- August 31, 2021
- Comments: 0
- Posted by: admin
Why should hoteliers change the way they manage room inventory? The simple answer is because they can make more revenue and increase customer satisfaction when guests are able to self-select room features that are relevant to them.
By moving away from traditional room categories and taking a granular inventory approach, hoteliers can cover several new revenue-generating opportunities, including
- New revenue management tactics due to higher number of price points
- Upselling solutions of room features and services
- Automatic room assignment and avoidance of free upgrades
- Clear differentiation of own sales channels compared to third-party channels
All of these elements can strengthen your brand value through positive guest recommendations and increase the chances of returning guests.
Historically there were many good reasons to display and sell room inventory in a simplified way. However, technology has improved significantly over the years and now allows hoteliers to reinvent their sales strategy by digitized their inventory with all its uniqueness and selling directly through their own channels.
With a granular inventory, hoteliers can create real differentiation from third-party sellers and are able to sell something that no one else offers. This could previously only be sold by email or phone, assuming the seller knew the rooms well. It depended on guest participation prior to check-in.
A differentiated offer of the inventory via the company’s own sales channels increases the chances to a channel change during booking and offers real advantages for loyal guests!
Product sales approach in other industries
Other industries have already learned from past crises and optimized their online sales process years ago to meet the needs of the “connected consumer”. In the airline industry, there was a lack of upselling opportunities to increase sales due to a non-differentiable product. The retail sector was increasingly forced to provide an appealing online sales experience due to advancing digitalization and pioneers such as Amazon. Clothing can now be tried on virtually and many products can be personalized according to customer needs.
- Additional price points due to different booking conditions
- Differentiation through additional services – sales attributes
- More than quadruple in ancillary revenues & baggage fees alone
Online – Retail
- Configurator & filter functions to individualize the shopping experience
- Extra revenue through product personalization options
- Double-digit growth compared to traditional retailers
Comparison of two new sales approaches
Attribute Based Selling – using a basic room category and selling individual room attributes on it (ABS approach):
The hotel industry has been discussing the adaptation of this approach to upsellingfor quite some time. In this approach, the price is based on a room category with the lowest common denominator of the entire inventory (basic/standard room). The booker can add any other attributes that are relevant to them. The principle is to first select the basic room at an entry price and then add attributes such as bed type, balcony, air-conditioning, connecting door, high floor or even services not related to the category, such as early or late check-out. The price point of each attribute is transparent to the booker in the selection option. The number and type of attributes selected will increase the room rate accordingly. For further explanation of the ABS approach, see the following article by Hospitality Technology.
Some of the large hotel chains are already piloting beta versions of this approach to further improve their return-on-investment opportunities. Individual hotels or smaller owner-managed chains are denied access to these systems.
Feature-based room sales – a guest-centric experience approach:
This is a new approach that is not based on room categories, but where rooms are clustered by feature combinations and additional experience dimensions are digitized and codified. In this way, rooms can be sold with their unique features as well as with a reduced number of features and can also be labelled differently. The guest can select preferences and is shown corresponding room options as a percentage match. This allows the booker to select the best room combination for them, with the bundled price points of the different room attributes displayed in aggregate (i.e. excluding the price of the individual features). This approach not only allows the sale of all room attributes including connecting rooms, but also any inventory combinations that a hotel can and wants to offer, such as “rooms next to each other”, “three rooms bundled together to create a new unit”, etc. More price points are naturally created by repackaging rooms in different ways and marketing them through different labelling.
Again, the upselling takes place during the booking process. The booker can select feature preferences, but without already making a decision about how much they are actually worth to them. This approach, which uses artificial intelligence, makes the booking experience more experience-oriented and customer-centric. The result: the guests’ needs are better aligned with the hotel’s sales strategy.
The same features can have a different value for different guests!
By identifying the different values of each characteristic, new technologies using artificial intelligence enable the right offer to be served to the right guest at the right time.
Supporting statistics or studies on user preferences in terms of attributes or room characteristics are almost non-existent for the hotel industry. Since the approach of moving away from room categories is still very new and attributes can vary greatly from property to property, collecting data points to understand which attributes are preferred by which user profiles is a critical first step to understanding price elasticity and demand patterns.
The departure from room categories
Moving away from selling by room category brings with it a high number of additional price points at the point of sale. The value of each room feature can be assessed differently depending on the reason for travel and personal needs. For example, traveling with companions such as a spouse or family, the purpose of the trip, or personal preferences can significantly change the value perception and price elasticity of each room feature.
The more price points and options that can be intelligently offered and presented to each booker, the higher the booking conversion and value will be.
In addition to additional price points, a new feature-based inventory management also offers the opportunity to enhance one’s own brand and pursue a new sales strategy. Only granular inventory management can also enable a differentiated inventory offering according to target groups, individual pricing, and differentiated marketing activities.
First steps for feature-based inventory management
It is recommended to check your inventory to make sure it is up to date. In the end, the room turnover is the one with the highest margin.
- Take the time to review your inventory, identify the differences, and record any previously undocumented features! Download a template here to get started and customize it according to your needs.
- Update your inventory in your relevant systems (PMS, IBE, CRS, etc.).
- Define the way you want to sell through your direct channels and implement the approach starting with email and phone reservation requests.
The next step is to review your current technology landscape to identify which solutions are already in place for this approach and which may still be needed. It may also be possible to replace several existing solutions with a single new approach.
Do these comments sound familiar? With a feature-based inventory approach, such reviews are a thing of the past.
Markus is the co-founder of GauVendi with over 25 years’ experience in the tourism industry who lived most of his career in Asia, in the Middle East, Eastern Europe and the Caribbean. His last positions included Global VP Sales & Marketing of WorldHotels, Regional VP Sales & Marketing of Mövenpick Asia, as well as various senior positions with IHG.