In a recovering hotel market, properties must look at all opportunities to increase their revenue and profitability to grow business. It should not be forgotten that the practice of upselling is an effective way for hotels to grow profits in such an environment. Offering guests an opportunity to upgrade their room or add additional services to their stay, represents a basic but highly effective tool that a hotel has available to grow ADR, revenue and unlock additional profit.
Upselling can be particularly important during low-demand periods when hotels may have unsold inventory, or when hotels overbook their lead in room categories and front office staff have to offer free upgrades anyway. In these situations, by offering upgrades at a discounted rate, properties can generate additional revenue that they may not have otherwise received. Upselling can also directly help hotels increase their profitability by increasing the revenue generated per customer. This can be particularly important for hotels that have high fixed costs, such as maintenance and staffing. By generating additional revenue through upselling, hotels can offset some of these fixed costs and improve their overall profitability.
Over the past decade, hotels began using technologies to prompt upselling offers during the booking process (normally before checkout and payment), via pre-arrival email sent before the guest arrives at the hotel. In recent years, revenue management has continued to evolve to include upsell strategies that can help hotels improve their business performance and enhance guest satisfaction.
Upselling offers are not limited to rooms upgrades anymore. They now include ancillary services and personalised offers based on a guest’s profile and preferences. For hotels, upselling today typically involves offering guests a mix of a higher room category or additional services, such as a spa treatment or room service. This can be a win-win situation for both the hotel and the guest: the hotel generates more revenue and the guest enjoys a better experience.
A key way revenue management can help hotels in upsell situations is by analysing customer behaviour and preferences. By tracking guest data, such as their booking history, spending habits, and demographics, hotels can gain insights into what types of upsell offers are most likely to be successful. For example, if a hotel notices that guests who book a certain room category are more likely to purchase spa services, they can create targeted upsell offers for those guests.
Dynamic pricing strategies, which involve adjusting prices in real-time based on factors such as demand, seasonality, and availability, can be applied effectively to upsell scenarios. By using dynamic pricing, hotels can offer more attractive upsell deals to guests during low-demand periods or for unsold inventory. This might involve a hotel offering an upgrade to a suite at a discounted rate during a low period of demand to entice guests to book the more expensive room.
Revenue management can also help hotels in upsell situations by using pricing psychology, or pricing tactics that influence customer behaviour. In this context, hotels might deploy an anchor pricing tactic where they offer a high-priced option first to make a lower-priced option seem more attractive. By using pricing psychology, hotels can encourage guests to choose more expensive upsell options.
What should not be forgotten in regards to the practice of upselling is the need for ongoing staff training and support. Upselling requires staff to spot upselling opportunities and to be persuasive, but not pushy towards guests. By providing staff with the right training and resources, hotels can ensure that they are making the best possible upsell offers without coming across as being overbearing. To help with this, hotels might provide staff with scripts and training on how to make upsell offers, as well as incentives for successful upsells.
Hotels can effectively grow revenue today through applying revenue management strategies to the practice of upselling. By analysing guest data, using dynamic pricing strategies, leveraging pricing psychology, personalizing offers, and providing staff with the right tools and training, hotels can improve overall business performance. And by providing guests with meaningful upgrades and add-ons that enhance their experience, hotels can build loyalty and long-term profitability.