The air and lodging fare structure

The pricing policy of airlines and hotel chains has become tremendously complicated in recent years. The product disintegration and the need to manage the rooms with the maximum yield, due to their perishable nature, forces to introduce in the negotiations with suppliers concepts such as the ancillaries, the BAR rate or the Last Available Room.

The companiesñías aéreas have disaggregated their product to offer more competitive prices in a first search;But make no mistake, after that the business traveler is adding the famous ancillaries——the seat, the suitcase, etc.— and the cost goes up. This commercial strategy makes it more difficult to compare prices and analyze fare increases and decreases. Its rate structure is complicated, according to several of the travel managers we collaborate with, so it is not easy to know what services are included in each rate.

Companies should be aware of the three main variables that mark a fare: the conditions for changes and cancellations, the date of issuance and in advance of booking. The airlines do not sign fare parity agreements, so the same fare may have different prices depending on the channel of purchase.

The case of the hotel rates is different. During the crisis they created the concept BAR (Best Available Rate) whereby they offered companies the best rates, regardless of the purchase channel. The BAR rate allows hotels to adapt to market fluctuations and still offer advantageous conditions to their corporate clients. Unlike the airlines, hotels sign a rate parity agreement, regardless of the purchasing channel, although compliance creates quite a few problems.

On the other hand, there is the concept of Last Available Room. It means that a company with an agreement has its contract rate applied up to the last available room in the hotel, not being assigned a room quota at that rate.

This model prevents hotels from offering a very competitive rate to companies, but with limited availability, so the customer may end up paying a higher price or changing hotels. This is a very interesting aspect to include in the negotiations.

The conditions of Last Available Rooms vary from one hotel to another and will depend on the price of the rate. No establishment or chain will allow a very high occupancy of rooms at a very low price, because its product is limited and perishable. The figure of the yield manager orrevenue manager is in charge of maximizing revenue per room and therefore of the occupancy and price mix.