By Fig Cakar, Managing Director – the Americas, SiteMinder
Your hotel’s inventory is its greatest asset and represents a major part of your investment. That investment is tied up until rooms are sold, making the effective management of inventory a key task for today’s hotelier. No longer just an idea, hotels that have mastered the art of inventory management are seeing big benefits to their bottom line. It is estimated that Marriott Hotels increased their annual revenue by as much as $200 million when they first introduced their inventory management strategy.
An umbrella concept
Inventory management is an umbrella concept that involves understanding, overseeing and controlling your hotel’s room inventory. It incorporates not only revenue management (managing and generating demand) but also yield management (maximising return). By analysing your inventory and rates on a regular basis, you can make adjustments in anticipation of peaks and troughs in demand, allowing you to cherry-pick the highest value bookings during peak times, as well as deploy discounts and other customer incentives to drive up demand and increase occupancy during quieter periods. This strategy is what is referred to as time-based pricing, or dynamic pricing, and the benefits include simplified yielding processes, increased speed and agility of a hotel’s responses to customers, as well as greater rate integrity and rate parity. Inventory management also enables you to set your prices relative to competitors, which is essential given that OTAs (which in 2013 accounted for $278 billion of bookings), are levelling the playing field for hoteliers through increased pricing transparency.
Creating a balanced strategy
It costs time and money to store, track, and promote inventory across multiple booking channels. Because mismanagement of inventory can cause significant financial problems, hotels must be vigilant in tracking their data and implementing findings on a regular basis with an eye to controlling the costs associated with inventory. Technology will help you make the most of your data and create a balanced inventory management strategy, this includes:
1. Lead Time
In order to maximise sales, you need to understand how long it takes to sell hotel rooms through each of your key channels. With booking lead times shrinking, creating more forecasting uncertainty, hotels must have a better grasp of what consumer behaviours and trends are driving lead times from the search-to-booking window.
What is the minimum number of rooms you have to sell through each type of booking channel in order to maintain effective sales levels? By understanding the minimum number of rooms to be sold (across day, week, and month) and across specific channels (direct and indirect), you can both reallocate any cancellations, and more importantly, decide how and where to utilise spare rooms for promotional offers and seasonally adjusted rates. For maximum efficiency, your inventory management strategy needs to work hand-in-hand with your sales and marketing strategy.
3. Demand Management
Monitoring demand and sales trends via your channel manager or in-house reporting system allows for real-time, effective inventory management, promotion, and reallocation of rooms so that you are aware of your available inventory at any given time. To this end, centralisation of all hotel staff resources is essential so that everyone is on top of your hotel’s current inventory, the prices they should be quoting, and any discounts or promotions they can offer. This centralisation is particularly important for hotels that receive high volumes of phone reservations and walk-in guests, or have call centres or central reservation systems.
A holistic approach
You need to think of inventory management holistically: it doesn’t happen in isolation from your other management, sales, and marketing strategies. With the right technology to help you integrate the different functions, you will be able not only to collect the right data and analyse it in a way that is meaningful, but also use it to drive your marketing campaigns through all your different sales channels and maximise your return on your inventory.
Look out for Part 2 of “How to store, track and promote your hotel inventory effectively”, where we will be discussing in greater detail how hoteliers can leverage technology for more powerful inventory management.