Introduction to hotel room upgrade
Providing guests with personalised value for money room upgrades is a complex task that needs planning if your goal is to succeed.
If your upgrade offer isn’t driven by a deep base of planning and strategy it’s most probably you won’t succeed. Hospitality professionals need to stay up to date when it comes to creating their room upgrade offer to drive hotels ancillary revenue. Using your sales & marketing skills, along with technology and a great UX design, is crucial for achieving your upgrade revenue goals.
Picking the right amenities to show and carefully selecting your room categories with its bed types, views and supplement requires a bit of thinking and planning.
This quick (we try to keep straight to the point) guide will help explain everything you need to implement your first room Upgrade strategy and give you helpful information on strategies to use at your property.
Establishing a hotel room upgrade strategy
Crafting and executing your room upgrade strategy requires you to do more than establish a list of room categories and its supplement. You’ll want to go beyond that – choosing the right amenities or unique selling points every guest wants so that you maximise your hotels ancillary revenues.
There are a number of questions that should surround your room upgrade strategy:
- What do your guests want?
- How does your strategy support your room inventory?
- Which strategy will complement your current business mix?
- How does your strategy integrate with your current pre arrival emails?
- Who are the experts that can help determine the right strategy?
Let’s take the first question as an example. Put yourself in the guest’s shoes: what are the most common problems you face while staying at a hotel? What do you wish you could guarantee before the arrival day? and what amenities would really make a difference in your stay? For instance, some may like to secure a double bed instead of two single beds, while others are happy with a coffee machine in the room or a room away from elevators and street views. This is where choosing your room upgrade unique selling points might come into play.
Technology can also play a major role in accurately and effectively establishing your room upgrade strategy at your hotel. Cross selling and business intelligence softwares make it much easier for you to implement, deliver, track your revenue, collect data, forecast, and make quick adjustments.
With all that in mind, the first priority of your upgrade offer should be understanding which two (2) room categories you can upgrade your guests to based on your inventory and the most popular room booked.
How to determine room categories for hotel upgrades?
As you might already know, there are many factors that will influence and help you determine your two categories. However, we have sold tens of thousands of room upgrades and based on our experience you should be looking at your total number of rooms available per each category immediately higher than the most popular room booked.
For example, if your hotel room inventory is divided into 50 Economies, 10 Standards, 20 Deluxe and 5 Junior Suites but 80% of your guests book the Economy room we will then create our room upgrade strategy offering three choices using two different room types; Two options using the Deluxe rooms (since you we have 20 units) for a ¨little¨ supplement and one option using the Junior suite category for a much higher supplement, but the reality is that we only care about the first room type, we will only aim to upgrade our guests to one single room category, the Deluxe one, you can eventually scale your offer to more categories but for now on forget about your highest category and lets stay focus on selling one category.
Your strategy should identify where the demand and supply are to sell a high number of room upgrades. With an effective room inventory strategy in place, you will be able to better identify which room category to include in your main upgrade offer.
Drive value and demand with your uniqueness
It’s important to let your guests see the value of upgrading their stay, If you simply offer a Deluxe room that offers them nothing. You need to highlight what makes your upgrade unique, which allows you to charge a supplement, instead of giving that room type away since 80% of your guests book Economy rooms.
Leaving Cohosting data on the side we reached out to 32 random hotels to share the most common requests they get from guests, and the most common responses were bed type, views, room location and amenities such as kettles. We did not ask the general manager what they wanted to sell, instead we wanted to identify where the demand is and understand your target market willing to pay for the upgrades.
It’s important to configure your offer to suit guest preferences.
The views, bed types and amenities play a huge role in implementing your upgrade offer. Define what you offer to your guests. It could be a peaceful retreat away from elevators, a business facility with great views, a romantic stay with a king size bed or anything else that is of value. Your upgrade offer should clearly focus on the USP being offered.
Here are a few questions that should surround your room category chosen for your upgrade offer:
- What type of bed guests want?
- What type of view most guests request?
- What amenities or unique selling points does my room have?
- What complimentary add-ons can I include to differentiate?
All of the statistics are showing the same results right now – modern guests expect (and rather, need) an uninhibited travel experience that is largely defined by personalization.
Recently IHG announced a new customer-centric reservation model which provides guests with room attributes – “Traditional room types will no longer be the core product offered by hotels,” the report states. “Instead, guests will choose from room configurations that match their needs.”
Pricing your upgrade
The method you use to price your room upgrades can be extremely diverse depending on what you focus on, as this is a quick guide to implement a frictionless room upgrade strategy we will keep it simple.
Since our launching back in 2016 we have also learnt that there’s no pricing strategy that is perfect for any hotel. Each property must consider the pricing strategy, this is why Cohosting lets you configure your supplements per night, per number of guests, per stay or per night per guest.
Upselling, cross selling and upgrades work because customers or guests have already made the most important decision: to buy. Adding another purchase that provides more value for our guests is much easier than trying to make the original sale.To motivate existing customers to buy more, we have to find our ‘optimum supplement’, after optimizing hundreds of our client’s upgrade offers we came up with the number 15, 15% of your annual ADR is the right supplement to cover costs while remaining attractive to your guests, when charging per night. Then you can raise your upgrade supplement later on specific dates using Cohosting’s dynamic pricing system.
Whilst 15% of your annual ADR isn’t full proof, we have scored pretty good results working out that number based on historical data, competitors, guest segmentation, length of stay and trends.
Guests looking to travel are as price-conscious as ever; but it doesn’t mean prospective guests won’t be likely to shed a bit more for a hidden gem!
Launching your upgrade strategy
If you have carefully read, you should know by now that your room upgrade recipe should meet the following criteria:
- There will be a total of three (3) upgrade choices displayed together for your guest to decide.
- Choices will be created using two of your existing room categories.
- One of the categories has to be your highest one.
- The other room category has to be higher than the most popular room booked and with enough inventory to guarantee availability.
- We only want to focus on selling one choice.
- Every choice has to include their bed type and views.
- All three choices need to show their uniqueness (attributes).
- The supplement of the choice we want to sell can not be greater than 15% of your annual ADR.
As we mentioned before this strategy revolves around selling one of the choices. Having that in mind and the different requirements, we can then implement our first room upgrade offer built with 3 a total of three choices as follow:
Choice 1 – The hook
This is the lowest option guests can book but this is not the one we aim to sell. In order to create this first choice we need to answer the following questions regarding the first room type, E.g. Deluxe room.
- What type of bed guests do not want?
- What type of view most guests request?
- What amenities or unique selling points does my room have?
- What complimentary add-ons can I include to differentiate?
Taking a deeper look at our last questions, we know that everyone loves free stuff, and hotels or hosts offer certain complimentary things to stand out against the competition. Our mission at Cohosting is to empower any Hospitality professionals (Hotels & hosts) to be at the center of the guests travel journey. To that end, we offer a frictionless technology with no PMS integration needed, so when a property is not able to connect its PMS to Cohosting and they use their own CRM to send pre-arrival emails oferring upgrade it can happen that ended up offering a Deluxe room to a guest who originally booked a Deluxe room, to cover your back we add value by offering complimentary services or amenities to differentiate the upgrade from the category itself.
If you are using Cohosting as your Cross Selling software to implement your upgrade the good news is that Cohosting will already give you ideas on complimentary options that actually work.
Once you have answered the above questions, the process of choosing the perfect name for your firsts category that is both catchy and drives sales towards the upgrade choice you want to sell, it is simple. A good way to create memorable names is to use the room type name e.g Deluxe room, and the bed type nobody wants at your property, e.g two (2) twin beds.
Choice 2 – Our sales goal
This is the one we want to sell, so once you have built your lowest choice you just need to copy paste it replacing the following elements:
Bed type – we will include the bed type guests want instead of the one nobody wants. From The Doubletree Inn, to The Peninsula, to The InterContinental, a good hotel room has one thing in common: a good bed. While each hotel has its own take on what that means in terms of the sleeping experience, they know that a good night’s sleep is invaluable when you’re traveling and therefore most guests will try their best to have the bed type they want, this is our hook.
The other element we will change is our complimentary amenity – Find a way to add even more value for your guest, beyond offering Welcome amenities. Think in terms of experience: How does staying at your hotel change the life of a guest? Can you improve their experience in the destination? Can you offer an environment that meets their needs? Can you personalise their stay? This approach will also allow you to keep a certain level of supplement and avoid unsatisfied guests if the room category offered as part of the upgrade is not much different from their original room booked.
For instance, you could offer a free gift such as Welcome amenities on choice 1 and a highly demanded service or amenity on choice 2 (The one we want to sell). Some hotels may have a lot of requests for late check-out as they have a lot of couples while others will be ok including Complimentary parking as most of their guests drive to their place. Take your time here, – on one hand, some guests just view them as a free valuable extra. Others however, will complain due to the amenities being part of the package that was marketed towards them.
As discussed before, the main purpose of a name should be to communicate what category and bed type the room is offering while being easy to remember, E.g Deluxe room with double bed or Deluxe double room.
Choice 3 – Your highest category
We operate in a very price-sensitive marketplace, so using the right pricing will dramatically increase your conversions. As a successful Cross selling tool, we’ve experimented with and analyzed dozens of different offers to optimize sales. Use consumer psychology when working out your offer, the only reason behind offering your highest category at a very high supplement within your upgrade offer is to make Choice 2 look as a great deal when charging 15% of your annual ADR. Now that we’ve explained the main reason, upload choice 3 following the same criteria as choice 2.
Share and display your offer to guests
That is pretty much it. Once you have your offer ready to go, you should (1) set up your email to be sent, we have learnt that the most effective time to let your guests choose their room preferences is 72 to 48 hours before arrival, you could also offer a second time 7 days before. At this stage guests are getting excited about their trip and want to make sure they have a pleasant stay and trip.
If you already have your own CRM make sure you are able to segment your reservation so that we don’t offer a Junior Suite to a guest that has already booked a Junior suite, if you are using Cohosting and your property is eligible for PMS integration, using your dashboard you can create segments to only offer room upgrade to reservations meeting certain criteria.
On the other hand you will have to create a frictionless user interface for your guest to access your upgrade offer. Beyond session times and bounce rates, the core purpose of user interface design is to make things as effortless and enjoyable as possible for your guest. At Cohosting the final result will be shown using a ¨Software Pricing page¨design, just like this
What will your pricing strategy be?
Certainly, this isn’t a complete list of everything you need to do to successfully implement your first room upgrade strategy to increase your hotel ancillary revenue. But, this gives you a good guideline for the key setting that needs to take place.
I hope you’ve found this guide to build your first strategies to be useful. We’ve tried out all of these, and know that they work in the right circumstances.
If you follow these steps, you’ll be in a much better place with your upgrade implementation, and if you still have concerns such as running at very high occupancies we advise you to rely in technology. Cohosting’ technology lets you make this service available on specific days and time of the year. You can set up the service to be offered on lower occupancy days such as Sunday and Monday nights, you can also set up block-out days.
We’ve also integrated with leading Property Management Systems and Channel Managers, if your property is eligible each day Cohosting runs an analysis of your occupancy to only offer the room if there is availability, if your front desk and reservation team is worried, you can turn off Instant confirmation and manually approve them after securing you have enough rooms.
Revenue management never stops
My final advice is to try one strategy at a time, making minor tweaks, and keeping a close eye on your conversion. Cohosting will let you download valuable reports to track your results, so you can look back on what worked, and what didn’t.
Over time, along with your dedicated Customer success manager from Cohosting you’ll be able to optimize your offer and pricing, and become a more successful cross selling guru. Good luck!
About the author
This post was by Alejandro soria, Founder and CEO of Cohosting, written with Alejandro Cuevas, head of Customer success at Cohosting.
Cohosting is an Intelligent Cross Selling software used by more than 5000 properties aiming to increase their ancillary pre-arrival revenue by cross selling add-ons and service through segmented pre arrival emails.
Founded in 2016 our mission is to empower any Hospitality professionals (Hotels & hosts) to be at the center of the guests travel journey. To that end, we offer a frictionless sign up process and an easy to implement scalable technology with no PMS integration needed, all under a Win-Win revenue model with no fixed costs.