Other than selling accommodation and specific items that can be found on the add-on list, hotels have many other options to generate revenue streams. But, in order to make it work, they need to create a perfect offer for their clients.
The only way hotels can achieve this is by personalizing their offers, showing them to customers through upselling, and offering value adds. Yes, making your hotel sales successful can be tremendously challenging these days, but value-adding strategies can make things a lot easier.
The success rates of selling a hotel service to a new customer are between 5% and 20%. Surprising as it may seem, selling a service to an existing customer is between 60% and 70%. That’s why hotels do their best to turn to upselling strategies.
Using upselling strategies can help you build deeper relationships with your customers, use the amenities of your property more effectively, and increase your revenue.
There are two common strategies for increasing your hotel revenue and staying ahead of the competition – upselling and offering value adds. In their essence, they are both all about getting the timing right, knowing your guests, and knowing your products.
Without further ado, let’s see the difference between these two strategies and their pros and cons to determine which one is better for an overall revenue increase.
All about upselling
Upselling is all about being good at persuading your customers to spend more money. It means making your customers book a more expensive room and inviting them to buy other available services during their stay.
You can even convince customers to purchase a room upgrade days before they arrive at the hotel. To implement upselling, you can turn to a couple of methods.
The first one is enabling the staff at the front office of your hotel to upsell. If they can upsell, it will work on all guests who have just arrived at the hotel and are looking to book a room. For guests who prefer to book online, you have to use other techniques.
Integrate your website with a direct messaging system and secure it with a booking engine. As more and more people prefer to book online – this may be the most efficient method of increasing hotel revenue.
Pros and cons
The pros of upselling and offering value adds are the same:
● Increase in revenue – both examples (upselling and cross-selling) increase revenue as they monetize services that customers rarely choose by default;
● Increase in value of every sale – both options enable you to optimize your sales, but offering value adds to existing customers may have a slight advantage here. It’s easier to convince a customer you know than a completely new one, right?
● Personalizing guest experience – personalizing experiences for each guest helps hotels build a relationship with them and show they care. The result is, again, an increase in revenue.
Cons of upselling:
● If you “overplay” the upselling card and don’t do your marketing right, it may not seem as compelling to the customer any longer. A bedroom that is too expensive or a service that is too pricey may even push some people away;
● Some hotels find convincing their customers that a more expensive hotel room is a better option a daunting task. That’s why tools like UpStay are a success in the hospitality niche. They give guests the opportunity to name the price they are willing to pay for a service or an upgrade.
To avoid such drawbacks, playing the upselling card must be done with great caution. You don’t want to make it look like you’re all about money to your customer. Also, you can easily avoid the second disadvantage if you invest in developing skills for good upselling in your front desk staff.
All about offering value adds in a hotel
When you are offering value adds (using cross-sell methods), your existing customers are also your target audience. It’s a method that should persuade those who have already purchased a service at your hotel to spend more money by purchasing another service related to the ones already bought.
A customer can pay for a massage, access to a gym or a pool, or a sightseeing tour. Wellness offers at hotels are especially popular nowadays. When a guest has already booked a room at your hotel, you should take that as your queue to offer them add-on services and items.
Pros and cons
Pros of offering value adds are, as mentioned above, the same as those for upselling, except that there is a slight advantage in offering value adds. This advantage refers to the ease of convincing an existing customer above new customers (as upselling does).
Now, let’s take a look at the cons of offering value adds:
● When overdone – offering value adds can damage the customer experience and ruin the possibility of building a trustworthy and long-term relationship. Being able to build such relationships is probably the most crucial part of running any business that is client/customer-oriented;
● When not personalized – the use of big data and advanced tools to anticipate your guest desires is crucial to avoid disappointment. Once a customer is frustrated, the hotel has a serious issue to deal with. When a customer has such a frustrating experience, the chances of getting repeat business from them are minimal.
Though there are just two disadvantages of offering value adds, they can have a long-lasting impact on your business, so it’s crucial to try and prevent these situations.
Which one is better?
It’s hard to say whether upselling or offering value adds is a better option since they target different audiences. Upselling targets new customers and tries to convince them to spend more for premium services and services.
Offering value adds targets existing customers and tries to bid and sell them additional services with the ones they have already purchased.
They are somewhat on the same level, but since convincing an existing customer to purchase something is slightly easier than convincing a new one, offering value adds may be a better option for increasing your hotel’s revenue. Building a long-lasting relationship with customers plays an essential role in revenue increase, and offering value ads is the best way to start building that relationship in the hospitality industry.
Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at UpStay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.