This article outlines the various types of sales contracts, segments, rate generation, and contract terms. Other articles may discuss lead generation and contract implementation / tracking.
Contract Type
Group Contracts are straightforward rate structures. It takes a few years before a hotel can get more sophisticated with it's group rates segmentation & strategy.
Hard Requirement
All sales contracts must incorporate terms to track the following minimum requirements and fee schedules when these terms are breached.
Life Cycle Tracking
Applicable Segment
All Group Contracts are straightforward rate structures. It takes a few years before a hotel can get more sophisticated with it's group rates segmentation & strategy.
Overview
| Segment | LNR | Group |
|---|---|---|
| Transient - Retail | ✘ | ✘ |
| Transient - Discount | ✘ | ✘ |
| Transient - Negotiated | ✓ | ✘ |
| Transient - Qualified | ✘ | ✘ |
| Transient - Wholesale | ✓ | ✘ |
| Group - Corporate | ✘ | ✓ |
| Group - Assoc. / Conv | ✘ | ✓ |
| Group - Govt | ✘ | ✓ |
| Group - Tour / Wholesale | ✘ | ✓ |
| Group - SMERF | ✘ | ✓ |
Long Term Contracts are booked under the market segment "Contract Revenue".
Comparison
| LNR | Group |
|---|---|
| LNR Contracts are only for transient segments. Rate strategy varies primarily depending on confidence in volume and traveler type. For example, corporate LNR clients don't tend to cause damage or use hotel resources as heavily. | In the beginning, group contracts are straightforward rate structures. It takes several years to effectively apply more sophisticated strategies. However, just because this is a group contract does not mean a discounted room rate is justified. Some group types tend to cause more damage and use a lot more of the hotel's resources. |
Segment
Each sales contract should apply to a specified rate code in the hotel's PMS system. Refer to the Overview of Market Segments article for more information. All Group Segments apply and must be booked through Sales. The primary transient market segments that will apply are:
- Transient - Negotiated
- Transient - Wholesale
Setting Rates
Use your judgement when negotiating. However, keep the target rate & occupancy levels in the crosshairs always. The steps outlined below should be used to determine the target rates & occupancy.
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400 RN at $20k
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300 RN @ $18k
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200 RN @ $16k
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100 RN@ $14k
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75RN @ 13.5k
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| Metric | Value |
|---|---|
| Room Nights | 400 |
| ADR | $50 |
| Contract Revenue | $20,000 |
| Departmental Expense | $23,000 |
| Departmental Profit | -$3,000 (loss) |
| Net Profit | -$8,000 (loss) |
| Metric | Value |
|---|---|
| Room Nights | 200 |
| ADR | $80 |
| Contract Revenue | $16,000 |
| Departmental Expense | $13,000 |
| Departmental Profit | $3,000 (profit) |
| Net Profit | -$2,000 (loss) |
This is a net profit for the department and will contribute to help pay overhead.
| Metric | Value |
|---|---|
| Room Nights | 100 |
| ADR | $140 |
| Contract Revenue | $14,000 |
| Departmental Expense | $8,000 |
| Departmental Profit | $6,000 (profit) |
| Net Profit | $1,000 (profit) |
| Metric | Value |
|---|---|
| Room Nights | 75 |
| ADR | $180 |
| Contract Revenue | $13,500 |
| Departmental Expense | $6,750 |
| Departmental Profit | $6,750 (profit) |
| Net Profit | $1,750 (profit) |
| Metric | Value |
|---|---|
| Room Nights | 300 |
| ADR | $60 |
| Contract Revenue | $18,000 |
| Departmental Expense | $18,000 |
| Departmental Profit | $0 (net) |
| Net Profit | -$5,000 (loss) |
Payment Notes
Most contracts are set up so that the company pays for all the rooms directly. In such instance, a company profile needs to be set up on PMS System and the staff.
In case a company requests to make payment after consumption, the accounting department will need to need to run a reference check and approve the Direct Bill payment method in writing.
Implementation Notes
- Rate Code should be set/confirmed in the PMS System and noted on the Sales Contract prior to being issued to the Hotel Manager.
- Company Profile should be set/confirmed in the PMS System & noted on the Sales Contract prior to being issued to the Hotel Manager.