How to improve hotel revenue: the advantages of upselling

This is a technique that has existed for decades and has evolved and become more sophisticated since the post-it note, in which the receptionist wrote down at what price he should offer a better room to each type of customer, to current systems. It supposes the improvement of income in a sale from a reservation, adding extras, a better regime, a better rate/package or even a superior room. At the same time, it increases the benefits of the client by offering them the option to improve their stay.

It promotes an increase in revenue for the hotel, more specifically, the average reservation value. “If upselling manages to transform the reservation into a better room, board or rate, what is automatically achieved is an increase in the average price of the hotel. Not the average price per room type, which would not vary, but the average amount per reservation”, says César López.

When upselling focuses on the sale of extras around the stay, the revenue improvement falls on the total value of the reservation and not on the average price of the room. An operation from which an increase in gross income is always obtained and it would be necessary to analyze "what expenses are incurred, to get to know the net profit, the truly important one, and that will depend on the upselling platform used," he adds.

In this sense, he explains that there are companies specialized in upselling in hotels, with innovative approaches, although the counterpart is a cost of around 25%.

César López also points out that the sales channels themselves can develop that additional layer of upselling on the room reservation and the cost may vary, depending on:

-If it is an OTA that offers its own upselling, the cost will be its commission, normally high. The usual thing is that the hotel does not intervene or find out about it, beyond receiving a modification of the reservation.

-If it is the direct channel, there could be two different cases

- Most often, neither OTA nor booking engines have an upselling module, so the costs are zero because upselling sales are zero

Improves the channel's value proposition

César López warns that if it is the intermediary that offers upselling, it will take credit from the customer's point of view, while if the channel does direct, will mean an improvement in the value proposition and differentiation of the establishment with respect to intermediation.

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On the other hand, he points out that "satisfaction is the basis of loyalty" and in this line he explains that a possible approach to upselling would be to offer it as added value, not so much with the objective of increasing income. It can be done at a reduced cost or free, extensively to all customers, those of the direct channel or those of a loyalty club. “For example, Booking.com usually offers a better room for free to Genius customers,” he adds.

A decision that can have different consequences, for example offering a free upselling if circumstances arise (low occupancy, price drop, special customer...). "The use of upselling in loyalty is not incompatible with extending it to other possible uses, such as attracting new customers."

In this way, “a type of superior room is usually more difficult to occupy, especially a few days before arrival. We have all searched for hotels at the last minute and with high occupancy and we have found that the last rooms available are usually the superior ones”, indicates César López.

What to take into account in direct sales

"As a hotelier, you are responsible for offering a good solution, unlike other channels. There are certain characteristics that you should aspire to", indicates the director of Mirai Business Development:

-That offers an upselling module. Most hotel reservation technologies do not offer it today

-That it act in the most autonomous and automatic way possible. Otherwise, it will require more time, that is, an indirect form of cost

-That it offers the upselling to the client at the most suitable time for them to convert. That moment is none other than shortly before your arrival, when some time has elapsed since the reservation was made, perhaps since you paid for it, and you are already thinking about your arrival, your stay, probably with enthusiasm, and what is more likely to be willing to make a new expense

-It should cost the establishment as little as possible, ideally no more than what you pay for the base reservation

-It must be very simple for the client, direct, attractive information and just one click away from accepting the upselling

-You must solve the operation, starting by modifying the reservation and sending it to the hotel. The operation includes many other aspects in which the hotel must be involved.

The operational challenge

Upselling offers numerous advantages, but it has to solve the operational. The platform used should fully automate the processes for detecting possibilities, calculating the upselling price, communicating with the client to offer them this option or modifying the reservation if the upselling is accepted, among other things.

“This implies that all the different ends are resolved so that it runs smoothly,” says César López. That is, “Will your channel manager and PMS be able to manage the modified reservation well? Will your receptionist be aware of what to charge for upselling, if at all? Will your room inventory be updated with each room category change? These and many other questions must be clear if you implement an upselling system”, he adds.

Reference information is available on the Mirai blog