Despite occupancy rates that have returned to pre-recession levels in many parts of the world, it is still not clear what 2014 will hold for the hotel market in regards to RevPAR and ADR. In fact, even industry experts are at odds on those projections(1). This apparent ambiguity suggests that, in order to achieve a full recovery, hoteliers need to maintain their focus on optimizing revenue, and not be content merely with achieving heads in beds.
One factor that is holding back ADR is that hotel revenue managers and operators are being challenged by considerable segment compression, resulting in very little upward pricing power. Some believe commoditization has created a “pricing ceiling” in some key markets, leading to an inability of hoteliers to push ADR that their properties’ inherent value deserves. In truth, the pricing ceiling is a myth; most guests are willing to pay for enhanced value, but only when the value proposition is made clear and often only if they are encouraged.
Too many hotels continue to give away premium room tiers discounted or for free (as added value), undermining their ability to differentiate their product and achieve optimized rates. While complimentary upgrades for loyal guests are a fundamental part of the hotel business, the all-too-common refusal or lack of interest to upsell higher room tiers is a tremendous missed opportunity to generate additional revenues at a significant profit margin. Just as importantly, failure to upsell is creating a lesser stay experience for a segment of guests who would clearly benefit from a room product more matched to their needs.
When booking online, most travelers seek out hotels in convenient locations and end up reserving base room levels. It’s predictable, except for only the most special of occasions – but this is not always out of lack of interest, means, or need. Instead, consumers simply have a hard time seeing the value of paying more at the point of booking. They want the reservation process to be as brisk and painless as possible, and comparing the relative merits of different room types is seen as an unnecessary extra step in the process. More to the point, complimentary upgrades have become so commonplace that even a guest who would otherwise book the higher room type online opts to hold out for the free or deeply discounted upgrade at time of check-in—in much the same way that a frequent flyer member on an airline may wait for the free upgrade at the gate. In many categories, the hotel industry follows the lead of the airlines, but in this case, a bad precedent may have been set. Rather than giving away higher rooms, hoteliers need to make a more concerted effort to sell the underutilized premium room types at the point of check-in. The solution is not discounting – it’s offering the right guests the right room product at the right time. Imagine if 5% of guests spent 20% to 30% more for every night – it would do wonders for average rates and the hotel’s bottom line.
Now imagine generating those extra revenues and making the guests feel like they got a fantastic deal. That is the power of effective upselling.
Upselling as a Win-Win
Foundationally speaking, upselling is not about directly generating additional revenues for a hotel. Done well, it certainly does that; hotels that have opted to use a front desk upselling training solution such as that provided by TSA Solutions, can post incremental RevPAR of sometimes up to 7%(2) after implementation.
That incremental revenue is absolutely significant in immediate fiscal terms – especially when it is derived entirely through higher ADR, but the real value of effective upselling is seen in the bigger picture of hospitality. When upselling is done correctly – when higher room types and value-added amenities are sold to those guests for whom such enhancements will improve the overall hotel stay experience – it can significantly improve the hotel’s entire image and loyalty base. Guests whose needs are met inevitably have a better opinion of the property, its employees, and the service levels they have experienced, all of which translates into happier guests who are likely to return and who will offer positive reviews online and to their personal social networks. Simply stated, a professional and efficient upselling program enhances guest satisfaction. In order to understand the extent of this synergistic relationship, a major global hotel company recently undertook a study to determine how its upselling program affected guest satisfaction at its properties. Correlating guests who were upsold using the TSA methodology with guest satisfaction scores, the company found a 3 point increase in overall guest satisfaction.
As if simple hospitality were not reason enough to strive to meet guests’ needs, research has proven over and over again that even modest gains in a hotel’s customer satisfaction scores can transform a hotel’s bottom line in significant ways. Cornell University’s Center for Hospitality Research concludes that a mere 1% score improvement to a hotel’s online guest reviews results in a 1.4% RevPAR increase.
Turning Front Desk Agents into Star Salespeople
A professional upsell training program turns a front office agent into an effective salesperson. TSA Solutions’ Front Desk Upselling program for instance, uses proven techniques to train hotel employees to understand the needs of various guest types and how optimally to explain advantages and benefits of premium room categories. The upselling strategies focus on engaging guests in a way that actually enhances guest satisfaction scores by engaging customers in establishing their needs.
Achieving staff member buy-in – convincing them of the value and importance of upselling – is sometimes its own challenge. The most important step in the staff buy-in process is to help them understand how upselling can be a benefit for everyone.
Some front desk agents are reluctant to engage in upselling. Often it is due to a misplaced belief that upselling equates to being a pushy salesperson, and pushiness is not seen as a desirable trait of a hospitality professional. An effective training program is needed in order to show these hotel employees that upselling is in fact a valuable guest service in its own right, and that the process can and should be a pleasant experience for all involved.
It begins with having a friendly, natural conversation with the guest and observing both visual and verbal clues —then combining that information with relevant pre-arrival information to determine whether the room type booked will meet their needs. If the upsell interaction is approached from the standpoint of delivering an ideal stay experience to the guest, rather than trying to sell a more expensive room, that is the very definition of being hospitable.
Rallying the Team
Incentivizing employees through healthy competition and tangible rewards does wonders for establishing staff buy-in and motivating them to push ahead with the upsell process on a long-term basis. Similarly, bringing a competitive component into the program, such as having front desk teams or sibling properties competing against each other, helps drive employee engagement.
As a standard component of its program offerings, TSA Solutions provides hotel clients with a robust reporting platform that clearly and simply illustrates upsell performance on a comparative basis. The reports let management and staff see which employees are converting the most upsell opportunities, tracking performance for the hotel against monthly and quarterly goals. Hotels are also able to track upsell performance against all other hotels partnering with TSA in given markets, all of which provides baseline metrics and a simple way for management to evaluate the hotel’s performance and opportunities for improvement.
Cultivating a successful upsell program has direct bottom-line benefits, and the long- term indirect revenue growth via improved customer satisfaction is also rather evident. But there’s yet another financial advantage that is less obvious: reduced staff turnover. Service industries struggle with high turnover rates, and hospitality is no exception, with front-line positions often turning over in less than a year. There are many reasons for the high turnover rate, but one of the most common is low employee morale. This can be due to frustration in not having the skills needed to perform their jobs with confidence and efficiency, so that lack of morale can oftentimes be remedied through an effective training program.
The resulting reduction in turnover will end up saving the hotel thousands that it would have lost in diminished productivity, searching for a replacement, and retraining. Instead, the hotel enhances the bottom line by retaining a talented employee with a higher level of confidence and a knack for generating higher room revenue.
In It To Win It – For Long Term Results
Launching a successful upsell program requires not only experienced hospitality professionals conducting a proven training program, but also complementary technology and long-term consultation. Simply throwing technology at a hotel only does not work. Neither does a touch-and-go training effort, because performance recedes rapidly if it improves at all. Only an upselling program with a continuous focus on engagement can be successful over the long term.
When hotels attempt to implement an upsell program internally, it is entirely dependent on one person driving it. What happens when the person leaves, or if his or her personal style does not align perfectly with the talents of the given employees? In either case, the program inevitably fails. With an optimized upselling program contributing on average up to 3% in incremental RevPAR, it is too important to make it dependent on one person alone, and a continuous engagement process is needed to ensure the hotel remains focused on driving optimal revenues from the upselling program.
Thus, the ability to provide program continuality and ongoing performance measurement is precisely what properties should look for when seeking out an upselling solution that can ensure long-term growth and profitability.
Think Global and Act Local
Hospitality is both a local and a global business. An individual property needs to take immediate competition and local customs into account, yet may be part of a global brand that has set performance standards around the world, regardless of locale. Therefore, properties should look for a company that can provide the local support the property needs, while also being able to address the needs of the group at large. Ideally, they should provide experienced hotel industry professionals who remain in contact with each property over the long term, returning on a regular basis to address any gaps in performance and offering support to ensure ongoing positive outcomes. In addition, the program should employ the right technology to support this team of professionals, such as reporting tools that show performance impact on the hotel’s bottom line and expose unrealized opportunities for continuous performance growth.
When all these pieces of the puzzle are in place, hotels can certainly find a happy balance between guest satisfaction and profits, maximizing both while increasing RevPAR and enhancing the bottom line. And that is certainly a win-win for the guest and hotelier.