Some upsell revenue is better than others. A guide to where you are really making money.
Here are some highlights from our recent article on Hospitalitynet.org:
With hotel profitability becoming more of a challenge, upselling provides the potential to generate additional revenue from every booking. When it comes to choosing which upsells to offer, hotels should be strategically clever by prioritizing those with the highest potential for profit while maintaining operational efficiency.
Not all revenue is equal in profitability – and why you should care.
More than 60% of consumers are open to spending more if an additional service complements or enhances their main purchase. While it is great to be able to provide guests with a wide array of services, the overhead to provide each service must be taken into consideration.
Room upgrades are the most profitable type of upsell revenue for hotels. Technically speaking, room inventory has the highest cost of anything sold in a hotel. But when it comes to upselling, that cost becomes zero. Any room product that can be sold over the original reservation is nearly 100% profit.
A room product that is often overlooked by hoteliers are stay extensions, i.e. early check-in and late check-out. Historically, these could never be operationally guaranteed in advance of arrival, but with today’s intelligent technology, early check-ins can be guaranteed without raising the ire of the housekeeping staff.
Another source of high-margin revenue that has emerged very recently is room-specific upgrades. For example, guaranteeing a room on a high floor, a room away from the elevator, a room with a particular view, a room with a balcony, etc.
These room-specific upgrades are different from typical room type (or room category) upgrades in that they monetize the differences rooms within a room type may have. New technology has emerged that is operationally aware, allowing hotels to extract more value from the details of their room product.
The new technology is called Attribute based selling (ABS), though in this case it is ABS-powered Upselling. With an ABS for upselling solution, hotels can identify the attributes of specific rooms, and then the system will automatically price the features based on demand in an upselling interface. Since these room attributes are, by definition, room product, ABS upsells are basically pure profit.
Using the same concept of room product, a hotel should look to maximize the revenue contribution of onsite resources and facilities whose costs are already baked into the costs of the building. For example, pushing ancillary services can counterbalance the standing real estate costs that hotels incur. Leveraging these types of high margin ancillary services can help optimize the return on investment for the property.
Ancillary revenue – Identify opportunities with the best cost-to-revenue ratio
Traditionally, hotels focus on selling services such as room service when trying to grab more of the guest wallet. But, if you want to maximize profitability, the key is to focus on and invest in upsells with a favorable cost-to-revenue ratio. Your guests will respond well to these value propositions and your asset manager will respond well to the NOI.
Ask a question
See A Demo