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Whoever Owns the Inventory Also Owns the Guest

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June 16, 2006
John Springer-Miller

© 2006 Hospitality Upgrade. No reproduction without written permission.

The battle over where to manage inventory extends back for at least two decades. We automated a hotel chain back in the early 90s, and they were adamant that the inventory for their 240 hotels be managed and booked through their central facility. The franchises fought against it, but the corporation won the right, in court, to dictate the technology used at the hotels, and they configured our technology so that the inventory would be controlled centrally. But it was always clear to me that the fight wasn’t really about the inventory, it was about the guests.

In fact, it really doesn’t matter where the data is located. From a technical perspective, your inventory can be accurately held practically anywhere in the world - even in multiple, replicating systems at the same time. But who manages it matters a lot.

The property is, in fact, always the controlling entity when it comes to determining exactly how many of a certain thing are available at any given time. It is correct for the people most familiar with the property to manage the inventory of rooms and suites, facilities, services and activities. For instance, if a hydrotherapy room has to be scheduled for maintenance, or if the only employee that can do hydrotherapies calls in sick, the spa manager will have to manage this, and he or she should be able to do so in the operational system used on a daily basis. A hotel manager should be able to control when to release the group block for the local university. After all, a computerized inventory is merely a reflection of the property’s reality, and only the property can stay directly in touch with the reality. Again, there are many, many reasons this remains true, including the complexities of suites and lock-offs, owner stays, shares, walk-ins, no shows, stay overs, early outs, room moves, maintenance, housekeeping, and on and on and on.

Ideally, the thousands of inventory changes that occur in the course of a day should affect all appropriate channels automatically. People who manage these things should not have to manage them multiple times.

But the core of this discussion isn’t the management of inventory, it is the management of availability! Properties that still think they can get availability by simply subtracting their bookings from their room inventory are missing the boat. In a revenue-managed world, the more significant part of inventory is how much you charge - for a spa service, a group, a suite for a Friday night only - and what rules apply to the availability of the things you sell. In order to truly leverage infrastructure, hotels need to start thinking about their availability, not in terms of room inventory, but rather in terms of the unrealized demand against their rate and package inventory. This is controlled by many things, including (possibly) a room in inventory.

This should be managed by the people within your organization who figure out what you sell, where you sell it, and how you sell. It is a function of marketing and revenue management. Again - it doesn’t matter where the people are physically located, and it doesn’t matter where the databases are physically located.

Often, the responsibility will be distributed. For example, a property’s F&B manager may create a wine tasting event for up to 100 guests (inventory). The marketing department figures out how to package it with other inventory, and what channels to promote it through (distribution). The revenue manager decides how much to sell it for, depending on a series of factors like booking lead time, length of stay and so on (availability).

Managing availability in today’s environment is one of the most challenging things a property faces. The inventory and selling strategies are complex, as are the myriad distribution possibilities available in the marketplace. Doing this well not only requires authority and capability that rarely exist in a single individual or location, but also requires technology that embraces open connectivity.

The ideal structure is a transaction model in which the appropriate people within the organization directly manage various kinds of availability through their daily operational systems, and the varied supported channels query this availability in real time. This is the only model that will eventually allow your availability to be presented consistently and accurately over all your channels, and it is in your near future.

Managing availability is the business of focusing and channeling guest demand in the most profitable way. Understanding your guests and leveraging their tendencies may be the most critical part of managing availability. And having your guests contact you in the most direct way possible gives you the maximum ability to manage availability.

A managed group of properties, or a chain, may choose to manage availability at CRES. This is completely appropriate. It is a great way to share and leverage specific expertise - and your CRES is still you.

You may want to contract with a third party to populate various distribution channels for you, until your technology handles this automatically. Each channel you select (including your in-house central reservations system) tends to manage and sell your availability differently, so this will be helpful until enough channels have the technology to let you promote your availability seamlessly.

But populating distribution channels is not the same thing as managing availability. Companies focused on distribution are motivated to fit all offerings into a series of consistent frameworks, and to leverage price-driven GDS and Internet models.

Managing availability is a function of marketing and revenue management. Why would you turn over your marketing to a company that focuses on making every hotel look the same? And why would you turn over your revenue management to a company that focuses on lowest price as the key sales strategy?

They are not motivated to make you look special. And you can’t blame them. A third-party voice center can really only effectively use one software system and one set of business processes, so you will have to fit their model. Their agents generally must sell all their properties equitably, their Internet offerings must provide a consistent approach for guests, and their connectivity to the GDSs must adhere to the rapidly failing airline mentality of selling one seat to one rear end.

And what they really want - most of all - is to control all the paths by which your guests reach you. They want to own your rear ends.


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