Consult with knowledgeable contacts inside and outside of your company in select locations where you have measurable volume to get some sense of the specific savings opportunity.A little (properly-informed) flexibility could deliver newfound savings AND enhance your relationship with a grateful hotel partner—an outcome suitable for any list of New Year’s resolutions.