Upselling gets a tech makeover

receptionist calling on the phone
A receptionist on the phone. (DragonImages/Getty Images)

Insight comment
The pandemic encouraged hoteliers to look more closely at how they promote and sell ancillary products and services. Digitalisation means a further shift towards upsell software.

Phone calls are still an important booking channel for hotels, especially for customers such as travel agents and event planners who have complicated bookings to make, and older adults who have questions about their stay. 

An advantage for the hotel is that when speaking directly to a customer there is the chance to upsell.

“A good reservation agent will do this subtly: ‘We have this room for $XX but we also have this room at $XXX.’ In many cases, voice tends to be the more profitable revenue channel because there’s the opportunity to upsell,” commented John Burns, president, Hospitality Technology Consulting. 

Whether booking over the phone or on a hotel’s website, hoteliers have tended to believe that customers will upsell by themselves if they receive an attractive choice.

“It’s a psychological game,” said Burns. “The $99 room is fine for you, but I’m special! I’m going to take the $119 room. I deserve the nicer room so I’m going to spend the extra ten or twenty dollars.”

However, there is no guarantee that guests will upgrade by themselves, especially if online room descriptions and images are not differentiated in a convincing manner.

Historically airlines have been ahead of hotels when it comes to selling upgrades and ancillary services and products. 

But the pandemic pushed many hoteliers to improve their room service and to be more creative in finding new sources of revenue and/or deploying attribute-based selling.

In addition to room upgrades, an upsell can be anything: early check-in or late check-out, a bottle of wine in the bedroom, F&B, spa services, office facilities, tickets to local concerts and events. 

High Earners

According to a Hotstats study of 100 hotel markets, there are significant differences between how much money hotels make over and above rooms revenue. Palm Beach, Florida and Wailea-Makena, Hawaii are unsurprisingly high earners of ancillary revenue, as are Paris, Osaka, Tokyo, Seoul and Hong Kong.

On the other hand, in many major city markets including London, Los Angeles, New York City, Toronto and Chicago the survey found non-rooms income is relatively low - less than $50 per day PAR.

At a time when there is a need to maximize every revenue opportunity, and as digitalization means fewer occasions for face-to-face upselling, many hoteliers have turned to software for help.

“There were plenty of apps offering pre check-in upgrades so they were around before the pandemic but now adoption has accelerated,” said Jane Pendlebury, CEO of HOSPA. “As hoteliers, we need to look at this from the guest’s point of view. We call it an upsell but for them it’s a bonus and an opportunity.”

Who are the main upsell software providers? Nor1 was the first company in hospitality to offer automated upsell solutions. Bought by Oracle in November 2020, it claims to have the largest installation base of any upsell provider. Other companies include Oaky, GuestJoy, EasyWay, Roomdex and UpStay.

Some upsell software is delivered as a standalone product that requires integration with property management systems. For instance, Roomdex establishes a two-way connection with a PMS, collects reservation, guest and occupancy data and creates offers based on this information that are emailed to guests at the right time.

In other cases, upselling is one part of a comprehensive guest messaging product (GuestJoy and EasyWay) and, elsewhere, some PMSs come with upsell software already included.

Chief information officer Vibhu Gaind at RBH Hospitality Management installed the StayNTouch Cloud PMS, which includes upselling, at four properties this summer. 

He said: “Having a mobile and flexible PMS platform enables staff to be more efficient with day-to-day tasks, and ultimately put more focus on delivering better service to the guest. We also loved the ability to drive room upgrades and ancillary revenue with automated triggers.”

Gaind said that part of his IT program is to roll out upsell software to other properties in the group’s portfolio of over 45 UK hotels.

What kind of returns from upsell software can hoteliers expect?

Nor1 said 17% of guests click the ‘request’ button on an upsell offer and the average price per night for accepted upgrades is $37.53.

Oaky’s website includes a calculator to gauge potential earnings from its upsell software. A four-star 100 bedroom hotel at 60 percent occupancy, for example, would average €7,012 per month in upsell revenue for a flat fee of €250. Hoteliers can download a spreadsheet to get a more detailed estimate of their hotel's potential earnings. 

Some vendors, such as Nor1 and UpStay, offer a commission model with no up-front costs, although the commissions can be as high as 25%.  Others, like Oaky, offer a fixed fee, which might be more lucrative in the long run as a property gets better at upselling.

When selling room upgrades, most software proposes a fixed price to the guest via their smartphones. Instead, UpStay invites guests to make a bid and enter the amount they are willing to pay, an approach which demands a higher level of engagement from guests.

Many are keen to view upsell software primarily as an effective vehicle for telling the guest about the hotel’s amenities.  “It’s crucial to give our guests information about what’s available in the hotel pre-arrival to see what their options are, and upsell before they arrive on the property,” said Gaind. 

Vendors say they can segment their customers according to length of stay, IP address, job title, reactions to previous offers, and other data, in order to get ever closer to sending the right offer at the right price to the right guest at the right time. Some vendors say they deploy machine learning to create their targeted offers.

If a guest is logged onto the hotel’s WiFi, software can trigger location-specific offers and promotions as the guest moves from one access point to the next, e.g. a guest coming back from the golf course walking towards the bar may be prompted with a 2 for 1 drinks offer.

Although easier to dismiss or ignore, too many messages or the wrong kind of messages are the equivalent of the pushy receptionist who misreads guest interactions.

“You don’t want to flood them with 25 emails. You want it to be very short and snappy; the right messaging at the right level,” said Gaind.

“Upselling needs to be done with finesse,” added Burns. 

Many would admit that the skills of an accomplished salesperson are not easy to replicate in the digital sphere.  Still, what upsell software lacks in human empathy, it makes up for in consistent performance and reliability.