THE PROBLEM WITH ROOM TYPES
ABS solves the issue of limiting guests to preset room types and rate plans.
“Room type limits only exist because computer systems used to have 24 lines of text available on a DOS screen,” says Ian Saxton, Senior Vice President Strategist CRS & PMS at Amadeus. “If a hotel had more than 24 room types, they wouldn’t all be visible on a single screen, making reservations much more difficult.”
But, what’s so wrong with preset room types? Unfortunately, they often lead to frustration on the part of the guest
In today's hotel room distribution, the guest has to read through individual room category descriptions to more fully understand the combination of attributes of each, and then make a single purchasing decision, says Pierre Boettner, Head of Product and Co-Founder, ROOMDEX. Finding a hotel with rooms that suit the guest and priced within their range can require many individual site visits.
“For that reason alone, it should be no surprise that even those guests that book directly, will often use meta-search engines or an OTA site for their search,” Boettner adds. “We have often viewed and presented the many sites visited prior to a booking, as indicative of the guest being in the 'dream' phase. I think it is a premature conclusion and am not sure how this was validated - and let's not forget, dreams can also be nightmares.”
But, it can get even worse for the guest.
“Currently, in a world of room types and rate plans, hotels typically sell at the room-type or category level and staff at the hotel assign specific rooms the night before guests arrive,” explains Mike Chuma, Vice President, Marketing & Enablement and Engagement, IDeaS. “This is a one-time, static room assignment process that happens every day. Because the sale of attributes today is usually on an ‘as available’ basis, hotels don’t have to worry about whether they have enough rooms with the requested attributes to meet the demand. ‘As available’ means never having to say you’re sorry.”
HOW ABS WORKS
Instead of offering guests room types to choose from, guests are given the opportunity to build their ideal room by starting with a basic room type and then adding on room attributes at varying price points.
“In the traditional hotel booking process, room rates increase as the supply of specific rooms falls,” Chuma explains. “In an ABS model, attribute prices increase as the supply of specific attributes is reduced. Using ABS, it would be possible for a standard room rate to rise to that of a higher room type if a guest adds in more attributes.”
For example, in our imaginary hotel, Jane Doe would begin by choosing between a queen room ($100), king room ($115), queen suite ($125) or king suite ($145). After choosing her room, she could be offered another attribute for purchase: a view of the courtyard (no upcharge), a view of the pool ($5) or a view of the ocean ($15). Additional attributes that she might be offered include floor level, proximity to the elevators/pool/gym, a shower vs. a soaking tub, etc. As she makes her selections, software automatically finds and assigns Jane to a specific room that contains her specified attributes.
So far, the value of this type of software is that it “makes the buying process not just simpler and pricing more transparent, it avoids false choice paradoxes and instantly increases satisfaction,” Boettner notes.
However, this is not the end of the process. It is just the beginning.
“Just as dynamic pricing is used to optimize revenue, a ‘dynamic room assignment’ approach becomes necessary in an ABS pricing model,” Chuma notes.
Let’s say the software assigns Jane to Room 100. As new bookings are made, the software is continually evaluating the attributes chosen against inventory. Perhaps Room 100 has some additional attributes that Jane was uninterested in paying for (distant from the elevators and an in-room hot tub). If another guest (Jack Smith) is willing to pay for one (or both) of these attributes, the system will automatically reassign Jane to a room that still contains her required attributes and will assign Jack to Room 100. This process can happen as many times as needed to ensure the hotel makes the most money possible per room and to ensure guests don’t feel they overpaid for a room with amenities they’re uninterested in or were stuck with a sub-par room that didn’t fulfill their desire. With ABS, room assignments happen dynamically during shopping rather than as a daily, manual process. Dynamic room assignment is the missing link for how hotels will operationalize guaranteed room attributes.
“Guest expectations are evolving, and the hotel of tomorrow needs to be prepared to meet them,” Chuma says. “The growing challenge facing the industry, on both sides of the front desk, is the lack of control guests have over many aspects of the hotel experience. ABS is the solution to this problem and the future of hotel booking. By embracing a booking strategy that offers room prices based on individual elements, guests are offered freedom of choice and hotels are awarded higher revenue.”
But how much revenue will hotels really make via this new sales format?
According to Saxton, hoteliers could increase room revenue 2% to 8% with most vendors, including Amadeus, quoting hoteliers at an average increase of 4%.
And while it may not be an apples-to-apples comparison, Chuma recommends that hoteliers look to the airline industry for an idea of how this new sales method could improve revenue among hotels.
“According to the Department of Transportation’s 2019 Airline Baggage Fee report, domestic air-travel carriers collected nearly $5 billion in baggage fees in 2018, up from $1.1 billion in 2008,” Chuma says. “And checked luggage is just one sellable attribute of a flight booking.”
