A new way of inventory management: Attribute Based Selling & Room Feature Combinations
June 2021, Carina Stegmayer, Co-founder GauVendi
To start off with, why should you change the way you manage your inventory?
The simple answer is because you are able to make more revenue when selling in a more granular way. What’s more… you are able to increase client satisfaction if guests have more freedom in personalizing their stay.
By breaking away from traditional room categories and embracing a different inventory approach, you are able to cover various revenue driving opportunities such as:
revenue management tactics (higher amount of price points)
upselling solutions (upselling all benefits, not only generic features and services)
automated room assignments (avoiding free upgrades and assigning room matches clients actually requested, along with a reduction of manual workload)
a different online retail approach - novel in the hospitality industry – that will lead to new bundling and price points
Each of the above elements will lead to an increase in positive guest referrals and chances of more returning guests… and who doesn’t want that?!
While there were many good reasons historically to sell simplified room inventory, technology has evolved and as such, hoteliers should take the opportunities that new technology offers them, to re-invent themselves and their sales & distribution strategies by selling their true inventory with all its uniqueness… through their own direct channels!
With this new inventory strategy, hoteliers can create a real differentiator to third parties.They can also provide a different offering - a non-comparable inventory - something that they previously were only be able to offer when guests would contact the hotel offline (email or phone), subject to how well they know their rooms.
Being able to provide
clear differentiation is elevating the opportunities
for a channel shift and provides real benefits to loyal guests!
What other industries have done:
Product sales approach in other industries
Now hospitality can do better too!
The hospitality industry has long talked about adapting the airline approach of Attribute Based Selling (ABS). This means de-bundling the room into smaller attributes and increasing potential upsell revenues during the booking process. The guest selects additional attributes that are relevant to them. Finally, some large hotel chains are in the process of rolling-out beta versions of this approach but they have a long way to go.
In addition, there is an even newer approach where rooms are clustered by experience dimensions and features into Room Feature Combinations, creating a lot more price points subject to the variances and features included per each room. Through this new inventory codification system, the booking experience is a much more guest friendly and customer orientated. AI is used to better match guest needs with the hotel sales strategy.
Contrasting the two selling approaches
a. Using a base category and selling individual room attributes on top (ABS approach) as an add on: In this approach the inventory logic is based on the minimal set of a room category (e.g. standard room) and all other features can be added by the booker as they consider this of relevance to them or not. As the booker adds attributes, the price of the room increases. The idea is to first select the room at a price point and then add attributes such as bedding type, balcony, air-conditioning, high floor or even other service items that are not attached to the category such as early check-in or late check-out.
b. Room Feature Combinations – a guest-centric experience approach: Decoupling from room categories in full and breaking down all rooms into features and feature combinations. This set-up allows hotels to sell the rooms with each of its unique features through a percentage match approach whilst at the same time also offer the same inventory with reduced number of features if desired. The purchase approach is changed by allowing bookers to choose the best room combination match, showing bundled price points of the various room attributes without showing the price of single features. This also includes rooms with connecting doors or any other inventory combination the hotel may like to offer.
Room Feature Combinations – the basis for a radical new selling approach
This approach allows you to create many more price points in a natural way, by repacking rooms in various ways and playing with different labelling strategies as well as monetizing the variations and unique features of the inventory.
By breaking away from room categories, a lot more price points are being added at the Point of Sales and the value of each included feature might be gaining a different value subject to the traveler profile. Imagine that guests are traveling with companions like a spouse or family, the purpose of the trip or personal preferences might change the value perception and price elasticity of each individual room feature significantly. This is different to the ABS approach where the attribute value is the same for all travel profiles.
As more price points and options can be smartly offered and presented to the relevant booker, the higher the conversion and booking value gets.
Same features may have a different value to different guests!
Identifying the different value of each feature, allows you
to price the right feature to the right guest at the right time using artificial intelligence!
More price points reduce the risk of churn!
Both selling approaches cover a way of upselling and allow to increase revenues through direct sales online (through booking engine, meta sites, social media channels, destination pages, etc.) in very different ways.
With the ABS approach it is clear what the room price is and any attributes/features come on top. It is up to the booker to decide what feature is relevant to him/her. This method is copied from the airline industry and enables an upselling solution at point of purchase. More explanation on the ABS approach can be found in the article from Hospitality Technology.
With Room Feature Combinations and the new inventory codification approach, the upselling is much more persuasive and relevant as the booker is able to select feature preferences without having to make already a choice about how much this is actually worth to the booker. Our industry does not know if a balcony is worth X or Y nor do we have any statistics or supporting studies to define the price points or even consider user preferences using artificial intelligence. Hence, starting to collect the data points and understand which room features and which user profiles choose what, is the first step to understand demand patterns and quantify every feature value or combinations of feature values.
Of course, you might consider thinking through plenty of new questions when changing the inventory strategy:
How should I set up my future price strategy?
Considerations should include breakdown by person, by purpose of trip (!), by target group (corporate, loyalty guests, groups, etc.), by markets (mass market versus markets versus individualized markets) and by channels direct (transparent inventory pricing) or indirect (simplified inventory pricing).
How do I position my property under consideration of a new inventory setup?
A new inventory set up on a feature-based approach allows you to negotiate differently with contracted business and also gives you a new opportunity to differentiate by distribution channel which inventory and feature you should be bringing to the shelf. The positioning of your property should be reviewed in the lights of a feature-based approach.
What systems, tools and add-ons do I require in future – what do I need to keep, what do I need to add and what to get rid of?
A review and cleanup of the current tech stack is an exercise that should be part of the regular routine of any hotelier. The same way as we tend to review our provider costs in our private lives (energy spend, mobile provider, etc.), this must also be done for the businesses we run. Identify necessary systems (if in place or needed) that are required to manage a feature-based inventory approach and sales strategy and adapt your tech stack accordingly. You may also identify opportunities to cut out of systems, replace it with new ones or extend existing tools and even improve the integration and automation levels. So, it is time worth spent!
For a feature-based inventory strategy:
Review which solutions you have today and which ones you require tomorrow
Inventory Management systems by room features
Revenue Management system
Room assignment solutions
Review tools (you are now able to act on reviews that are linked to rooms feedback)
Is there anything that stops our industry from making a strategic change on how inventory is being sold?
Not really! There are some things we are missing in our industry and which we should tackle and promote with associations, in forums and educational institutions to close the gap. These include
Digitalizing our experience and the hotel inventory to make full use of the online distribution opportunities: The industry requires solutions that allow us to digitalize the room inventory in a cost-effective way and be able to keep this up to date reducing the dependency on third party resources and costs.
Building digital expertise and knowledge for our industry: The current curriculum for hospitality studies still does not consider a real education or focus in distribution, revenue management, IT/technology, e-commerce or online marketing. Whilst this is something the hospitality industry must re-enforce with the educational institutes; we currently need to insource this expertise from other industries which will come at a higher cost. A challenge, particularly post pandemic.
Revitalizing the entrepreneurial spirit in the hospitality industry! A spirit that breaks with the re-activeness of our industry of the past decade and wants to gain back what belongs to us – the guest! We just need to dare and make a change!
So, it looks like these are all manageable changes and not everything has to be done overnight. Why not start with the essential? Take the time to review your inventory, identify the differences and put all the idle assets on the shelf! Download here a template you can start off with and adapt to your needs.
Change the way you set up your inventory and start to revolutionize the way you sell to make more revenue and increase customer satisfaction!
It is time for a change – now!
Common guest review examples, still happening today due to the fact how inventory is managed (source, GauVendi, 2021):