"Distressed Inventory" - What is it?

"Distressed Inventory" - What is it?

The term is more or less what it says on the tin. It's a set of inventory experiencing some sort of pressure as a result of being unsold. In travel terms, that can mean a hotel, a hotel chain, a tour company, flights, staterooms on a cruise, or some other type of travel or collection of itineraries that is somewhat undersubscribed at a given point prior to departure or occupancy.

Is it a sale?

Not to be confused with a sale or promotion, although it can be disguised as such, an offer for distressed inventory will often go to travel agents first because it can be a very specific date or departure that needs a bit of human interaction for the success of all involved, including you, the prospective traveller.

Let's back it up a moment. A sale or promotion will be planned in advance. For the company offering the "deal", they will have done some calculations regarding return of investment and plan out their sales many weeks, months, or even years in advance. Distressed inventory is different in that it is very reactive and, while it can be predicted with somewhat better accuracy and frequency in modern, algorithm enhanced times of business, there might not be any clear pattern as to why something just doesn't get booked. Think: The far reaching consequences of interest rates against mortgages combined with political and media related factors and a pinch in perceived income security and... yeah, if you could predict this you're probably a wizard and don't need our blog.

Back to distressed inventory. Let's say there's a medium-sized boutique hotel in the Dominican Republic that's owned and run by a retired couple from Europe, let's call this boutique hotel Odyssean Sleeps. Odyssean Sleeps has 100 rooms and a normal occupancy rate of 46% and a minimum occupancy rate of 34% - what that means is that during the average month (or season or year or whatever scale is used by a particular business) Odyssean Sleeps typically has 46 occupied rooms every night or 1,400 bed-nights per month [(46 rooms*365 nights)/12 months = ~1,400 bed-nights per month]. If they book fewer than 46 rooms on a given night it's not a big deal, even the occasional 25 on a Tuesday might not be cause for concern. It's when the average starts to drop and their bed-nights per month look a little more limited that they start to worry. So if they start coming closer to the break even point of 1,034 [(34*365)/12 = ~1,034] or even dip below that number, they really start to feel the pinch. Breaking even is far better than running at a loss, which in turn is worse than being near fully booked, but let's get to that concept in another chat.

Back to Odyssean Sleeps and their predicted occupancy issues. Let's say that at the end of May, if Odyssean Sleeps needs 1,034 bed-nights per month to break even and they have a look at their booking summaries for the month of July and they are averaging 1,020 bed-

nights during that month, they might consider a

sort of last-minute solution. Different companies have their own standards and solutions to these problems, but sometimes they will offer up their product as distressed inventory. This can mean that Odyssean Sleeps may promote bookings for mid-July as a limited-time-only offer and nearer to their break even point than would normally be acceptable. A win for both you, the traveller and for Odyssean Sleeps as they now have revenue!

You might be thinking - what's the catch? Well, as with anything that comes last minute, you'll have to be flexible with your travel plans, too. You might not get to choose as much, the departure date, category of room, class of seat, or choice of stateroom (etc.) might all be pre-selected. But if you have control of your work-life or just a lucky opportunity to travel, you could end up saving money and wasting no time in planning and comparing. So for those of you who just feel like a getaway, distressed inventory could be the way forward.

With some frequency (remember it can't be predicted) we here at Odyssean Travel do get notification from various suppliers, discreetly requesting we find them someone to book their destination/hotel/cruise/tour/etc., and typically at a price that can't be beat. Rest assured that when we do receive this information, it gets shared to our Facebook Page or direct via email to clients who've opted-in to our email sales and updates. Do you really need another reason to follow us or subscribe to our email guest list?

#distressedinventory #sale #deal #offer

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