Hospitality Sales and Marketing Association International
Hospitality Sales and Marketing Association International
 
Hospitality Sales and Marketing Association International
Think of inventory as a precious asset v. a perishable commodity

Excerpted from the HSMAI and Infor White Paper "Ten MORE Ways to Pull More Revenue Through to Your Bottom Line: Taking Ownership of Your Customer Relationships"

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Airlines have successfully adopted an approach to extract a few more dollars on every flight through charging for services that were once free – everything from checking a bag, checking in early, sitting in an aisle seat, enjoying a cup of coffee, and having just a couple more inches of legroom.

While the concept of unbundling to this degree may be problematic within the hotel environment, there are some things you should consider that could have a dramatic impact on your profitability.

The fact that, after a night passes, the value of an empty room is gone forever, makes it one of the most perishable products money can buy. But this fact seems to drive an unhealthy industry view toward the value of our product. While it’s true that value of a given guestroom fluctuates seasonally, from one customer to the next, and even from day to day, correctly assessing the value of one of your most precious assets at any given time is critical. Defaulting to selling by “run-of-the-house” is easy and allows for greater flexibility operationally, but comes at a terrible cost. It’s time to change that.

Selling by unit type, even for group business and particularly during periods of high demand will allow you to garner additional ADR from existing demand. Selling in this fashion also changes the mindset of both sales and front-line associates as their attention shifts from upgrading to upselling. Reinforcing this behavior through appropriate incentive programs will help solidify this approach through all levels within the organization.

During periods of low demand, it is wise to oversell a given unit type, provided oversell limits and operational impacts are clearly defined and communicated. Unit-type utilization reports combined with an assessment of rate differentials (price steps between unit types) will point you in the right direction. Price differentials should be smaller during periods of low demand and greater during high demand periods. Understanding your guests’ motivation behind unit selection may also lead to additional revenue opportunities not previously considered. Of course, these motivations are different by customer segment, so gaining necessary insights will also require some level of personal interaction.

Another way that hotels often undermine the value perception of their inventory is by giving away early check-ins and late check-outs. The conventional wisdom falls into two schools: first, if the room is ready early, why not let the guest have it, or second, if check-in is at 3PM, it’s better to hold to that policy no matter what, no matter how many clean rooms we have ready and available, to avoid unmet expectations. But consider the value of an early check-in – is the guest just looking to deposit their luggage before a full day of meetings, and perhaps have the security of avoiding a potential check-in line later in the day? Or is the guest just off an exhausting overnight flight, or anxious to begin enjoying their vacation at your property? Charging extra for the latter scenario is a big revenue opportunity, while giving away the former only dilutes the value of your inventory. The same is true of a late checkout. While the concept of “charging for rooms by the hour” is usually part of a punchline, maybe it needs renewed scrutiny, and of course requires technology that gives you an advance view of what time guests expect to arrive and depart, and a real-time view of occupancy and housekeeping status. It also requires lightning fast status updating when a dirty room is now clean, or an out-of-order room is back on-line – a great application of mobility in technology.

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