Upselling and dynamic pricing in hospitality
With increasing competition in the hospitality sector, optimizing all revenue streams has become a strategic priority.
In this context, upselling emerges not only as a commercial technique to increase revenue, but as a sophisticated strategy that, when combined with dynamic pricing, becomes a powerful tool to optimize profitability while also enriching the guest experience.
Dynamic pricing in hotel upselling involves adjusting the cost of additional offers (room upgrades, ancillary services, experiences) in real time based on a range of variable factors.
Just as room rates are dynamic, so too should upsell prices be.
This approach moves away from setting a static price for a given upgrade or extra service, allowing hotels to respond flexibly to changing market conditions, demand, and the specific characteristics of each guest.
What is dynamic pricing in hotel upselling?
- Capturing Maximum Value
By applying yield management strategies to ancillary services, hotels can raise upsell prices during periods of high demand or for highly requested offers.
This ensures the hotel extracts the maximum value from each upselling opportunity. - Stimulating Demand in Low-Occupancy Periods
During off-peak times or to sell less in-demand services (e.g., spa treatments during non-peak hours), hotels can offer discounted or more accessible upsell pricing.
This encourages spending even when overall demand is low, mitigating revenue loss. - High Profit Margins
Upselling to existing guests comes with a very low customer acquisition cost, making the revenue highly profitable and margin-rich.
Dynamic pricing further enhances this margin by ensuring the optimal price point for every upsell. - Unlocking Ancillary Revenue Potential
With rising operational costs and inflation impacting room rates, more focus is being placed on ancillary revenue, tracked by metrics like RevPAM² (Revenue Per Available Square Meter).
Dynamic pricing is essential to optimize revenue from non-room services such as F&B, spa, activities, early check-in, and late check-out.
How to implement dynamic pricing in upselling
Implementing dynamic pricing effectively requires a mix of strategy and advanced technology:
- Data & Analytics
It’s essential to collect data on guest behavior, booking patterns, upsell purchase trends, current demand, and seasonal trends.
This information fuels smart pricing decisions. - Advanced Technology
Modern upselling software uses Artificial Intelligence (AI) and Machine Learning to analyze data and automatically suggest dynamic prices for upsells.
These systems can predict the likelihood of offer acceptance at a given price and adjust accordingly to maximize opportunity. - Integration with PMS/RMS
To be truly effective, dynamic pricing for upsells requires real-time, bidirectional integration between the upselling software, the Property Management System (PMS), and ideally, the Revenue Management System (RMS).
This ensures prices are updated in line with availability and the hotel’s overall revenue strategy.
Dynamic pricing works best when combined with personalization.
A dynamically priced offer becomes even more powerful when delivered to the right guest, at the right time, through the right channel, and tailored to context.
Dynamic pricing is not just a short-term revenue booster, but a strategic pillar that—enabled by technology and driven by data—allows hotels to optimize upselling profitability across all categories: from room upgrades to ancillary services like early check-in, F&B, spa, and activities.
When this strategy is paired with a deep understanding of the guest and a focus on delivering perceived value (often by showing only the incremental price rather than the full cost), hotels can unlock significant incremental revenue potential, contributing to sustainable business growth.