Behind every great hotel stay is a room that was sold at the right time, for the right price, to the right guest. But here\u2019s the catch: hotel rooms aren\u2019t like products on a shelf; they\u2019re perishable. Once the night passes, that unsold room is gone for good.<\/p>\n\n\n
That\u2019s why inventory management is the heartbeat of your revenue strategy. Manage your finite stock of rooms wisely, and you\u2019ll maximize profit, fuel demand for ancillary services, and keep costs under control.<\/p>\n
In this guide, we break down everything hotels need to know about effective inventory management, from pricing and distribution to best practices and software solutions.<\/p>\n\n
Hotel inventory management is the process of managing the availability, pricing, and distribution of a hotel\u2019s products and services to maximize revenue and profitability.<\/strong> Guestrooms are typically the primary focus of inventory management because they are the most profitable product for most hotels. Room sales also generate sales of other products and services on property, such as food & beverage, meetings & events, spa treatments, parking, and recreation. <\/div>\n\n \n\n\n Inventory management is important because hotels have a finite number of rooms to sell each night, and room inventory is perishable.<\/strong> Unlike a can of soup, for example, which can sit on the shelf for months before it\u2019s sold, hotel rooms have a short expiration date. If a room isn\u2019t sold on a given night, that opportunity is lost forever<\/strong>. And the more frequently rooms sit empty, the harder it is for hotels to maintain profitability.<\/p>\n Inventory management is also important because:<\/strong><\/p>\n More than just maximizing sales, a key objective of inventory management is to sell the right rooms to the right guests at the right prices on the right channels<\/strong>. Not only does this generate more hotel revenue at lower costs, it also improves guest satisfaction by matching hotel guests with the rooms best suited to their needs.<\/p>\n On the other hand, if room inventory is mismanaged, hotels miss out on booking opportunities, and distribution costs can skyrocket, eating into profits. And if hotel guests feel like they\u2019ve overpaid or the room doesn\u2019t live up to expectations, it can damage loyalty and lead to bad reviews.<\/p>\n As mentioned, every distribution network has different costs<\/strong>, whether it\u2019s an online travel agency (OTA), a GDS (global distribution system)<\/a>, or the hotel\u2019s website. If a hotel receives a majority of online bookings from OTAs, an expensive channel due to high commission rates, its guest acquisition costs (GAC)<\/a>, or the expenses used to generate bookings, will be high.<\/p>\n However, if the hotel generates a higher proportion of direct bookings, which typically have lower costs, GAC will be lower. When pricing is equal, the lower the GAC, the more profitable bookings are.<\/p>\n Another key performance metric<\/a> in hotel inventory distribution is cost per occupied room<\/a>, or CPOR<\/strong>. This is a measure of the average cost of a guest occupying a room. Because some operating costs are fixed \u2013 that is to say, relatively consistent regardless of how many rooms are occupied \u2013 hotels benefit from economies of scale and lower CPOR as occupancy rises. When pricing is equal, the lower the CPOR, the more profitable the hotel is.<\/p>\n If you\u2019ve ever worked in a retail store, you know that staff perform monthly inventory tracking, counting all the items on the shelves and in storage. This helps them keep track of inventory items, what needs to be ordered, and what products should be discontinued or returned. With smart inventory management, stores always have enough stock to meet customer demand but never too much that it won\u2019t sell.<\/p>\n The approach is similar in hotels, but with key differences. First, instead of a physical product, hotels sell rooms \u2013 and not the rooms themselves, of course, but overnight stays in rooms. And while hotels also take inventory of supplies and equipment to ensure they have enough stock to serve the needs of guests, hotel inventory management typically refers to the management, sales, and pricing of room inventory<\/strong>.<\/p>\n All other products and services in a hotel \u2013 in the restaurant and bar, room service, banquets, minibar, spa, gift shop, parking, golf, and other ancillary revenue \u2013 are considered a secondary type of inventory. Sales of these items are primarily driven by room sales. The more rooms that are occupied in a hotel, the busier its outlets tend to be \u2013 although some hotels also attract local residents and guests from other properties.<\/p>\n How hotels categorize and distribute room inventory has a direct impact on sales. Here are four main types of room inventory<\/strong> and how they are distributed.<\/p>\n Split inventory enables property owners to bundle and sell their rooms as a single unit (known as virtual accommodations) to appeal to a broader range of customer segments. To better understand split inventory, let\u2019s first explain virtual accommodations in more detail.<\/p>\n\n Virtual accommodations refer to a combination of physical rooms sold as a single unit. For example, a hotel with 12 physical rooms can create virtual accommodations by combining them in different ways, such as selling two deluxe rooms as a suite or one deluxe and one standard room as a duplex. <\/div>\n\n \n\n\n With split inventory, lodging operators can distribute unique and customizable virtual accommodations to different segments to increase occupancy, earn higher ADR, and differentiate from competitors. Split inventory can be leveraged on OTAs and a hotel\u2019s direct channels for maximum impact.Why is inventory management important?<\/h2>\n
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How does inventory management affect a hotel’s operating costs?<\/h2>\n
Types of inventory – rooms vs. services<\/h2>\n
Hotel room inventory types<\/h2>\n
1. Split inventory<\/h2>\n
What are virtual accommodations?<\/h2>\n