Effectively Managing your Hotel Inventory to Maximize Revenue

Apr 30th, 2020 in

Effectively managing your hotel inventory is an integral part of running a successful hotel. On any given day, you may be looking at your occupancy rate, adr, online guest reviews, marketing promotions and messages – pretty much everything under the sun and even before you make the rounds to check on staff and guests. Today’s hospitality landscape is much more competitive and transparent than it used to be and managing your inventory has become a top priority, and a difficult one at that. 


What is hotel inventory management?

Inventory management encompasses the understanding, overseeing and controlling your hotel’s room inventory. Hotels have something called perishable inventory, which means that their inventory (rooms) aren’t able to be sold after that time has passed. Managing that inventory effectively is balancing need and demand, while maximizing returns. Revenue is unlocked only when rooms are booked so returns need to be maximized by selling those rooms at the optimal rate, at the right time, in the right distribution channel.

There are 3 fundamentals at the core of inventory management. We’ll break them down for you here:

1. Price

Price generally is the most elastic factor in inventory management. If you’ve ever booked accommodation before, then you’ve witnessed first-hand when you’ve tried to book a hotel during the summertime, or during a huge event, say the olympics, prices sky-rocket. Likewise, if you’ve ever booked during a shoulder season, say near the end of September when all the holidays are over and everyone has returned to work or school, you’ve been able to score a great deal on that hotel. Hotels drive up and discount down prices fully optimize inventory and get maximum occupancy at the best rate. Through dynamic pricing, hotels can influence their supply by understanding what is in demand at any given time.

2. Distribution 

Distribution plays a part in inventory management as these are the channels in which your inventory is reaching your consumers. In hospitality today, it is almost unfathomable to not have your hotel listed on OTA websites. Managing your distribution means understanding what the minimum number of rooms you will need to be sold for any given period in each channel. Understanding this will give you the power to make quick decisions regarding relocation of cancellations of where to list spare rooms to fully optimize your inventory and maximize revenue.

3. Market Segmentation

You wouldn’t be able to price or distribute your hotel if you didn’t understand market segmentation. Market segmentation refers to the market you’re in, preferences, demands, and affordability of the different demographics associated within that market. This will translate into how you price and distribute your rooms across the various channels. Being able to adapt and be flexible is key as a hotelier as it allows you to understand your customers, cater to their preferences and build loyalty, which in turn, raises your bottom line.


What are some inventory management tools?

Software capabilities have revolutionized the hospitality industry for the better. Nowadays, everything is done at a click of a touch-screen button. Two assets to have in your hotel that will help in navigating the complex task of managing inventory is a Revenue Management System (RMS) and a Channel Manager. 

In order to do big business, we need big data. No, not those scribbles of numbers and figures on that ancient notepad. We mean real-time data right underneath our fingertips. Leveraging an RMS will allow you to create accurate demand forecasts and update room prices in real-time. Other functionality of an RMS include collecting historical data of your reservations, access to booking and guest data and producing demand generation forecasts for every type of room for any day of the year. This will give you insight on historic book channels and patterns, lengths of stay, what they paid and what yield was generated on each room as well as trends in cancellations. 

These forecasts and reports collaborate with optimization programs to be able to set inventory controls allowing you to automate different set rates for room types and lengths of stay and create thresholds for specified overbooking levels. In short, it allows you to best manage your inventory by optimizing the highest yield on your rooms.

Having a channel manager will allow you to use a pooled inventory model. This means that you can sell all your rooms on any channel at the same time, instead of splitting your total inventory into chunks and allocating those chunks to each channel you connect it to. Why is this a benefit? Pooled inventory will ensure your hotel avoids overbooking and double booking.

Channel managers also get your hotel booked faster by removing manual entry with complete real-time automation. It will pool all your inventory, increasing exposure and ranking which increases chances of booking. Your channel manager will be able to produce deep reporting and give you better understanding of trends like last-minute bookings.

Ensuring that your channel manager integrates with your RMS is key here because you won’t be able to fully optimize your inventory without connecting the two. By integrating the two systems, it will become a powerful tool in managing your inventory. You will be able to sell your rooms for the right price at the right time because your channel manager will quickly distribute real-time rate recommendations from your RMS. By ensuring your rates and availability are always up to date in real-time, this reduces the amount of time it takes to adjust in all booking channels, therefore increasing revenue. 

Leveraging your technology will give you the robust data you need to make decisive, informed actions and anticipate future trends. This will also allow you to streamline marketing activities and capitalize on emerging markets and trends.


How to maximize revenue opportunities by effectively managing your hotel inventory


1. Data based decision making

Information is available to us, so it only makes sense to make decisions based on hard facts and data, instead of a reactively emotional or instinctual basis. Making sure to gather your facts to formulate a decision by using key metrics like occupancy rate, ADR, revPAR, booking source, just to name a few. These should be used in tandem with customer segmentation, seasonality, special events, booking trends, and competition rate setting to allow you to forecast demand and create appropriate pricing and promotional strategies aimed at different customer segments. The most effective managers know how to use their tools to gather the right data to make the right divisions that impact revenue.

2. Integrated channel manager

Like we touched upon above, having a channel manager that is essential to improve the overall performance of your hotel’s real-time inventory management will give your hotel the ability to manage rooms, bookings, rates, and distribution of your total inventory across multiple channels all at once. If your channel manager is not properly integrated, you risk reservation errors, double-bookings and missed booking opportunities. A proper interaction makes sure that your room rates and inventory availability are simultaneously updated accurately among all your distribution channels and gives you the power to react to market conditions immediately to fully optimize pricing and distribution for maximum occupancy levels and maximize revenue.

A few more important things to look for in your channel manager:

  • Do they offer full integration with your PMS or RMS?
  • Is it user friendly?
  • Is the user interface user friendly?
  • Is adequate support and training in your country’s native language?
  • Do they use a pooled inventory model?
  • How robust is the reporting?
  • Do they automate and update in real-time?
  • How long does it take to implement the technology?


hotel group sales ebook

3. Go mobile 

Having data and reporting in real-time at the touch of your fingertips will give you the power to make informed decisions quickly, which is essential in today’s competitive and constantly changing market. Having a centralized, cloud-based PMS software can help you out with that. Managers can view live performance, monitor operations, access key reports, know what their staff are working on, and push updates all without having to be physically on-site. On the revenue management side of things, managers can make decisions based on rates and inventory based on real-time updates to hotel and market conditions and make the necessary inventory adjustments where needed. Having information that is quickly available streamlines management and communication at all levels, thus driving up efficiency in decision making on delivering the right room to the right guests at the right time.

4. Push your direct channels

OTAs make a huge commission off of your revenue. In most cases, OTAs are not the last step in the consumer’s booking process. Once they find your hotel and are interested, they will then look you up on different social channels like your website, instagram, facebook, or youtube to collect more data. Ensure that these social media outlets are fully optimized to influence direct traffic to book. Offering incentives on your social media channels and websites that aren’t available on the OTA website are a great way to encourage direct bookings. Just make sure they’re visible and easy for your consumer.


5. Use OTA marketing to your advantage

Ah OTAs… can’t live with them, can’t live without them. OTAs have become a necessary middlemen in today’s hospitality industry. Most guests browse through OTAs when searching for accommodation to view what’s available in one convenient place. They can filter through photos, locations, reviews and prices. Instead of being resistant to OTAs, you can play on what they’re really strong at: marketing.

It’s no lie that they have a much more substantial marketing budget than you do so use this to your advantage. One way to do this is use the pooled inventory method we outlined above. By doing so, most OTAs will reward you with higher visibility in their ranking algorithm.


Managing inventory has become increasingly complex and difficult with today’s constantly evolving hospitality landscape. Hotel inventory management is centralized around three components: price X distribution X market segmentation. By using an RMS that integrates with a channel manager, these powerful tools will give you the ability to see this data in real-time and ensure that you are managing your inventory effectively across all distribution channels, and avoid overbooking and missed sales opportunities. It’s important to forecast based on data, push your direct bookings where possible, and use OTAs for what they’re strongest at: their huge marketing budget. By leveraging your software tools along with your informed decision making, effective inventory management will maximize your revenue and create higher demand for your property. 

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