In the past 12 months, as hotels try to recoup losses sustained from the pandemic, revenue managers are under greater pressure to find revenue wherever they can.
Pre-Covid, revenue managers were mainly concentrated on selling rooms. But, in the absence of regular booking volumes, hotels need to focus on how to drive revenue and increase the average spend per guest beyond the core business of room sales. Stay extensions, are one such example that can offer a quick and easy way to add incremental revenue and considerably increase the bottom line.
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Stay Extensions: What are they?
Traditionally, when it comes to hotels and stay extensions people would normally and duly assume it to mean adding an extra day or days to a guest stay. Typically stay extensions comprised of one or two extra days added either side of the originally booking. In more recent years extended stays of longer periods of time have grown in popularity in line with the rise in the digital nomad travel. While both are archetypal examples, early check in and late check out are also forms of stay extensions but are often overlooked and not monetized at all. Why?
Stay Extension Fees
Charging for early check-in and late check out for some hotels is controversial. Both items are seen as a courtesy to the guest, or a treat for VIPs. Charging for such items is nearly seen as the antithesis to the service, the luxury, the traditional values that underpin a hotel’s function or purpose. Hoteliers don’t want to be seen as ‘nickel and diming’ their guests on the phone or in-person.
If they charge a fee at all, hotels tend to be too cautious with early check-in and late check out pricing. Many set static rates, which are not responsive to demand, occupancy, and forecast conditions. Static price points can sometimes be too high, hurting conversion, or more often, too low, leaving money on the table. Given that early check-in and late check out are recognizably “room rent” or an extension of a reservation, they both should be yielded just like normal rates are.
Oddly, there is a feeling amongst revenue managers that people just won’t pay for either early check in or late check out. But the opposite is true. Today’s consumer pays for extras on things all the time. The airline industry is a prime example where guests have the flexibility to add services that they find essential, such as priority check-in and seat preference. Now, when it comes to their hotel stay, guests want the same convenience and control. Offering them the option of early check in and late check provides the flexibility they want. The originally booking reservation transaction is out of mind – they only look at the value of the additional service (early check in and late check out) at the time service is offered – not the entire bill. Kevin Le, Area Director of Revenue Management at Modus Hotels notes “I didn’t anticipate was the early arrivals and late departures doing so well. I think other hotels will be surprised with the results themselves.”
The relationship between Automation and Peace-of-mind
For most hoteliers though, the truth is that there is no real effective or successful mechanism in place to operationally guarantee and deliver an early check in or late check out in advance. While upselling software solutions exist, one of the biggest issues is that most do not check or forecast actual room-by-room inventory usage. So even if a guest purchases early check-in, if availability is not verified, the sale may not be fulfilled, leading to a poor customer experience.
Justin Ellison, General Manager at Mint House in New York City said, “From a hotel operating perspective, I always want to under-promise and over-deliver, right? So, I want to make sure that if I’m selling that early check-in, I’m going to be able to deliver on that promise. There are always things that are going to be out of my control. If somebody decides not to leave their room on time early in the morning, no matter if I have housekeeping ready to go, I may be setting myself up for failure if I sell an early check-in. But with [automation], we really haven’t had any operational conflicts like that. Everything just works.”
Justin is referring to ROOMDEX automation, a tool that empowers hoteliers to guarantee stay extensions in advance of check-in based on true forecasted availability. It also reduces your front desk overhead, removes any risk of human error by eliminating the disconnect between departments, as well as headaches over broken promises.
Performance You Can Expect
Looking across ROOMDEX data, we know:
- Hotels that enable early check-in and late check-out upsell generate on average 55% more upsell revenue.
- 48% of guests that are offered early check-in or late check-out purchase one or both stay extensions.
- On average early check-ins purchased range from $55 to $100+, with late check-out purchases averaging from $60 to $150.
This is revenue our clients would have otherwise missed out on had they decided not to offer early arrival and late departure upsell.
In our current time of low demand and lower-than-usual occupancy, hotels should look at what they already have and focus on maximizing the value. Instead of rooms just sitting empty, they should be used to offer early check-ins or late check-outs to your existing guests. When done right, automated stay extensions are a quick and effective way to achieve additional high margin revenue.