Last Room Value (LRV)

Last Room Value (LRV) is a control that ensures you accept only the most valuable demand. LRV blocks lower-valued yieldable business when G3 RMS thinks that your property might sell out. For example, an LRV of $150 means that guests can book a Flexible Rate product at $160, but not a discounted PrePay&Save product at $140. G3 RMS optimizes LRV by Room Class.

selling systemClosed Any distribution system, like a PMS, CRS or a Channel Manager, that is used to sell your transient guest room inventory. Ideally, G3 RMS sends all controls to your selling systems, but this may vary based on their capabilities. For some integrations, the selling systems may not include the reservation system that provides with data.

Let's use an example to illustrate the LRV. Imagine a five-room hotel that is so popular that ten guests want to book it. The guests differ in how much they are willing to pay. Five want to pay $200-$300, and the other five want to pay less than $200. Based on the hotel’s demand and forecast, we want to allow only the five highest paying guests to book. To do that, G3 RMS sets the Last Room Value at $200. The system uses the LRV like a bouncer at a night club to ensure that nobody who wants to pay less than $200 can book the hotel.

Of course, real life is more complex than a five-room hotel with exactly 10 rooms of demand. That's why G3 RMS can send other values to your selling systemClosed Any distribution system, like a PMS, CRS or a Channel Manager, that is used to sell your transient guest room inventory. Ideally, G3 RMS sends all controls to your selling systems, but this may vary based on their capabilities. For some integrations, the selling systems may not include the reservation system that provides with data.. They ensure that the LRV remains current between optimizations, while reservations are being booked and canceled. The selling system uses the LRV and these other values from G3 RMS to calculate a Hurdle Rate. The Hurdle Rate helps the system decide if a rate code is available or not when a guest inquires. Learn more about Hurdle Rates and best practices for setting up your selling system.

What Questions Do You Have about LRV?

Purpose of LRV - Video

Frequently Asked Questions

How Does G3 RMS Determine LRV?

G3 RMS calculates LRV for each occupancy date, for each Room Class and length of stay. The below factors impact LRV. To investigate LRV, review the Best Practices.

If LRV is only $10, does G3 RMS want me to sell a $10 Rate?

The LRV is a value and not a rate. The definition of Last Room Value is "The maximum room revenue that you can expect to make from the last room available for sale." If your demand is less than your capacity, the LRV will be zero because the last room available for sale will remain unsold. With an LRV of zero, G3 RMS is not selling a zero dollar rate but is accepting rates that are above that zero value. LRV is sent as a control to the designated reservation system (typically your PMS or CRS), where it plays the role of the “bouncer” to accept all rates.

Can I Override LRV?

You cannot override LRV, but you can influence it. Unlike pricing, LRV is not a familiar decision where you might have experience in setting the value. The complex calculations of the LRV data inputs are impossible for anyone to replicate at the required granularity. However, like pricing, you can directly influence LRV through the inputs into optimization. Unconstrained Demand is one of the inputs into LRV. If you know something about the remaining demand that the system does not, share that information through a Demand Override. The change in demand will have a direct impact on LRV and other decisions.

What happens if LRV is higher than the highest price that is set up?

LRV is calculated by arrival day, Room Class, and for each length of stay. If the LRV is higher than your highest BAR value, your guests might no longer be able to book that Room Class for that day and length of stay, since the LRV closes all lower Yieldable rates.

G3 RMS marks these days with a LRV Greater Than Price icon in Pricing Management.

For example, if your property has Standard and Suite Room Classes, and the Standard LRV is larger than your highest Standard rate for a one-night stay, the icon displays for the Standard Room Class. The icon indicates that your guests might no longer be able to book any Standard Room for a one-night stay, since the LRV closes all lower yieldable rates, including BAR. At the same time, the Suite LRV might be lower than your highest Suite rate, so Suites will remain open.

What if your Room Class contains room types with different BAR price points? Then, G3 RMS applies a formula to determine whether to display the LRV Greater Than Price icon for that Room Class. For example, the Standard Room Class contains Room Types RT1 and RT2. The BAR rate for RT1 is $100, and the BAR rate for RT2 is $110.

In this case, G3 RMS uses a formula based on the remaining demand for each room type. If the ratio for the remaining demand between RT1 and RT2 is 60% to 40%, then the system uses a value of $104 calculated from (100*6 + 110*4) / (6+4) = 104. If the LRV for Standard for Monday is $105, the LRV Greater Than Price icon displays. If it is $103, the icon will not display.

Why is LRV Low when the Forecast is 100%?

Go through the steps to Review LRV. G3 RMS might expect that you need to accept some lower value business to maximize revenues. For example, if your overbooking is high due to high wash expectations or due to your upgrade path, then Available Capacity to Sell might exceed Remaining Demand and the LRV will tend to be low. If you do not agree with the Remaining Demand, share what you know with G3 RMS.

What if LRV is near or at zero even though your property is already sold at or above the property overbooking level and Remaining Demand is very low? This might occur because the system considers that if On Books business cancels more than expected, it will be difficult to fill the open rooms due to the low remaining demand. So if cancellations cause rooms to become available, a low LRV ensures that the property accepts all possible remaining business.

Are you far out from the day of arrival in the booking curve? Uncertainty is higher for dates further in the future when On Books is low. Therefore, LRV might be low. G3 RMS will likely raise the LRV as business materializes and the uncertainty decreases.

Why Does G3 RMS select a Price below LRV?

When the Restricted Price Is Not the Highest Available Price

If your property uses BAR by Day pricing, the price might be restricted by the LRV on a day when the selected price is not the highest available price point, as a result of stay-through demand.

With this type of pricing, the pricing decision for each day is used by both one-night stays and guests staying through that night. G3 RMS might select a price below LRV for a single day, even though a higher price is available. That is because it wants to encourage more stay-through demand. G3 RMS marks these days with an LRV Greater Than Price icon .

This scenario does not apply to BAR by LOS pricing, because G3 RMS prices each LOS independently.

The following example shows a three-night stay: Tuesday-Thursday. The pricing decision for Wednesday is the highest available price. An LRV Greater Than Price icon displays on Tuesday, because BAR 2/190 is below the LRV of 200:

  Tuesday Wednesday Thursday
LRV 200 200 0
BAR by Day BAR2 / 190 BAR1 / 210 BAR3 / 170
BAR by LOS - LOS3 BAR2 / 190 × 3 = 570

In this example, the system keeps the pricing decision lower on Tuesday to maximize revenue across all lengths of stay, as indicated by the LRV Greater Than Price icon . The restriction could be related to the three-night length of stay or demand from any longer stay.

For a BAR by LOS property, BAR is not restricted for Tuesday because the price for a three-night length of stay is above the LRV of 400.

When a Room Class BAR Is Lower Than LRV

In some instances, G3 RMS might set the pricing decision for a Room Class below LRV, even though a BAR level priced above LRV is available. This instance is similar to the condition that triggers the Pricing Override is Below the Last Room Value (LRV) Exception. The decision appears to be a suboptimal, so why would the system choose it? The answer is that G3 RMS chooses the optimal decisions to maximize revenues across all Room Classes, which might mean that the decision for a single Room Class appears suboptimal.

Occurrences of this condition often result from setup issues, specifically restrictive overbooking and upgrade paths. For example, a property has Standard and Deluxe Room Classes. Standard still has a lot of demand at around $200, but it is already sold out and overbooking is set up at none. The higher Deluxe Room Class still has a lot of inventory, but not enough demand to fill it, so the LRV for Standard might be $200 and Deluxe is close to zero.

Even with Upgrade Path enabled, you cannot sell any more Standard rooms due to the lack of overbooking, regardless of the price. So the only way to maximize revenues is to price Deluxe similar to the $200 Standard demand. However, the highest possible price for Standard is $250, and the Room Class order prevents the system from selling Deluxe below Standard. Thus, the only way to price Deluxe at around $200 is to push the Standard decision below that, like $180. Since the pricing decision for Standard is irrelevant because you cannot sell any more Standard rooms anyway, the system sets a suboptimal Standard price in order to sell Deluxe and maximize revenues. If the property disagrees, they can override the pricing decision.

Best Practices to Review LRV

Complete these steps if you question an LRV decision.

Compare Remaining Demand against Available Capacity to Sell

  1. Click and then Investigator.
  2. Select the date to review.
  3. Scroll down to Pricing Details and click the Price for the Room Class to review.
  4. Check the last bullet point under Additional Details whether there is enough demand to fill the Room Class.
  5. Click See more details.
  6. Compare Remaining Demand - Total against the Available Capacity to SellClosed Physical Capacity plus Overbooking minus On Books and minus Out of Order. This value is the number of rooms that G3 RMS can sell before the property or room type is sold out. for the selected Room Class.

If the demand value is larger than the capacity, then there is enough demand to fill the Room Class and G3 RMS uses LRV to restrict demand. If you need to analyze the business mix, view the remaining demand by Forecast Group.

Investigate LRV across Room Classes

Are you wondering why LRV is well above zero even though Total Demand is well below Authorized Capacity? If you have more than one Room Class, this is likely due to the Upgrade Path.

In Investigator, review the Pricing Details for the date in question. In this example, LRV for Standard, Deluxe and Premium is in the 100 to 200 range:

But when you select the Room Class and scroll down to review the Price Ranking Chart, you can see that, on Sep 15, the combination of On Books and Remaining Demand (=Total Demand) for Deluxe and Premium doesn’t reach the Effective Capacity line. That means demand is well below capacity for both, so why the high LRV?

There are three factors that explain this:

  1. The solid blue arrows indicate that the Upgrade Path is enabled between Room Classes: from Standard to Deluxe and to Premium.
  2. Demand for the Standard Room Class exceeds capacity (above the gray line) and the excess demand is enough to fill Deluxe and Premium with upgrades or upsells.
  3. To maximize revenues, G3 RMS balances the LRV across Room Classes so that a higher-ranked Room Class (with the Price Rank and Upgrade arrow ) always has a higher LRV than a lower-ranked Room Class. Without this balancing, LRV might be 500 for Standard and close to zero for Deluxe and Premium. That would mean that a guest could book a low-priced rate code around 100 for the higher Deluxe and Premium Room Classes, but not for Standard. Not a revenue-optimal or logical situation. With balancing, the LRV for all three Room Classes is well above 100 and the low-priced rate code can't be booked.

Investigate the Impact of Neighboring Days

Use the Pricing Details table in Investigator to review LRV for neighboring days. While the system calculates LRV for each occupancy date, it finds an optimal mix of demand that results in the maximum revenue for a whole set of days rather than for each individual night. The system might be very restrictive for a peak night that has more demand than capacity to direct demand to shoulder nights that do not have enough demand to sell out, which you can see in the week below.

Hurdle Rates

G3 RMS optimizes LRV for each Room Class during each processing. In between optimizations your selling system might receive many new reservations and cancellations, in other words the business conditions can change rapidly. That's why G3 RMS can send the LRV together with other values (LRV Delta, Ceiling and Maximum Rooms Sold) to your selling systems to ensure that the LRV remains current between optimizations. Many selling system can translate the LRV by Room Class together with the other values into Hurdle Rates. For example, Deltas increase the Hurdle Rate with each new reservation taken. See How is the Hurdle Rate calculated below for details.

When the reservation system receives an inquiry for an arrival date and length of stay, it compares the Hurdle Rate against the setup value of a product (a rate code and room type combination) to decide whether that product is available or not. For example, a reservations agent gets a call for a specific rate and runs a rate query in your selling system. For the requested date and length of stay, the price of that rate code for the standard room is $100. If the Hurdle Rate for Standard Room Class is $90, the rate code shows available for standard. If the Hurdle Rate is $110, the agent doesn't see the rate code. The same applies to availability searches on your web booking engine.

Using Hurdle Rates means that you don't need to apply less flexible controls, such as minimum length of stay (Min LOS), to restrict discounted rates. To learn more about how to set up Hurdle Rates see Best Practices for Enabling Hurdle Rates.

If your selling systems don't support or your G3 RMS subscription doesn't include Hurdle Rates, G3 RMS can translate the LRV into another format, like Min LOS, to enable decision upload. See Restriction Setup for more information.

Hurdles Rates are applied by Room Class. For example, Standard Room Class LRV is delivered to the selling system for the SD, ST and SK room types. The LRV for the Suite Room Class is delivered to the SU and SX room types. If rate values vary by room type, then the impact of the LRV varies by room type. In the above example, the Suite price for SU for BAR is $300, and for SX it's $330. If the LRV for Suite is $310, then price for SU is closed, while price for SX is open.

How G3 RMS Calculates the Hurdle Rate

For each reservation inquiry the selling system performs the below calculation to check if yieldable rates are available or not: 

Hurdle Rate = Last Room Value + LRV Delta × the minimum of (number of Incremental Rooms Sold since the last optimization or Rooms Sold Ceiling)

Let's look at what each of the values mean: 

LRV Delta

The Delta ensures that in between optimizations the LRV adjusts as new reservations or cancellations are made for a day. A new reservation for a day increases the LRV by the Delta, a cancellation decreases it by the Delta, same for reservation changes. During the optimization, G3 RMS recalculates the Delta for each Room Class and occupancy date:

Delta = (Highest BARClosed Best Available Rate. The lowest non-restricted product with flexible cancellation policy that anyone can book. G3 RMS optimizes the pricing of the BAR product. Other products, like Advanced Purchase or packages, can be linked to the BAR price. – LRV ) / Rooms Sold Ceiling

G3 RMS calculates the Delta based on how much it expects On Books and LRV to change until the next optimization. Very simplified, if it expects both the LRV and the On Books to go up by 10, then the Delta is 1, meaning that 10 Deltas at 1 each increase the LRV by the expected amount of 10.

Some selling systems might not support LRV Delta values, or they might not support this control at the Room Class level. If this control is not supported at the Room Class level, G3 RMS provides Deltas at the property level.

Rooms Sold Ceiling

The Rooms Sold Ceiling is the maximum number of rooms to which the selling system applies the LRV Delta. The control is used to avoid that Deltas increase the LRV by too much in cases when many new reservations are made in between optimizations. For each booking, cancellation or change the selling system updates the number of transient Incremental Rooms Sold since the last optimization (and resets that number to zero after each successful upload of decisions from G3 RMS). When the number of Incremental Rooms Sold exceeds the Rooms Sold Ceiling, the system stops adding Deltas and instead keeps the Hurdle Rate at the value of the Rooms Sold Ceiling.

Incremental Rooms Sold and Maximum Rooms Sold (MaxSold) Calculation 

The MaxSold value considers a property's Effective CapacityClosed The hotel's physical capacity minus the out of order rooms., Overbooking, and Rooms Sold. When the number of Incremental Rooms Sold reaches MaxSold, the selling system stops accepting any more transient bookings.

That means that if new reservations reach the MaxSold level, your selling systems show you as not available for that date, Room Class and, if applicable, length of stay. But until the next optimization you still show available rooms in G3 RMS, because the new reservations are not reflected.

If you have questions about the MaxSold on specific dates, open a case.

Simplified Example

In the below example the LRV for a given Room Class at the last optimization was $90. The Delta is calculated at $1 and the Rooms Sold Ceiling is 3. For the first room booked after the optimization (left side) the system uses the Hurdle Rate of $90. For each new room booked the Hurdle Rate increases by the Delta of $1, so for the fourth room it's $93. With the fourth room the Rooms Sold Ceiling of 3 is reached, since three Deltas have been added. That means that the Hurdle Rate now stays at this level, meaning if there is fifth (or more) booking the Hurdle remains at $93.

Adjusting the Yieldable Value

When the selling system decides if a yieldable rate is available or not, it compares Hurdle Rate to the value that is set up (by room type, by season). But what if the setup value isn't representative, for example, because it's a package and contains other revenues like theater tickets that bring you no profit. Then you want to adjust the yieldable value of the package to the value of the room revenue.

Yieldable value adjustment types vary by selling system, but common examples are Stay Cost/Value, Fixed Cost/Value, Per Person Cost/Value, or Yield As. Here are some examples for adjusting yieldable values:

  • In the case of the package, deduct the costs of the package portion to lower the yieldable value. If the theater package is set up at $300, it may be the highest priced rate code that you offer, but it includes $200 in ticket costs that bring little or no profit for you. Subtract the $200 ticket cost to lower the yieldable value to $100. Such package adjustments might be per room per day, or per person per stay, or other combinations.
  • Add value to increase the yieldable value of rates that deliver an add-on value to your property. For example, a resort or casino might offer a discounted $100 rate to guests who spend a lot of money in other areas, like gambling, spa or golf. The overall value of these customers to the hotel is much higher than the guest room rate. Thus, the hotel can add $200 of average expected spend in those other areas to increase the yieldable value to $300.
  • Yield As enables a rate code to have the same yield controls as another rate code. This option is often used for corporate rates that have Last Room Availability (LRA) status and can only be yielded the same as BAR. For example, if you set the corporate LRA rate code LRA1 to "Yield As" BAR (either the designated daily BAR rate code or the highest value BAR rate code), then the Rate Code LRA1 will be yielded at the value of the current BAR decision and not to the LRA1 value that is set up.

When the selling system evaluates a reservation inquiry against the Hurdle Rate, it calculates the Rate Value as follows:

Rate Yieldable Value = configured Room Rate value – negative Rate Adjustment Values and/ or + positive Rate Adjustment Values

Best Practices for Hurdle Rates

You must enable and set up Hurdle Rates in your selling system. Your selling system handles reservation requests with Hurdle Rates in place. Use these best practices to ensure they function correctly. Some of the below features might not be supported by your selling system. If you require support on specific setup items, contact your IDeaS representative.

Set up Rate Details Correctly

Understand that for yielding purposes, the selling system uses the value from the Rate Detail within the Rate Code setup, loaded for each room type.

If your property is in a country where booked prices have to include taxes (like VAT or GST), the LRV tax setup (inclusive or exclusive) depends on how your Reservation System sends the data to G3 RMS. If you are unsure of your setup, contact your IDeaS representative.

You may have set up package elements in your selling system for accounting purposes (for example, a package element to inform the selling system that the setup of the Bed and Breakfast package rate of $120 includes $20 breakfast revenue and $100 room revenue). The selling system ignores that package element for yielding purposes and compares $120 against the Hurdle Rate unless you deduct the $20 as a cost to lower the yieldable value.

Set up Rate Codes as Yieldable, Non-Yieldable, or "Yield As" Another Rate Code

Yieldable

The selling system compares the setup value of a Yieldable rate code against the Hurdle Rate to decide it's available or not. In other words, the availability of the rate code is at the full discretion of the property.

 Non-Yieldable

Some rate contracts or the top level of a hotel loyalty program may require a Non-Yieldable status. That means the selling system checks the rate against any inventory restrictions but doesn't compare it against the Hurdle Rate. Except for contractual obligations, use of Non-Yieldable status for a rate code should be rare.

Yield As

Last Room Availability (LRA) rate contracts mean that a rate must be available as long as the contracted room type is available for BARClosed Best Available Rate. The lowest non-restricted product with flexible cancellation policy that anyone can book. G3 RMS optimizes the pricing of the BAR product. Other products, like Advanced Purchase or packages, can be linked to the BAR price.. IDeaS recommends that you set these rate codes to Yield As the highest BAR rate (for BAR by LOS) or the Daily BAR rate plan (for BAR by Day) to ensure that LRA rates are restricted when BAR rates are restricted.

Use a Separate Selling Strategy

Having an LRV doesn't replace your selling strategy. For example, if you have a very low employee rate that is not meant for general sale, you must still set up the rate accordingly in the selling system. Otherwise, a zero LRV in low demand periods opens such a rate for sale.

Remove Manual Restrictions

After you enable Hurdle Rates in your selling system, remove all manual restrictions except those that are related to the strategic availability of rates. An example of a strategic availability is a rate with a two night minimum stay requirement. Such a rate needs to be set up or restricted to only allow reservations with a minimum length of stay of 2 nights. The same applies to advanced purchase rates: the minimum days to arrival restriction should still form part of the rate set up. For example, an advanced purchase rate that should only be sold 21 days prior to the arrival date should have 21 applied in the Minimum Advance Booking Window set up within the rate code.