Superior rooms inventory management is the result of knowing the unique features of the rooms that make up the rooms inventory and then making available the right rooms products for the right guests. The specifi c tactics RMs use to do so are many. One good way to better understand these tactics is to examine how they are applied to rooms sought by potential

guests. Although the specifi c rooms buyers utilizing a hotel will vary based on the property’s location, service level (full or limited), and target market, in most hotels, guests can be generally classifi ed as belonging to one of three market segments:

· Transient

· Group

· Special contract and negotiated

As a result, RMs apply specifi c revenue optimization strategies to their transient rooms, their group rooms, and those rooms sold on a contract basis.

Transient guests are best defi ned simply as those who are not part of a group or contract sale. Strategies for optimizing rooms revenue relative to transient rooms inventory management can best be understood by examining those tactics applied prior to arrival and those that are applied at the time of the guest’s arrival at the property.

The best RMs are very adept at managing rooms inventory related to group room sales. Inventory management of group rooms is different from that of transient rooms simply because of the way group rooms are sold. Recall that the sale of a group room is a two-step process. In the fi rst step, rooms are blocked, or removed from available inventory for future use by the group. In the second step, rooms are picked up (i.e., individually reserved) by group members.

In addition to inventory issues related to transient and group rooms, RMs face unique challenges when managing

contract and negotiated rate inventories. To illustrate the inventory management challenge of negotiated rates consider the travel needs of a large corporation. The corporation, which is headquartered in city A, sends a large number of overnight corporate travelers each month to city B. To minimize room and travel planning costs the corporation’s rooms buyer negotiates with one of city B’s hotels to offer rooms to its traveling employees at an agreed on rate. The benefi t for the company is that all of its travelers know in advance where they are to stay and the rate they are to be charged. The hotel benefi ts from capturing all of this company’s business.

Overbooking as an Inventory Management Strategy

All hotels overbook. In some cases, the overbooking is unintentional while in other cases it is intentional. The reasons for unintentional bookings can vary but include the following:

Damaged rooms.

Staff errors.

Inventory availability errors.

Guest overstays.

Experienced RMs know it is best not to walk:

_ Members of their hotel or brand’s loyalty (frequent guest) programs

_ Group meeting or event attendees

_ Contracted rooms such as airline crew rooms

_ Couples celebrating special occasions

_ Families arriving late at night

Price Management

When RMs have accurately forecasted buyer demand and monitored their product availability, their next task is price management. Recall from that the establishment of an initial price is the fi rst step in revenue management. This is so because the demand forecast for a hotel’s rooms reflects buyer response to an established price. Price management is the process of adjusting that initial price to infl uence demand.

To illustrate, consider your own personal interest in purchasing a fi ve-night stay in Miami, Florida, to visit South Beach. If you are like most buyers, your interest in purchasing the fi ve-night stay can only be determined after you know its price. At a very low price, your interest will likely be high. At a higher price, your interest will likely decline. Thus, it is an RMs’ response to forecasted demand and supply levels at initially determined rates or prices that is the essence of price management.

Hoteliers may establish their initial rate offerings based on a variety of factors including the season, their hotel’s location, its operating costs, and the service levels it provides. Understanding exactly how hoteliers historically determined their initial room prices is helpful in understanding how it is done today, as well as how a hotel’s initial rates can be price managed to optimize revenues.

Questions

1. Differential pricing strategies for optimum inventory management?

2. Name the the reasons for unintentional bookings?

3. What is price management?

Literature:

1. Hayes, D. & Miller, A. (2011). Revenue Management for the Hospitality Industry. Hoboken, NJ: John Wiley & Sons, Inc.

2. Stanislav Ivanov. Hotel Revenue Management: From Theory to Practice. 2014. Varna: Zangador

3. Revenue Management. American Hotel & Lodging Association (AHLA), 2006