The article breaks down how technology use can increase your ancillaries revenue
25 April, 2023
Whatever lodging business you have, your top priority is to maximize your gains from it, isn’t it?
The common issue the hotel chains are facing is a fierce competition in room pricing. According to the report, 36% of travelers name price as a top factor influencing accommodation decision. It seems that to win a customer, the hotel should offer the smallest room price possible. But what about the profit? The business is very likely to go down the drain unless other revenue streams are not utilized. That’s why it is critical for hotels to leverage opportunities to sell additional services and activities throughout the guest journey to increase the average booking price.
In the post-pandemic time, cost control, efficient staffing and diversification of revenue streams play a crucial part in the hotel business strategy. As stated above, selling the room to the customer doesn’t bring sufficient benefit to the venue, yet it is a vital starting point for driving profit. According to the industry statistics, in some large resorts ancillary revenues can affect up to 50% of total revenue.
There are two major ways to drive additional profit for your hotel- upselling and cross-selling.
What exactly is cross-selling and upselling? In sales and marketing, ‘upselling’ is referred to the practice when customers are encouraged to pay more for a similar (but higher quality) product/service than the one they initially intended to purchase.
’Cross-selling’, on the other hand, means selling additional products or services that are complementary or related to the purchased product/service.
Both of these techniques are valuable for hotel owners because they are used to gain more profit from the same guest in addition to the room price.
Apart from additional revenue, these techniques contribute to guest experience and boost customer loyalty. Besides comfortable conditions, guests are looking to experience local attractions and various entertainment activities.
Actually, while the majority of businesses concentrate on attracting new clients, they oversee some important facts. According to business experts, retaining customers should be prioritized as much as or even more than acquiring new ones. Let’s dive deeper into that matter. Statistics show that existing customers have far bigger revenue-driving potential:
So, one of the primary principles of any business is to keep existing customers and maintain a loyal relationship with them, which will cut customer acquisition costs.
We have conducted a survey among people heavily involved in tourism – travel agents and experienced travelers to understand the needs and desires of business and the customers regarding entertainment activities.
Both groups of respondents admitted that the venues didn’t exploit their full ancillary potential and criticized the traditional approach of offering additional services to guests when all the advertising is done by a travel agent or reception staff. The conventional way doesn’t work because of the following:
At the same time, all respondents stated they would love to have an application packed with guest entertainment activities and enabling efficient upselling and cross-selling for hotels and effortless purchasing for the guests.
To make the most of the ancillary revenue potential, it’s essential to take into account the entire customer journey, from booking to departure, and work out the best strategy and means for ancillary sales at each stage.
Industry experts recommend not to overload the booking process with additional offers, just to include the most relevant options, such as meal plans, transportation, and amenities.
When the customer has become your future guest, it’s the most suitable time to offer them various extras. We remember that the probability of selling to a new prospect is 5–20%, while the probability of selling to an existing customer is 60–70%.
For the best conversion level, it is essential to make your offers personalized and fit the interests of the certain type of guest. The pricing of your offers should be well thought-out as well.
Let’s have a look at what actual data show us.
GuestJoy studied upsell data collected from around 1000 hotels located in 25 countries across the globe to identify the services which were the most popular among the guests.
What makes the most money?
Purchasing pattern is not the same throughout the year and changes according to the season. In the summer, room upgrades sell 4% more, while restaurant-related offers are purchased 6% more often. Taxi and room services show a little increase in popularity as well. The only service group that decreases in sales during summer is wellness offers.
Once your guests are already enjoying their stay, they will be typically more open to opportunities to enhance it. Make sure each guest knows everything you have to offer without them having to ask or look for it.
During Check-Out and Post-Stay.
Upselling and cross-selling take place throughout the guest cycle. If done right, they enhance your guests’ experience and increase your property’s bottom line.
The most critical point that each hotelier should keep in mind is to make sure that upselling and cross-selling are performed in the most efficient/ high-converting way. While the traditional approach via front-desk selling still works, both guests and hotel businesses increasingly feel the need for a more modern approach, such as doing it via a hotel application or a virtual concierge. It will fully cover all ancillary revenue opportunities throughout the entire guest journey at your venue, as well as provide a more seamless travel experience for the guests.
Adopting technology at your venue will not only pave the way to service excellence and increased customer loyalty, but also unlock hefty sources of revenue. A custom solution, taking into account all the needs of your hotel as well as your guests, is an efficient way to sell both à la carte and third-party ancillary services. It makes it easy to offer additional services and activities during the entire guest journey and tap into customer’s interests with personalization. Besides, it will make your guest experience much more engaging and memorable, which, in turn,
will improve guest retention rate and revenue potential of the hotel. BandaPixels has a vast experience of creating custom solutions for hotels. Check out the Projects section to have a look at case studies of the applications created for the hospitality industry. Contact us if you would like any kind of further information.
by Vlada Hladyr
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