The increase in revenue of a good room upselling strategy
There is a general consensus that a good room upselling strategy brings a lot of value to the hotel. We summarise it in four points:
- More revenue through higher average booking value. This increase can be even greater in hotels that do not overbook standard rooms to divert guests to superior rooms, and that, thanks to upselling, free up cheaper rooms, gaining competitiveness at the last minute and, therefore, a greater possibility of selling them.
- Higher GOP (gross operating profit), as this increased revenue goes straight to the bottom line. This additional revenue is free of acquisition costs and has almost the same operating costs. If €100 of revenue generates €35 of GOP (35% margin), €110 of revenue (+10% thanks to upselling) generates almost €45 of GOP (+28% GOP). A much higher impact.
- Increased customer loyalty, making them feel important and special, which will have a positive impact on your online reputation.
- More differentiation of the direct channel compared to intermediation, making it more attractive and increasing conversion.
Four major advantages that, in addition, do not entail any drawbacks in return. Implementing a good upselling strategy does not involve any conflict with your hotel competitors or with your channel competitors (OTAs, wholesalers, tour operators). Therefore, it is an improvement that every hotel should implement.
In this article, however, we do not try to delve into the value of upselling (which we have already detailed in this other post) but to quantify it, to get the figures in euros. To do so, we have analysed the performance of the last four months of upselling featured in our booking engine. By way of information, our automated upselling system sends an email to the guest five days before their arrival, inviting them to purchase their upselling with just one click.
More than 6% conversion rate increasing revenues, on average, by 14%
Conversion rate: out of every 100 customers, more than 6 accepted (exactly 6.04%) and purchased the upselling option. We observed a marked seasonality with data ranging from 4% to 7% depending on month of stay, segment and market.
Average revenue increase: among those who purchased upselling, the average revenue increase was 14.05%. In other words, if the initial booking amount was €500, the customer ended up paying €570.
It should be noted that these are average figures, but if we dig deeper we find hotels that are true success stories with conversions above 20% and/or similar revenue increases. We analyse the reasons for this success below.
Another conclusion we draw from this data is that there is a high correlation between conversion rate and revenue increase. The lower the upselling price, the higher the conversion, and vice versa. This confirms that price and conversion (occupancy) are connected.
