Today’s revenue managers are not stupid. They all know that occupancy is terrible, and while they can try to prop up the rate, it will be hard to reach 2019 revenue levels from reservation acquisitions alone. Their plan is to derive more revenue from their acquired guests now. So, things like room upgrade platforms, once considered a bonus, are now getting a second look from commercial teams counting every penny.
Optimize Secondary Revenue Streams
The good news is that during the pandemic, technology providers have invested heavily into R&D and can provide tools that can optimize secondary revenue streams. The bad news is that they are not all the same. On the surface, what may seem like a good room upgrade upselling solution may not have what is required “under the trunk.”
Many hoteliers think they are adding an upselling solution to their tech stack only to quickly realize that it was just a bolt-on feature they checked the upselling box but didn’t deliver. And worse yet, they just signed up for more work than imagined. The truth is that there are many of these Upselling “Light” solutions in the marketplace.
This article will help you understand what is behind these different systems and what those differences will mean to your business.
How to Identify an Upselling “Light” Solution
Request Systems
Most guests love the idea of an upgrade, especially when they think they are getting a great deal… but there is a catch. What if the room they upgraded to and “paid for,” in fact, does not exist. They didn’t buy anything. They just reserved a place in line, hoping that an upgrade would be available.
So, why are many upselling systems just lightweight request systems? The answer is Operational Blindness. Request systems are identifiable by their 1-way integration with the PMS. With these systems, upgrade requests are granted only once the hotel understands who has checked in, who will be checking out, who has booked since the request was made, and how the housekeeper shifts are playing out. That can only happen the morning of arrival.
With 1-way integration, advanced upselling of upgrades and stay extensions can never be 100% guaranteed. Promoted upgrades often do not materialize, and guests are left disappointed.
For a hotel to guarantee their guest’s room upgrades, 2-way integration with the PMS is critical. Only PMS data can provide a smart system to forecast the true availability of room inventory usage.
Non-dynamic Pricing Systems
How room upgrades are priced will determine their success or failure. Traditionally, hotels set static rates or “flat” pricing for room upgrades. One of the main reasons is that it is easier for the hotelier to manage. As a natural progression in the digital sphere, early upsell systems were thus created accordingly.
But the problem with managed static rates, whether established by room type or set each morning, is that they are not responsive to demand, occupancy, or forecasted inventory usage. One of two things happen. Either the price is too high for the guest, you miss the sale, or the price is too low, and you leave money on the table.
The price and conversion of room reservations are based on supply and demand in the market. Upselling conversion is no different and should be treated as such. Upgrade revenue is, after all, rooms revenue. To master upselling, hotels need to master their pricing. Look for a system that leverages the yielding work you have already put into your room inventory but then adds additional controls to vary the yielding up of your upgrades.
Blanket Targeting Systems
Everyone has their preferences. While one guest might enjoy a hotel’s room’s scenic street view, another hotel guest will be driven up the wall by the room’s constant street noise. So, when it comes to a room upgrade offer, conversion depends on an understanding of your guest.
For example, if I have booked a standard with a courtyard view, I most likely will not be as enthusiastic about a suite with a street view as I would a suite with a courtyard view. But while this line of thought seems obvious, many upsell systems cannot offer a room upgrade comparable to what the guest originally purchased or match the expectations of each particular guest.
The name of the game is figuring out how to maximize conversion. Untargeted, generic offers will result in low upgrade conversion. Just as a good salesperson understands as much as possible about the customer to position the right product at the right price at the right time – a good upsell solution should do the same. Look for a system that dynamically creates offers based on personalized data.
Limited Reservation Targeting
Are all your guests considered for upgrade offer eligibility? If you rely on upselling through confirmation emails only, they are not. Commonly, guests who book via other channels, such as OTAs, are routinely not offered an upgrade or considered in the upgrade pool of offers due to contact information. But if you aren’t covering all channels, you are ultimately limiting the amount of upgrade offers that could be sold to those who may be eligible for one.
Again, a system with a 2-way interface with your PMS will ensure that all reservations are eligible for automated consideration of an upgrade offer.
Smart Revenue Managers Adapting to New Market Conditions
Smart revenue managers adapt to new market conditions by adding upselling solutions to their toolsets. There was a book published in 1998 called Who Moved My Cheese? The premise was that those who adapted to change would be the most successful – and the happiest.
But do your due diligence and take a deep dive into what’s behind each upselling system. Insist on a 2-way integration with your PMS. Then make sure you can layer on yielded pricing, inventory usage forecasting and dynamic offer targeting for ALL of your reservations.
You will optimize your upsell revenue stream, reduce your work and make your guests happy. Don’t settle for Upselling “Light!”
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