With occupancy rates returning to pre-recession levels in many parts of the world, many property owners and hoteliers expect that revenue per available room (RevPAR) and average daily rates (ADR) will continue to grow with an increased number of heads in the beds. However, without an effective upselling program, it will be difficult for properties to increase revenue in 2014 and beyond.
We discussed implementing a front desk upselling program in a previous blog post, which dealt specifically with how training companies are attempting to teach employees to effectively upsell when guests check in.
Upselling provides an important revenue stream for managers and hoteliers, but the idea is still underutilized across the industry. Let us look at why your upselling program will not only increase your revenue, but may also increase the satisfaction of the guests who choose to stay with you.
ADR and RevPAR
One factor that is holding back ADR is that hotel revenue managers and operators are being challenged by considerable segment compression, as noted by Klaus Kohlmayr of TSA Solutions, resulting in very little upward pricing power. Kohlmayr discusses a “price ceiling” in some key markets, leading to an inability of hoteliers to push ADR that their properties’ inherent value deserves.
The idea of a price ceiling is a myth because most guests are willing to pay for enhanced value, but only when the value proposition is made clear and often only if they are encouraged.
Differentiating Your Product
Many hotels will give away their premium rooms at a discounted rate, or even for free in some cases, making it difficult to differentiate their product and achieve optimized rates. It is not uncommon for properties to reward loyal travelers with room upgrades, but in many cases, the front desk representatives are unwilling or unable to upsell higher room tiers. This is a tremendous missed opportunity to generate additional revenue at a significant profit margin.
Upselling for Need
It’s not just the general upsell that these properties are missing out on. Take the case of a family who books a vacation at your property. They went online to book a room through one of the major OTAs or metasearch engines, but they booked the cheapest room they could find in a convenient location. Perhaps this is a larger group that would benefit from having additional space for the entire family. If front desk employees are unable to identify this as a great upsell opportunity, your company is missing out on not only an opportunity to generate additional revenue, but also to satisfy the needs of these guests.
Travelers have also become accustomed to the idea that they might receive a complimentary upgrade that instead of booking a higher room type online, they opt to hold out for the free or deeply discounted upgrade at the time of check-in. This can also be seen in the airline industry when a frequent flyer member on an airline may wait for a free upgrade at the gate.
In many categories, the hotel industry follows the lead of the airlines, but in this case, a bad precedent may have been set. Rather than giving away higher rooms, hoteliers need to make a more concerted effort to sell the underutilized premium room types at the point of check-in.
The solution here is not discounting – it’s offering the right guests the right room product at the right time. Imagine if 5% of guests spent 20% to 30% more for every night. This would do wonder for average rates and the hotel’s bottom line. Now imagine generating those extra revenues and making the guests feel like they got a fantastic deal. That is the power of effective upselling.
To read the entire Hospitality Net article written by Klaus Kohlmayr, click here.