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Central Pool of Inventory Vs. Channel Allotment

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Posted by Alex Gaggioli
October 28, 2015

Introduction:

Marketing your property online can get complicated fast. With so many online travel agencies (OTAs) to choose from, how do you manage your property’s availability across all of them? The hospitality industry has come  up with two strategies: “central pool of inventory” and “channel allotment”. While both have their pros and cons, there is a clear winner. Central pool of inventory saves you time and money. We’ll explain the pros and cons below, as well as what you need to do to optimize your inventory’s allotment.

Channel Allotment

Channel allotment refers to an inventory management process where you must manage every channel’s inventory individually. Channel allotment means a property does not use a channel manager. Therefore, you must update every channel individually. In order to prevent over-bookings, most properties divide their inventory between channels. This makes it difficult to optimize revenue strategy because all your available rooms are not on the market.

Without a channel manager, you are also required to do the following:

  • Login to each extranet and allocate a certain amount of inventory
  • Manually move inventory from one channel to the other in the event one channel sells out their allotment
  • Manually close out each channel once your property sells out
  • Manually update allotment on each channel if you sell reservations directly (in-person, phone, walk-ins, etc)

There are several risks associated with channel allotment:

  • Potential loss of revenue: Once a channel sells out of their allotment, you now have 1 less active channel selling available remaining inventory
  • Rate Parity Issues: If one room-type sells out of Expedia, for example, but booking.com continues to sell inventory, you are no longer offering parity
  • Over bookings: If you forget to close a channel or if you placed more inventory on a channel than is actually available, you are prone to over-bookings.
  • Wasted time: it takes a lot of time to manually check daily allotment by room type and date in real time. Not only does it take a lot of time, it is extremely prone to error, which wastes even more time.

Central Pool of Inventory

When your property uses a channel manager, you can implement a central pool of inventory strategy. Instead of dividing your inventory up evenly across all online channels you use, a channel manager makes OTAs all draw from one giant pool of available inventory, until inventory is gone. A channel manager makes life a lot easier because it gives you one central location to manage your entire inventory. You no longer need to log into every extranet every day and worry about missing bookings.  

Here’s how it works:

  • Login to your channel manager and place the total amount of inventory you want to sell through the channels on any given day.
  • The channel manager will update all connected channels simultaneously. So, when a room is booked on one site, it will update all of the others. The same thing happens for cancellations as well.
  • If you close out the channel manager, the channels close too.
  • A channel manager’s calendar easily allows you to see the total availability and consumption on a per room type and date basis.

There are many advantages a central pool of inventory as it allows you to set rates and restrictions:

  • Set rates and restrictions in the channel manager to have them instantly sent to all your connected channels
  • Managing 10 channels takes the same amount of effort as managing one. A channel manager allows you to add more channels to increase your visibility and bookings.
  • Allows you to become more aggressive in last minute decisions to yield more revenue or extra nights from online reservations

The Best Part of a Channel Manager

Reservation delivery:

  • After someone books a reservation on a certain channel, the channel manager reduces the total allotment. It then instantly updates all your other connected channels and maximizes efficiency.
  • As soon as your last room is booked, all your channels close preventing over bookings.
  • Cancellations are instantly updated and the system immediately tries to sell the inventory
  • A central pool of inventory eliminates duplicate bookings and/or misplaced reservations

Recap:

Channel Allotment

Benefits:

  • It’s free, no platform or software needed

Risks:

  • Time consuming
  • Prone to human errors
  • Each extranet operates differently

Central Pool of Inventory

Benefits:

  • Optimized sale of inventory
  • Elimination of over bookings
  • Adds as many channels as you want
  • Save hours of daily work

Risks:

  • Takes time and effort up-front to set up channel connections
  • Limited to channel manager’s available connections. (Our channel manager, myallocator, partners with hundreds of online channels. See the complete list here.)

Conclusion:

Channel allotment and central pool of inventory both have benefits and risks. But, central pool of inventory is clearly a safer, more profitable solution for your property. Channel allotment reduces productivity and revenue opportunity, putting your business at risk. Central pool of inventory offers fewer risks and more benefits for your property.

We recommend that you find a channel manager as soon as possible. Click here to learn more about Cloudbeds’ channel manager, myallocator