Hotel sourcing · Rate engineering

Hotel RFP Engineering: LRA vs. NLRA Close-Out Math, Dynamic BAR Caps & Commission Rebates

A 15% NLRA discount beats a 10% LRA discount only when the hotel almost never closes it out. In high-occupancy cities, where NLRA inventory disappears on 30%–44% of midweek nights and travelers pay public rates 35% above BAR, the “cheaper” NLRA program costs 11%–19% more than the LRA program. Break-even arrives at a close-out rate of just 10%.

This page shows the arithmetic, the 80/20 City-Pair Tiering Rule for deciding where LRA is worth paying for, how dynamic BAR caps work, and the 85%–100% commission pass-through clause that recovers what most TMCs keep.

Updated 6 Nov 2026 · 6 min read · Procurement Benchmarks, RFP Playbooks & Calculators

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11%–19%NLRA cost penalty at 30%–44% close-out

10%Close-out rate where NLRA stops saving

35%+Premium over BAR paid on closed-out nights

85%–100%Hotel commission pass-through to demand

The proof: why a 15% NLRA discount costs more than a 10% LRA discount

An LRA (Last Room Availability) rate must be sold whenever the hotel has any room left in the contracted category. An NLRA (Non-Last Room Availability) rate is sold only when the hotel chooses to open it, and revenue management closes it once forecast occupancy passes roughly 75%–80%. On those nights the traveler books at whatever the hotel is selling, typically a compression rate well above BAR.

The model: BAR of $289, a 10% LRA rate, a 15% NLRA rate, and closed-out nights paid at BAR plus 35%. For each close-out share c, the blended NLRA nightly cost is (1 − c) × $245.65 + c × $390.15. The LRA rate is a flat $260.10 because it never closes out.

NLRA close-out share	Blended NLRA nightly cost	LRA nightly cost	NLRA penalty vs LRA	Extra cost per 4,000 nights
0%	$245.65	$260.10	−5.6%	−$57,800
10% (break-even)	$260.10	$260.10	0.0%	$0
20%	$274.55	$260.10	+5.6%	+$57,800
30%	$289.00	$260.10	+11.1%	+$115,600
35%	$296.23	$260.10	+13.9%	+$144,500
40%	$303.45	$260.10	+16.7%	+$173,400
44%	$309.23	$260.10	+18.9%	+$196,520

Every 10 points of close-out add $14.45 per night, about 5.6% of the LRA rate. The 5-point deeper NLRA discount buys back only $14.45 per night on the nights it is available, so it is fully consumed at 10% close-out. Above that, the NLRA program loses money on every additional compressed night. At 30%–44% close-out, the range we typically see on midweek nights in compressed markets such as Manhattan and Boston and Cambridge, the penalty is 11.1%–18.9%.

What the headline discount hides

The close-out penalty is the largest cost, but three smaller ones compound it.

Amenities fall away. When an NLRA rate closes, the replacement public rate rarely includes the breakfast and Wi-Fi bundled into the negotiated rate, adding $25–$40 per night in expense claims.
Cancellation terms tighten. Compression-night public rates often carry 48–72 hour or non-refundable cancellation instead of the negotiated 24-hour terms, so trip changes create no-show charges.
Travelers leave the program. Once a preferred hotel shows no negotiated rate twice, travelers book elsewhere, often through consumer sites, and the volume that justified the discount erodes before the next RFP.

Use the calculator below with your own nights, BAR and close-out share. The defaults reproduce the 30% row of the table.

Interactive tool · Hotel rate model

Hotel LRA vs. NLRA Close-Out & Commission Recovery Calculator

Enter your room nights, average BAR, close-out share and commission terms to compare NLRA and LRA program cost and the commission you could recover.

1 Annual room nights in the city or property set

nights

100100,000

2 Average public Best Available Rate (BAR)

$80$1,200

3 Room nights falling on compression dates (occupancy above ~80%)

0%80%

4 LRA discount off BAR offered

0%30%

5 NLRA discount off BAR offered

0%35%

6 Public rate premium paid when NLRA closes out

0%120%

7 Room nights at non-negotiated, commissionable hotels

0%100%

8 Hotel commission rate paid to the TMC

0%15%

9 Share of that commission returned to you today

0%100%

Annual cost the NLRA program adds

0.0% more than the LRA rate

Effective NLRA nightly rate (blended with close-outs)$0
LRA nightly rate (holds on compression dates)$0
Annual cost on NLRA$0
Annual cost on LRA$0
Hotel commission not returned to you$0

Better rate structure

Total annual opportunity$0

NLRA cost = nights × [(1 − close-out) × BAR × (1 − NLRA discount) + close-out × BAR × (1 + surge)]; LRA cost = nights × BAR × (1 − LRA discount); commission = nights × commissionable share × BAR × commission rate × (1 − share already rebated).

The 80/20 City-Pair Tiering Rule

LRA costs more to negotiate: the hotel gives up yield on its best nights, so it offers a shallower discount. Paying for LRA is worthwhile only where compression is real and volume is concentrated. In most programs about 20% of cities, often fewer than 20 properties, carry 60%–80% of room nights. That concentration decides the structure.

Tier	Which properties	Rate structure	Must-have terms
Tier 1 · Core	The top properties carrying the bulk of nights in compressed cities	Static or capped LRA rate	LRA, breakfast, Wi-Fi, 24-hour cancellation, no blackout dates
Tier 2 · Secondary	Regular-use cities with seasonal compression	Dynamic % off BAR with a ceiling	LRA on the dynamic rate, cap by season
Tier 3 · Long tail	Cities with fewer than ~150 nights a year	Chain-wide or consortia dynamic discount	Commission pass-through, 24-hour cancellation
Extended stay	Project and plant sites with 14+ night stays	Length-of-stay tiered rate	Weekly and monthly rate steps, no attrition clause
Event peaks	Trade fairs, conventions, UN General Assembly week	Pre-negotiated peak cap	Explicit peak-date cap instead of a blackout
Government-rate cities	Cities where travelers qualify for per diem rates	Compare LRA with the current GSA per diem	Rate parity clause

Extended-stay sourcing is covered in manufacturing and field service travel; per diem benchmarking in Washington D.C. and Northern Virginia; corridor compression by city in the corporate travel corridors index.

Dynamic BAR caps: a percentage discount with a ceiling

A dynamic rate is a fixed percentage off whatever BAR the hotel publishes that night. It never closes out when it carries LRA, but on a compression night 10% off a $520 BAR is still $468. The cap fixes that: the rate is BAR minus the discount or the cap, whichever is lower. A well-set cap sits 10%–15% above the property’s average negotiated ADR and is set separately for peak and off-peak seasons.

Clause 5.2 · Dynamic rate with seasonal cap
The Corporate Rate shall be the hotel’s Best Available Rate for the night of stay less 12%, provided that the Corporate Rate shall not exceed USD 319 per night from January to August and USD 349 per night from September to December, exclusive of taxes. The Corporate Rate shall be available on a Last Room Availability basis whenever any room in the Run of House category is offered for sale through any channel, and shall include breakfast, Wi-Fi and cancellation without charge until 6 p.m. local time on the day before arrival.

Audit caps monthly: shop the public rate on a sample of nights and confirm that the rate booked equals the lower of discounted BAR and the cap.

Recovering hotel commission: the 85%–100% pass-through clause

Hotels pay travel agencies commission on many published and some negotiated rates, typically 7%–10% of room revenue on commissionable stays. Unless the TMC contract says otherwise, the TMC keeps it. On 4,000 nights at a $289 rate, with 40% of nights commissionable at 8%, that is $36,992 a year paid by hotels on your travelers’ stays and retained by your agency.

Clause 7.1 · Hotel commission pass-through
The TMC shall remit to the Client not less than 90% of all commissions, overrides and incentives received from hotel suppliers in respect of bookings made by or for the Client’s travelers, whether paid per booking or in aggregate. Remittance shall be quarterly, accompanied by a property-level reconciliation of commissionable nights, room revenue and commission received. The Client may audit supporting supplier statements once per contract year.

Negotiate between 85% and 100%: 85% where the TMC shows a real reconciliation cost, 100% where the commission is offset against booking fees instead. The reconciliation method is part of the 30-day forensic audit, and the hotel fee line it offsets is benchmarked in the TMC fee report.

Executive FAQ

Questions procurement teams ask about this

What is the difference between LRA and NLRA hotel rates?

An LRA (Last Room Availability) rate must be offered as long as the hotel has any room in the contracted category for sale. An NLRA (Non-Last Room Availability) rate is offered only when the hotel opens it, and revenue management typically closes it once occupancy passes about 75% to 80%. NLRA rates carry a deeper headline discount, usually 5% to 12% more than LRA, because the hotel keeps the right to withdraw them on its most profitable nights.

When is an NLRA rate the better choice?

NLRA wins when close-out is rare. In the worked model, a 15% NLRA rate beats a 10% LRA rate only while fewer than 10% of nights close out. That holds in low-compression cities, on weekend-heavy volumes or at properties with ample supply. Measure your actual close-out share per property before renewing an NLRA rate; in compressed business districts it is usually far above 10%.

Should we use static or dynamic hotel rates in 2026?

Use both, tiered by volume. Static or capped LRA rates suit the small number of core properties that carry most room nights in compressed cities. Dynamic percentage-off-BAR rates with a seasonal cap suit secondary cities and the long tail, because they are cheaper to negotiate, never close out when they carry LRA, and the cap stops the discount floating up with compression pricing.

Can we get hotel commission back from our TMC?

Yes, if the contract requires it. Hotel commissions paid on your travelers’ stays are commonly retained by the TMC unless the agreement mandates pass-through or a fee offset. Ask for a property-level reconciliation of commissionable nights and commission received for the last 12 months, then negotiate 85% to 100% pass-through, paid quarterly, with an annual right to audit supplier statements.

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