In many hotels around the world, receptionists keep a post-it note behind the counter to remember the prices at which to offer guests a better room.
NB: This is an article from mirai, one of our Expert Partners
This is what we call ‘upselling’. It has existed for decades in this rudimentary form, which gives us an inkling of its inherent value. Of late, upselling has become more sophisticated, though the basic idea remains the same. To upsell is to increase the revenue generated from a closed or upcoming sale. In the case of hotel bookings, this mostly means selling something worth more than what had initially been booked: extras, a better board type, a better rate/package or, especially, a better room.
Subscribe to our weekly newsletter and stay up to date
The advantages for guests are obvious: the optional possibility of improving their stay.
And for the hotel? Let’s take a quick look at its advantages, which revolve around increasing revenue and improving customer satisfaction and loyalty:
Increased revenue (specifically, the average price per booking)
If upselling successfully transforms a booking into a better room, board type or rate, that automatically increases your hotel’s average price. Not the average price per TYPE of room, which remains the same, but the average booking price.
Even more so if the upselling consists in selling extras related to the stay at the hotel; the extra revenue would then increase the total price of the booking, and not just the average price of the room. Accounting aside, the bottom line is that it always involves an increase in gross revenue.
More precisely, we should also ask ourselves what expenses are involved to better calculate the net profit, the one that really matters, and that will depend on the upselling platform being used:
- There are companies that specialise in hotel upselling with very good products and innovative approaches. They indeed provide hotels with the technical platform they need. The downside is that they tend to ask for about 25%.
- On the other hand, sales channels can also add this extra layer of upselling onto their base product: the room booking. The cost may vary:
- If an OTA offers its own upselling, the cost will be its commission, which tends to be high. What usually happens is that hotels play no part in this process and therefore do not even realise the OTA is running its own upselling system; all they see is a booking modification.
- If it is the direct channel, two things could happen:
- The tech provider (the booking engine) will charge the hotel an extra
- or it will charge the usual rate, the same one it applies to basic bookings. The latter possibility is more interesting because these prices tend to be quite low as they don’t support extra investments in marketing, which is what truly makes prices go up in direct sales.
- Funnily enough, neither OTA’s nor booking engines usually have upselling modules, which means the costs are zero… because the total number of upselling sales is zero.
Greater value proposition for the channel offering it
If the intermediary channel offers the upselling, it will take the credit in the eyes of the client.
If, however, your direct channel offers it, this improves your value proposition and gives you an edge on the intermediaries. Keep in mind that clients associate the direct channel with the hotel, which means a good online direct sales service, upselling included, will be seen as a good service on the part of the hotel. This does not happen with intermediaries.
Higher customer satisfaction and, therefore, more chances of them returning to your hotel
Customer loyalty is built on satisfaction. One possible approach to upselling would be to not focus on increasing revenue, but instead to offer upselling as a form of added value – at a discount or for free – aimed at all clients, direct channel clients or loyalty club clients. For instance, Booking.com tends to offer Genius clients a better room for free.
All hotel and chain direct sales should pursue the same goal: to make upselling a tool of their loyalty club to boost their distinctive value. This can lead to several scenarios, like offering upselling for free in specific circumstances (low occupancy, price drops, special guests, etc.). Using upselling to increase loyalty does not mean it cannot be used it for other ends, such as acquiring new clients.
Freeing up cheaper rooms
Upselling to a better room has happy consequences for your available stock: when a booking is upgraded to a better room type it frees up the original lower-category room, which is usually easier to sell.
Occupying rooms that are harder to sell
Another consequence of the previous point is that upselling helps occupy rooms that would otherwise be harder to occupy, especially a few days before the guest’s arrival. We have all looked for hotels at the eleventh hour in times of high occupancy only to find that the only rooms available are the superior ones.
In short, ensuring the availability of rooms that are easier to sell is an indirect way of improving your chances of increasing your revenue.
What should an upselling system applied to your direct sales include
Unlike with other channels, in the case of your booking engine, you, as a hotelier, are responsible for offering a good solution. There are certain features you should keep in mind:
- To state the obvious: it must include an upselling module. Most booking engines for hotels do not include this option.
- It must be as autonomous and automatic as possible, otherwise it will take up too much of your time – and time is money.
- It must offer upselling to guests at the right moment to guarantee they will take it: that moment is shortly before their arrival, long after they made the booking or paid for it. At that point, guests will be thinking about their arrival, their stay, perhaps excitedly so, which makes it the time when they are most likely to spend some more money.
- It should cost you as little as possible, ideally no more than what you pay for a basic booking.
- It must be very simple for guests: clear, attractive information and the upselling should be available at a click
- It must handle the operational side for you, from modifying the booking to letting you know about it. The operational side includes many other issues for which you will have to involve your hotel…
Mirai’s upselling tool fulfils all these requirements.
The operational challenge
Does upselling only have advantages? Basically, yes. There are no downsides as such. But you will have to first work out one prerequisite: the operational side.
You should use an upselling platform that automates as many processes as possible: opportunity detection, upselling price calculation, informing the guest about upselling opportunities, modifying the booking when the upselling is accepted, etc. That way there should be next to no loose ends and the process should go smoothly. Will your channel manager and PMS be able to manage the modified booking without problem? Will your receptionists be aware of how much to charge for an upselling when the time comes to do so? Will your room inventory be updated every time a room category is changed? These and many other questions should be addressed if you are going to implement an upselling system.
Conclusion
Once you have accounted for all the operational processes, upselling is nothing but advantageous. Even in a worst-case scenario, you will not have anything to lose. The first step is to have an upselling system, which is not all that usual. If you do not have one, you should seriously consider it and research options, especially applied to your direct sales.
Hoteliers receive endless proposals to receive more bookings… in exchange for lowering rates or driving up costs. These ideas are meritless. What you really need are ways to increase your revenue or cut your costs: upselling is a rare gems that provides just that.
