The way our grandparents or parents booked hotel rooms differ quite drastically from the way we book hotel rooms today and is still evolving. This is due in part to the hotel industry’s attitude towards room distribution, particularly, attribute-based selling.
With the traditional hotel distribution model, your parents probably chose their destination, and then settled on a hotel and length of stay and then called the hotel (or a travel agent) and received a list of rates. These rates would correspond with different combinations of room types and rate plans, with each combination with its own price. In this case, they would need a double room but things like breakfast, wifi, parking, and type of view are not specified during. For any given type of double room this hotel has, one may have a beach ocean view with a balcony, or one may have free breakfast, free cancellation and a high square footage floor plan – but the guest doesn’t get any control over this. They are simply looking for the best specific room type with the best rate to fit their accommodation needs.
This model leaves very little control and personalization to the guests. It’s a completely top-down, transactional process. For a single room type, some rooms have attributes like a desirable location of the room, amenities included, and impressive views, which are all features guests value, but are unable to choose during the traditional room-type booking process.
What is attribute-based selling?
Attribute-based selling, or ‘ABS’, is a selling model that is driven by room features, versus room type. It is a way of bundling, or should we say “unbundling” of hotels services into many smaller units, each with their own inventories and costs. This allows guests to filter their search with specific features they want and book a room based on what matches their preferences.
The attribute-based selling concept has become increasingly prominent in recent years due to the presence of self-service online booking and OTAs. In the past, you would call around to different hotels, explain what you were looking for, and a hotel staff would give you options based on their own knowledge of the rooms and corresponding rates. Now, you simply go online, and in many cases, before you’ve even settled on a hotel, you start filtering your search by what your preferences are. For example, you’re going to Hawaii, and haven’t started research on where you want to stay yet. You go on an OTA website, set location to ‘Hawaii’ and start filtering what you need: wifi, ocean-view, king sized bed, shuttle service, and a gym. You hit ‘apply’ and the OTA populates suggestions based on that specific criteria.
How does it work?
Attribute-based selling is a consumer-led process focussing on their criteria and preferences. Room types are now eliminated and instead, hotels break down their inventory bundles into individual services.
Think of it this way: instead of simply ordering the “steak dinner” for a set price that includes your steak, sides, and fixings, you’re now able to “build your own steak dinner”. You want a porterhouse cut, with the bearnaise sauce, and a side of garlic mash and asparagus. Each component of the dish was broken down into individual costs and you have the freedom and flexibility to add as you like.
Now apply this to hotel rooms. Perhaps you’re looking for a queen room with a higher floor with a sky city view, and free breakfast. Each attribute is priced separately and added to the chosen baes room rate. Since the guest creates their own product, the hotel is not limited to a hard inventory count of a specific room type. This means they can assign and reassign rooms as long as those single attributes are available, creating a way bigger inventory pool.
Why should hotels adapt attribute-based selling
The concept of ABS may seem revolutionary but it’s not new. The airline industry is a prime example of how the attribute-based selling model was widely implemented and adopted, and has now become the norm when booking flights. Not to mention, ABS has made airlines highly profitable.
In the past, when you needed to book a flight, you would call a travel agent or the airline, ask for a ticket that would get you to your destination and you paid. End of story. Certain assumptions and implied in the price at the time of booking like: your seat, baggage allowance, and meal/refreshments. Then the airline industry introduced the attribute-based selling model (influenced by the insurgence of online self-serve booking), where your ticket means you’ve just paid for a seat on the plane. Anything else that you’re accustomed to is not assumed anymore, and is sold as an add-on item. Things like, seat selection, baggage fees, priority boarding, and meals are now a la carte. With this transition, we saw the emergence of ultra-low cost carriers, who became champions at unbundling air travel services. In 2019 alone, airlines profited $110 billion globally from add-on revenue.
Not only are the numbers a huge benefit, but it plays a huge role in better hotel inventory management as well. Hotels are able to maximize the features that each individual guest values the most with the ABS model. Features that some individuals are indifferent about or find negative, can be sold to others with differing preferences. Furthermore, hotels are also now able to up-sell guest rooms based on the demand for specific amenities. Consumers are now able to get exactly what they want, and are happy to pay a premium for it, which in turn, increases the hotel’s bottom line.
While the hotel industry are late adopters when it comes to attribute-based selling, there is without a doubt that this concept will have a positive impact on inventory and revenue. Things to consider for moving in this direction will be things like an industry standard code list of attributes and ABS inventory software capabilities that need to be created to facilitate this inventory distribution method. With the immense technological advancements the hospitality industry has seen over the last decade, we’d be surprised if someone wasn’t already working on this. We believe the attribute-based selling model is the next logical step in the hospitality industry, and even though there will be challenges along the way, the long term rewards will be invaluable.