"Last room availability" means that as long as a hotel has a room for sell, even one room, then parties with a last room availability clause have a right to buy it, or sell it, at their contracted terms and prices.
In the 1980's, before sophisticated hotel Revenue Management Systems, most hotels used to sign these clauses with key local commercial accounts who could make or break a local hotel. For example, The Empty Arms hotel would sign a deal with Acme Trust Company a local account that might commit to booking 15 rooms per night in return for a flat negotiated corporate rate of $79 rate. However, when rooms in the city got tight, the Empty Arms would be charging everyone else $169, so, to avoid the dilution of selling a room for $90 less than the market, the hotel would tell Acme that their rate was "sold out". The next year, Acme demanded "last Room availability" in their contract. This meant that as long as the hotel had a room available at any rate, they had to allow Acme to book it at their rate. Most hotels felt that since Acme was worth over $300,000/ year, they were too large to lose because their money would be difficult to replace. Hotels had a Hobson's choice: let the business go elsewhere and hope to back fill at a higher rate or take the terms of the deal including "LRA". Since there were not any other accounts that large, it was considered impossible to replace the $300,000, and most hotels in the 80's agreed to LRA.
When Revenue management systems became prevalent in the 90's, the detailed analysis showed hotels just how expensive these clauses were. In many cases, the dilution alone was way over $300,000; so, most hotels dropped Last Room Availability clauses and negotiated other, less expensive, ways to retain large commercial accounts (like offering commercial rate blocks or negotiated discounts off the prevailing rate of the day). Last Room Availability Clauses dropped off the face of the earth and Revenue Managers did not miss them one bit!
LAST ROOM AVAILABILTY RETURNS
Recently, Expedia, another account considered too large to lose, has replaced the local commercial account in demanding Last Room Availability. They have put a different spin on it because they are demanding a flat mark up rate not a flat rate. This means that they are allowing the RMS to set the rate, but they want to have availability for that discount rate as long as the hotel has any availability. Thus, a hotel who is allowing Expedia a 25 or 30 percent discount can no longer cut off Expedia availability, when they KNOW they only have rooms that they can sell on their own web site at no discount.
Using the same logic as they did in the 80's most hotels have signed the new Expedia agreement with the LRA clause because they believe they cannot replace their revenues in this down market. I agree that once again they have little or no choice. However, they should demand something in return for LRA and they should complete a detailed analysis to determine if they can make more money, on balance, with other channels who do not demand LRA. For help with the analysis see the Hotel Revenue Tools LRA Analyzer coming soon.
THOSE WHO DO NOT LEARN FROM PAST MISTAKES ARE LIKELY TO REPEAT THEM.