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The revenue potential of upselling in the hotel industry

23 Sep 2024

As the hotel industry continues to evolve, upselling (a sales strategy that involves encouraging customers to buy a higher-end version of a product than what they originally intended to purchase) has emerged as a strong contender in enhancing guest satisfaction and driving revenue growth.

Source: Supplied.

According to a recent data report, the implementation of upselling techniques in the hotel industry has shown significant financial benefits, with hotels increasingly capitalising on additional services.

The report highlights that top upsell services in 2023 included breakfast, early check-in, late check-out, drinks on arrival, and pet fees. These services are not only popular among guests but also contribute significantly to the hotel's revenue stream.

On average, each upsell during the online check-in process added approximately R581 to the booking; nearly doubling the revenue from similar services in the previous year.

This upsell strategy has proven particularly effective during the online check-in process, with a growing number of properties recognising its value. For instance, properties that offered additional bookable services like parking spaces and meeting rooms generated an average of R561,400 in extra annual revenue.

David Swanepoel, head of sales at hotel tech company, Ankerdata Hospitality Systems, emphasised the importance of upselling in the current hotel landscape.

"Upselling is not just about increasing revenue; it's about enhancing the guest’s experience. Offering guests the opportunity to tailor their stay with personalised options like early check-ins or pet-friendly rooms creates a win-win situation. Guests appreciate the flexibility, and hotels benefit from the additional income."

While upselling offers significant revenue opportunities, Swanepoel also cautions against overusing this strategy. "Revenue managers must be careful not to start charging or seeing upselling opportunities in every possible service. This approach can backfire and annoy guests, as we've often seen in the airline industry. It's essential to strike a balance between offering valuable options and maintaining guest satisfaction."

Top guest requested services

Early check-in and late check-out: These services have consistently ranked among the top upsells. In 2023, these services were among the most purchased during online check-ins, contributing significantly to overall upsell revenue.

Pet-friendly offerings: As more travellers opt to bring their pets along, pet fees have become a lucrative upsell opportunity. Hotels offering pet-friendly rooms have reported a steady increase in demand, with pet fees being one of the top five revenue-generating upsells.

Honeymoon turn downs and special occasions: Customised experiences, such as honeymoon turn downs, have also gained popularity. These tailored services do not only enhance the guest experience, but also enhance the overall booking value.

It is evident in the report that properties utilising upselling strategies are better positioned to diversify their revenue streams and improve their bottom line. With the average revenue per guest (RevPAG) increasing by 50% from 2020 to 2023, it's clear that upselling is becoming a pivotal part of hotel-revenue management.

Swanepoel concludes, "By offering guests more choices and upsell options, hotels can not only increase their revenue but also improve guest profiling, and this will result in greater guest loyalty."