Hotels are continuously looking to improve their sales and garner more revenue from their existing assets. As a sales strategy, up-sells and upgrades are extensively used in the hotel industry in the United States, due to its relatively low cost and simplicity of adoption. Up-sells and upgrades are generally done through customer contact points such as hotel front desk or reservation touch points such as telephone/internet booking. It is one of the best methods of generating direct sales, and is used by all the major hotels in the United States.
DIRECT HOTEL BOOKINGS
Independent reports suggest 76% of online bookings happen via online travel agents at present. The remainder is estimated to be sold through direct sales channels.
UPSELLS/UPGRADE SALES IN THE UNITED STATES
Studies suggest that hotels can garner as much as 35% more sales through up-sell/upgrade if they effectively implement their up-sell program. The average percentage of up-sell/upgrades in hotel industry is estimated to be 8.6% (data triangulated from the given source) of the total sales at present. Hotels in United States are aggressively pursuing up-sell/upgrades to improve their occupancy rates and also garner additional sales.
FACTORS INFLUENCING HOTEL BOOKING UPSELLS
1. Psychological factors: According to research by INFORMS journal Manufacturing & Service Operations Management, the success of upgrade programs is directly tied to the type of guests who frequent the hotel. Studies suggests that if guests are myopic (i.e., non-repeat guests who may not be able to predict the chances of being awarded a standby upgrade) and hotels have higher ratios of premium-to-standard rooms, then the success of standby up-sell program is more likely.
2. Incentive based up-selling: Hotels must give incentives to their customer touchpoint staff in order to garner more success in their up-sell program. Incentives make the whole effort more serious and rewards an employee for closing the deal.
3. Consolidating customer lifetime value(CLV): The increased focus on customer lifetime value (CLV) has also given a fillip to the up-sell/upgrade initiatives. It is much more expensive and difficult to acquire a new customer than to up-sell to an existing customer. So, more and more hotel chains are investing in up-sell programs and the consolidation of customer lifetime value.
4. Percentage of premium rooms: up-sell sales strategy is more effective for hotels that have a higher number of premium rooms. Through upgrades, hotels can fill a larger number of premium rooms through up-sell programs, which helps generate more revenue.
DIFFERENT TECHNIQUES BASED ON HUMAN PSYCHOLOGY INCREASE BOOKING UPGRADES
1. Reduce decision-making: Studies suggest that too many choices can make purchasing decisions too complex for a customer. This reduces the probability of selling an upgrade to the customer. So, it's important to logically split the booking options into separate steps. Start by showing customers the room options first, and then give them the various rate plans and add-ons.
2. Use rounded numbers for rates and discounts: Research shows that rounded numbers (e.g. $100 vs. $98.75) are better at driving emotionally led purchases. So always use rounded numbers for selling upgrades. When advertising your room rates, stick with dollars and avoid using cents i.e., go with $100 and not $98.75.
3. Address buyer’s remorse: Address buyers remorse in a way that stops his/her abandonment. For example, in booking form, minimize the amount of details required (e.g. name, address and card number) to complete the booking. This will reduce the amount of time your potential guests have to think about the pain of payment.
4. Urgency-based selling: Use urgency-based selling by portraying the deal as something that is fast selling at the given price.
5. Emotional engagement: Develop emotional engagement through descriptive language with emotion-rich adjectives to bring your destination and property to life
Hotel chains in the United States are exploring creative new ways to engage with their customers and have the potential to significantly increase their profits. Up-sell/upgrade programs are an innovative way for hotels to increase annual revenue by as much as 35 percent. Up-sell also helps in creating awareness for unique room features, improving guest satisfaction and loyalty, and filling frequently unused premium rooms. The type of hotels, and guest psychology, also plays a major role in determining an up-sell program's success. Even though the direct sales percentage is less, there is still a lot of scope for the U.S. hotel industry to get new revenues through up-sell/upgrade initiatives.