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The Art of Upselling

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The Art of Upselling - TRAVELINDEXHung Hom, Hong Kong SAR, September 18, 2021 / TRAVELINDEX / Online upselling is an ever more popular way for hotel companies to bring in revenue. However, it remains unclear whether online upselling complements or replaces in-person strategies such as front-desk upselling. In an important exploratory study, Professor Basak Denizci Guillet of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University sought to answer this question. Her findings generate crucial insights for hotels in volatile and challenging times, while also providing an “upselling model for the industry that considers the complexities of today’s multifaceted ecommerce environment”.

Hotels can increase their revenue in various ways – most obviously by attracting new customers. However, this can be costly and time-consuming. An increasingly popular alternative is upselling, whereby existing customers are persuaded to spend more on an already agreed transaction, such as by upgrading to a superior hotel room.

Upselling helps hotels to “sell higher room categories, such as club and suite rooms, which would otherwise be empty or used for free upgrades”, says the researcher. The customer also benefits from upselling by getting a superior room at a reduced price. Upselling can take place at “any point during the customer cycle”, such as during the booking process, between booking and arrival, during check-in, or even at check-out with an offer for the next stay.

Traditionally, a hotel’s front desk staff would upsell to guests during check-in. In today’s digital era, however, more and more hotels are introducing online upselling systems. These systems send personalised upselling messages at various points in the booking cycle, give guests the opportunity to “bid for a better room”, and allow customers to select upselling options through the online portal.

However, as little research has been done on this topic, it is unclear whether online and offline upselling channels are complementary, offering customers a choice of the most convenient channel, or whether online upselling has had a negative effect on offline upselling. Dr Guillet aimed to explore this issue and also to investigate whether hotel customers’ profiles and sociodemographic backgrounds influence their likelihood of bidding for superior rooms in the upselling process.

A mixed methods approach, involving the collection of both qualitative and quantitative data, was chosen for the study, which the researcher described as “exploratory”. The qualitative data were collected in 2018 during 16 in-depth interviews with “hotel industry professionals familiar with online upselling”. The interviewees included revenue directors, consultants, front office managers and marketing directors working in hotels in the US, Europe and Asia. During the interviews, the hotel professionals were asked about their online upselling systems, why and how they used them, and how the hotels benefited from them.

In the second part of the study, conducted in the same year, the researcher partnered with an independent hotel company in Hong Kong to compare online and front-desk upselling. The hotel has 262 rooms, ranging from standard rooms to suites. For online upselling, the hotel uses a system called UpsellGuru, which offers customers with a reservation “a chance to bid for one or several different room types” by moving a slider to indicate the price they are willing to pay. The hotel can then decide “whether to accept or deny the upgrade offer within 24h”.

The industry professionals who participated in the interviews identified a number of customer and hotel-related factors that influence upselling. They all agreed that only customers who book directly or through an online travel agency are contacted for upselling offers, because an email address is essential. Otherwise, the professionals did not differentiate between customer characteristics for online and offline selling.

They did, however, identify a few customer characteristics that influence whether they might be contacted for upselling. For example, it seems easiest to upsell to customers who are staying for leisure rather than business, celebrating a special occasion, or travelling from abroad. However, as one respondent mentioned, sometimes the hotel receives more than 50 upselling bids a day. Therefore, when deciding whom to choose for upselling, it is difficult to take other factors into account apart from the potential increase in revenue.

The professionals also tended to focus on customers who booked the most basic rooms, because this makes it easier to find options for upselling, such as a larger room, a sea or harbour view, or club access with free breakfast, tea, and cocktails. Indeed, data from the second study showed that the “most popular upsells” were from a standard city view room to a standard harbour view room, and from standard city and harbour view rooms to club city and harbour view rooms.

There was a general consensus among the industry professionals that online and offline upselling “go hand in hand”, as there are advantages and disadvantages of both approaches. Front-desk upselling has the advantage of offering a larger customer base, but it is only possible to sell un-booked rooms on a single day, whereas online upselling can take place a few days before arrival. Online upselling offers greater involvement for customers because they select the price they are willing to pay rather than the hotel setting the price, as is the case with offline upselling.

The industry professionals were divided in their opinions on whether online upselling affects front-desk upselling. However, as one respondent pointed out, overall, only 30-40% of customers book directly or through an online travel agency, leaving many customers whom “front office staff can approach for upselling during check-in”. This suggests that online upselling will not replace front-desk upselling in the near future.

The findings of the second study, in which data were collected from UpsellGuru, confirmed that online upselling was not a substitute for front-desk upselling. In terms of the revenue brought in by the two channels, revenue from online upselling was greater overall than from offline upselling, yet during several months of the study this trend was reversed. In general, upselling revenue increased considerably after the introduction of UpsellGuru, partly because the change prompted the hotel to make its front-desk offers “more attractive to customers” by making the room prices more comparable with those offered online.

Hence, online upselling has certainly not had a negative effect and both channels help to increase revenue. As the researcher explains, it is likely that “the type of customers that choose to bid for upselling” differ from those who “respond positively to front-desk upselling offers”.

Of all the practical implications of the study, writes the researcher, “perhaps the most important one is the need to move away from treating each upselling channel as independent”. The two channels are complementary rather than substitutive, yet currently they “are not streamlined and aligned”. By taking a “more unified view” of customers, hotels can align their marketing efforts to maximise upselling across both online and front-desk channels. The key to achieving this “omni-channel approach to upselling” is to understand customers’ preferences better by collecting data that “go beyond the strategies hotels implement now”. An omni-channel approach also enables an “integrated, seamless experience across multiple devices and touchpoints”.

Overall, the researcher advises hotels to continue to invest in front-desk upselling. To ensure its success she suggests that employees such as front-desk staff should be “trained on the methods and importance” of data collection, and should receive “specialised, regular training in upselling”.

This exploratory study provides an interesting overview of current upselling approaches in the hotel industry. It clearly shows that there is room for both online and offline upselling channels, as long as they are aligned and streamlined. Nevertheless, as the researcher concludes, the study “opens up more questions than it actually answers about upselling in the hospitality industry” and further research is needed to better understand how to achieve the omni-channel approach and improve data collection to “generate a single view of the customer from all distribution channels”.

Basak Denizci Guillet (2020). Online Upselling: Moving Beyond Offline Upselling in the Hotel Industry. International Journal of Hospitality Management, Vol. 84, 102322.

First published at TravelNewsHub.com – Global Travel News

How to Cope in a Crisis – A Case Study

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How to Cope in a Crisis - A Case Study - TRAVELINDEXHealth crises are every hotel manager’s worst nightmare, but they are becoming increasingly common. In a fascinating and prescient case study that bridges the gap between theory and practice, Dr Clare Fung and Dr Alice H. Y. Hon of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University and a co-author show that embracing a four-stage crisis management model can help hotels to protect their residents, reputations, and revenue. Written before the COVID-19 pandemic, their study documents the responses of Hong Kong China Travel Service Hotels Limited to the outbreaks of SARS and swine flu, showing just how critical a crisis management plan is. As the hospitality and tourism industry emerges from the COVID-19 pandemic, the lessons contained in this case study will prove invaluable.

In recent years, the global hospitality and tourism industry has faced numerous shocks, including acts of terrorism, geopolitical instability, and the 2008 global financial crisis. Threats to health have been particularly severe. “The hospitality industry has faced a considerable disease crisis challenge in the past 15 years”, say the researchers. The short-term impact is a loss of revenue, and the longer-term consequences may be devastating. “An unexpected and potentially disruptive crisis can threaten tourism demand and harm the business performance of a hotel, as well as the reputation of its location”, the researchers caution.

Hong Kong China Travel Service Hotels Limited (HK CTS Hotels) operates more than 18,000 rooms in Hong Kong, Macau, and mainland China, as well as 50 UK hotels. The success of the hotel group lies in “dedicating the best hospitality services to hotel guests”, the researchers tell us. Over time, the group has had to adapt to several emerging threats, making it the ideal focus for a case study of crisis response. The researchers examined how HK CTS Hotels dealt with two serious health events – the outbreaks of SARS and swine flu.

In February 2003, a guest checked in to room 911 at the Metropole Hotel, Hong Kong. Along with his luggage, he was carrying the deadly SARS virus, which he would subsequently pass on to at least 12 other guests. “There was no awareness of SARS at the time”, note the researchers. However, the world soon learned of this deadly disease, which ultimately claimed more than 700 lives. The crisis took the hotel completely by surprise, and it was slow to react.

“The SARS outbreak had a significant impact on the Metropole Hotel’s business as well as that of other Hong Kong hotels”, say the researchers. This included a 90% drop in reservations. Investigators publicly stated that the professor’s vomiting on the floor outside his room had caused the virus to spread. For a chain that prides itself on cleanliness, this report was hugely damaging. “The investigation finding shocked the hotel guests and the wider community of Hong Kong”, the researchers report. The hotel itself became known as the “SARS hotel”, a name it would struggle to shake off. It was eventually rebranded as Metropark Hotel Kowloon.

The hotel’s failure to contain the crisis caused significant damage to the business and the brand. Recognising the risk posed by future health outbreaks to the hotel group’s reputation and profitability, the chain’s management team acted decisively. “The SARS infection case in the Metropole Hotel forced HK CTS Hotels to develop its crisis management system to ensure that its hotels could smoothly handle any potential crisis”, explain the researchers. The group soon had the chance to put this system into action.

As soon as news of the 2009 swine flu outbreak emerged, HK CTS Hotels’ crisis planning taskforce created preventative guidelines for all of the group’s hotels. Despite these measures, the group was unable to avoid its first infection case. A traveller from Mexico who checked in at Metropark Hotel Wanchai was confirmed as the first swine flu case in Hong Kong.

To contain the outbreak, the hotel’s guests were forced to stay inside for seven days. This caused significant “dissatisfaction and anger”, the researchers tell us. The hotel became the focus of global media attention. “Guest satisfaction became a critical factor in the public image and the reputation of the hotel”, say the researchers, and it quickly became the focus of crisis management efforts. The hotel sought to distance itself from the quarantine arrangements. It was made clear to residents, the public, and the press that “the role of the hotel was to provide excellent service to all guests”.

An enquiry desk was set up to field calls and provide information and advice. It also conducted an impact assessment to identify practical ways to make guests feel more comfortable and informed. The hotel made guests’ health and safety its “first priority”, note the researchers, arranging for them to receive relevant information from government health experts. To put its guests further at ease, the chain waived all costs, organised meals and events, and even handed out Sony PlayStation Portable consoles to bored children. A crucial line of communication with the head office was established. This, say the researchers, enabled Metropark Hotel Wanchai “to receive suggestions and support from the HK CTS Hotels management team and resources and support from HK CTS Hotels”.

Clearly, the detailed crisis management plan and decisive action taken by the hotel manager and other decision-makers ensured that Metropark Hotel Wanchai was well prepared to cope with the swine flu outbreak. As well as providing essential support for residents, the researchers note, the hotel’s action plan helped to protect its reputation.

Comparing the responses of HK CTS Hotels to these two dramatic health events, the authors found evidence that adopting a four-stage crisis management process is highly effective. To manage a crisis, they explain, a hotel must go through four key stages: “reduction, readiness, response and recovery”. This theoretical model provides hotel managers with a “general crisis management framework which provides guidelines on how to handle a crisis properly”, the authors state. Going further, they outline a blueprint for crisis management informed by experience.

During the first phase, crisis reduction, hotels should seek to “minimise the impact of an upcoming crisis”, say the researchers. This involves gathering information on the potential threat from all sources, including, crucially, social media. This stage is not about acting – yet. Instead, it “should mainly be about knowledge acquisition, creation and storage”, advise the authors.

On reaching the crisis readiness stage, the organisation has already been affected. Therefore, “providing protection for staff, guests and property will be the main aim of the contingency plan”, the researchers explain. The crisis should be categorised according to its seriousness and its impact, or the “type of damage” it inflicts. Its categorisation should dictate the particular strategy to be taken.

Communication is paramount during the crisis response stage. Having activated and implemented its contingency plan and tactics, the hotel should now “build up effective internal and external communication channels so that its employees, hotel guests and the public can access updated information”, the researchers recommend. Ongoing evaluation is required to assess the impact of the crisis and to re-evaluate and refine approaches.

Once the danger has passed, the hotel enters the crisis recovery stage. It must now “focus on implementing a recovery plan and reconstruction”, suggest the researchers. Although disruption and damage are unavoidable, there is room for optimism, as a “well-devised recovery plan and marketing strategy can change the crisis into an opportunity in the long term”. Such tactics might include price differentiation, service quality enhancement, the efficient use of social media, and public relations tactics. The ultimate aim of this stage, explain the researchers, “is to consolidate the organisation’s competitive advantage and its positioning”.

Translating theory into practice is not always simple, but it is vital – especially at times of crisis. As this case study shows, by adopting and implementing a four-stage crisis recovery plan, HK CTS Hotels was able to safeguard – and even strengthen – its reputation. The paper is a powerful illustration of the important work that SHTM academics carry out in bridging the gap between theory and practice, applying lessons learned in the classroom to the real world. It is this practical and pragmatic approach to management that sets our students and researchers apart.

Clare Fung, Bruce Tsui, and Alice H.Y. Hon (2020). Crisis Management: A Case Study of Disease Outbreak in the Metropark Hotel Group. Asia Pacific Journal of Tourism Research, Vol. 25, Issue 10, pp. 1062-1070.

 

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First published at TravelNewsHub.com – Global Travel News

Tourism in Technicolour

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Hong Kong, Hong Kong SAR, April 30, 2021 / TRAVELINDEX / Cartoons might just hold the key to attracting an important new niche in the tourism market, according to a pioneering recent study by Dr Mimi Li and Mr Yuhao Chen of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University and their co-authors. With society’s increasing emphasis on family togetherness and…

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First published at TravelNewsHub.com – Global Travel News

Are Residents the New Tourism Ambassadors?

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Hong Kong, Hong Kong SAR, March 27, 2021 / TRAVELINDEX / Local people may be the best ambassadors for tourism in their home towns and cities, according to Ph.D. graduates Dr Philipp Wassler and Dr Liang Wang, and Dr Kam Hung of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University. Building a brand for a destination is an effective way of attracting tourists…

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First published at TravelNewsHub.com – Global Travel News