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Drip Pricing Versus Upselling – Analyzing the Subtle Difference

Here’s how to avoid nickel and diming guests while still getting them to pay more.

Tuesday, August 05, 2014
Mr. Larry Mogelonsky - CHA
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The term ‘upselling’ no doubt conjures up thoughts of capturing more revenues from each individual guest. Drip pricing is a little less understood, so bare with me through a broad definition. It’s the practice of removing services out of what would normally be included in the regular nightly rate then offering them for an additional surcharge. Hence, the prices ‘drip’ from a customer’s wallet as opposed to flushing out in the form of a single line item on the final bill.

To look at it in black and white: drip pricing is bad; upselling is good. Getting into examples of drip pricing is where we need to properly distinguish both these terms lest we severely ‘diss’ our guests. There are obvious examples of upselling like room upgrades, spa packages and loyalty reward programs, but when it comes down to the more quotidian services like housekeeping, local calls, complimentary breakfast and WiFi, it would be a terrible mistake to promote these as upsells both to your guests and internally to your sales team.

It all boils down to managing customer expectations. If the norm is for such operations as housekeeping, heating, turn down services, air conditioning and cable TV to be a silent contributor to the guestroom rate, then charging extra for them falls into the category of drip pricing. Such extraneous costs will irk guests because they are unexpected and not in a good way. On the other hand, for most properties, spa treatments are not expected to be incorporated into the daily room rate and thus levying an extra fee will not be seen as greedy in the eyes of your guests.

These norms and standard perceptions differ tremendously depending on your property’s star rating as well as your branding engine. For economy properties, drip pricing is less of an issue as the general expectation is one of ‘no frills’ and less about delivering an all-encompassing experience. But for four-star and five-star locales, you must be especially cautious about using the term ‘upselling’ for the gray areas which may be judged as drip pricing. (Even if a guest doesn’t know the term ‘drip pricing’, they’ll still know when they are being fleeced). Think about an ‘all inclusive’ resort and what preconceived notions a guest has – in this case, charging for breakfast will most likely be met with contempt.

In fact, expectations fluctuate for nearly every property. There’s no magic bullet. For instance, take a vacation destination outside of an urban area. Charging for parking here is something I would consider drip pricing because it is exceedingly necessary to have a vehicle in order to reach the property and travel about during the day. However, offering parking at an urban facility would better fit the upsell classification because the assumption is that, when in a city, parking spaces are inherently more limited (accruing greater costs for the hotel which must be offset) and a vehicle is not a vital means for arrival (public transportation, taxis, limousines and so on).

Perhaps whether you denote a service as a ‘drip pricing’ or as an ‘upsell’ all boils down to how essential that service is based on preformed views about what the experience at your property will be. In this regard, should WiFi – a service deemed essential by many internet-addicted consumers – be considered an upsell or a vile, drip-priced surcharge to be avoided? As you can see, a lot of this is open for debate and I invite you to offer your own examples and opinions on the topic.

Credit
Larry Mogelonsky CHA    Mr. Larry Mogelonsky - CHA
President and Founder
Owners, Principals, or Partners
LMA Communications Inc.

Bio: Larry Mogelonsky (MBA, P. Eng) is the founder of LMA Communications Inc. (www.lma.ca), an award-winning, full-service hospitality consulting and communications agency. Established in 1991, the company has assisted hundreds of luxury independent and branded properties throughout the world, providing solutions to sales, marketing, operational and digital challenges. Larry is an associate of G7 Hospitality Group as well as a member of Cayuga Hospitality Advisors and Laguna Strategic Advisors. He is also ...
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RE: Drip Pricing Versus Upselling – Analyzing the Subtle Difference article link
Well said! However, I used to love groups that wanted a substantial discount for long term stay-I would offer the lower rate BUT also only offer one full clean a week and light clean the rest to offset on the expense side. It's a win/win when you have over 500 rooms to sell and it's a slow period!
Posted by: Shay Baranowski
Email: shay.baranowski@ihg.com
8/6/2014

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