Gaps in Availability – Costlier Than You Think
When it comes to managing inventory, hotels have the daily challenge of selling as many hotel rooms as possible, at the most profitable rate, before the clock strikes midnight. Unsold nights are permanently lost revenue opportunities. This is why it is critical for Hotels to have an inventory management strategy that maximizes occupancy and revenue.
In today’s online travel market, the hotel wholesalers are an important cog in the hotel distribution landscape and vital in giving hotels quick and easy access to travel consumers around the world. As intermediaries, these wholesalers are in the business of aggregating hotel inventory and selling it on quickly and competitively through travel retailers such as OTAs and tour operators. To be successful wholesalers need strong relationships with both hotel suppliers and the travel retailers.
By aggregating hotel data such as availability and rates from a spectrum of suppliers, the wholesalers seek to respond to inbound search requests with the right hotels, for the right price at the right time. If one hotel appears not to show availability (such as no rate loaded, or no rooms available), a similar hotel nearby is quickly sourced from possibly another supplier and presented as quickly as possible to secure the transaction. At the same time hotel distribution managers using a variety of distribution channels need to actively monitor their channels to make sure that their availability responses are as accurate and error-free as possible.
With hundreds of millions of dollars of inventory being requested and sold every day, wholesalers and hoteliers alike must have appropriate inventories to meet demand combined with robust infrastructures and APIs in place to be able to return swift relevant responses to the high volume of search requests.
It is well documented that internet shopping has given rise to some staggering look-to-book ratios, which impacts the servers and systems right across the travel supply chain. In order to compensate for the maintenance costs and drive profits, many online B2B travel organisations invest considerable amounts of money in connecting more clients, developing their distribution capabilities and marketing to generate ever increasing volumes of search traffic.
All too often considerably less emphasis is placed on optimising their inventory. In part at least, this is due to inherent technical challenges in capturing and analysing large quantities of search traffic in real-time.
Having no inventory available can and does every day account for millions of dollars in potential lost revenue opportunities for one travel provider or another. If you are not returning products then you can’t clinch the deal.
Triometric has been working with many intermediaries, both big and small for some time. Our experience in this sector suggests that it is quite typical for more than 20% of searches to show zero availability with an even higher percentage to show low product availability or choice. This we call the inventory gap. This 2 min video demonstrates how XML API analytics rapidly turned a leading wholesaler’s inventory gap into a £7 million revenue opportunity using search intelligence.
The challenge for the online travel distributor is having a process which enables them to assess the financial impact of the gap, identify the causes and then take actions prioritised by revenue wins which will minimise the gap.
It is highly unlikely that any online travel distributor will be able to supply product for every single search request that they receive. The key question is: how large is the gap between the inventory of available products and the searches that the system is currently servicing?
The gap is characterised by:
- Internal gaps: No availability being shown for standard inventory products being requested.
- External gaps: Inventory that is being requested by clients but is not available within the standard inventory.
- Time: Changes in demand by season, trends, specific events and other factors.
Inventory can only contribute to revenue where there is both availability and relevance when compared to current search traffic and not simply in isolation. When an appropriate API monitoring system and search analytics platform is in place, the internal inventory gaps can be readily identified and tracked to root causes such as popular destinations not being sufficiently available, or errors in the message chain. These can then be resolved through prompt technical or commercial actions.
External inventory gaps represent the opportunity for business growth into areas that had not been considered as part of the mainstream business. Thus representing untapped opportunities
Triometric’s white paper “Closing the Multi Million Pound Inventory Gap with XML Search Intelligence” presents a more detailed analysis of how search data can be used to generate the necessary business intelligence to optimise a distributor’s inventory.