The Difference Between Rate Maximization and Upselling
Being in the business of hotel sales training, most months I spend at least six to eight days training hotel sales managers and also reservations sales agents on how to convert more business and along with how to maximize average daily rates.
In our pre-training consultations, I always encourage the revenue leader to share their vision of the hotel’s rate optimization strategy, and therefore get to hear today’s leaders articulate their visions. While some do a much better job than others, too many have a hard time truly explaining the concepts of rate maximization versus upselling.
Depending on your hotel’s classification (resort vs. hotel), branding and segmentation (upscale, luxury, midscale, economy, boutique), the terminology might vary, yet every hotel has one or the other revenue opportunities and most have both. I find the best way to explain these concepts is by using definitions such as these:
- Upselling refers to selling guests higher-rated accommodation types. At hotels, this might be categories such as traditional, superior, deluxe or premium, or rooms and suites. At resorts this might include garden view, partial view and full (ocean, mountain, lake) view.
- Rate maximization is best explained as referring to the strategy of selling the highest open rate tier first, before offering discounts. Open in this context is the rates tier the revenue manager has set to show up in the reservations system. Generically speaking, this would be high demand rate tier, moderate demand rate tier and low demand rate tier. Discount in this context refers to rates such as AAA/AARP, advance purchase / non-refundable, or match rates / book direct rates.
- Rate options. For some hotels, there is a third rate type term to throw into the mix, which is rates that include options such as breakfast, parking or hotel services (recreational experiences, F&B credit special amenities).
The points of differentiation between these three blanket terms might seem simple to revenue managers who spend most of their day immersed in numbers and data. However, I find that a lot of front desk, reservations and even hotel sales managers are themselves a bit confused. As a result, they have a hard time explaining all these options to today’s value-driven, deal-seeking transient guests and meeting planners. Here are some suggestions for revenue managers: