This post by Nancy McAleer of AMI Home Rental is designed to help independent owners and managers attract guests looking for more complete vacation packages while simultaneously increasing our bottom lines.
One of the benefits of owning a vacation rental is that I can look at the entire business cycle and make quick, solid decisions about maximizing profits. This year I am focused on what I like to refer to as my Burger Combo Maximizer.
One of the greatest restaurant franchises in the world is McDonald’s and their ability to increase profits simply by asking “Would you like fries with that” or “Would you like to make that into a Combo?” seemed like a lesson for me to follow in the vacation rental world. My idea was to increase the average number of 'units' the client is buying. Meaning not just ordering the VR Burger but also the fries (ie: kayaks, golf carts, ATV’s, cooking class, etc...). Thus increasing the average sale rate. Yup, I decided to upsize my vacation rentals from the burger into a “Combo Meal”.
In the process, I learned that this would be a game changer in attracting more guests. I offer something that very few competitors are doing and in return make my property much more attractive to the potential buyer. I help guests imagine their dream vacation without the headaches of booking it themselves. I’m thinking kayaks to start, then move onto street-legal golf carts (they’re allowed on my island) and finally investing in a boat.
This isn’t something that needs to be complicated you just need to take a step back from running your day-to-day business and really analyze what your guests are asking for.
Since I am the front-line booker for my homes I have the luxury of answering all the concierge-type questions. I’m often asked for kayaks/golf carts/boats during the booking stage, so by integrated them into my marketing, guests avoid the planning and booking headaches. Smart entrepreneurs know that guests are far more likely to increase their purchase during the buying phase. The question is will you maximize your profits by upselling into a Combo?
I’m going to explain in some pretty easy steps to determine which upsell product is right for you, test the return on your investment and understand the net income.
Firstly, you need to understand your vacation rental niche and what options for upselling are in your area.
Step 1. Understanding Your Niche
Put simply, you need to know what your guest wants during their vacation. If you don’t have statistics from your inquiries or past guests already it’s easy to start. I’ve found that oftentimes the reasons why you purchased your vacation rental will closely resemble what people are spending their money on. Did you buy a cottage on the lake because you love fishing, kayaking, and SUP paddle boarding?
If you don’t have the data to support your theories already you can use a poll using Monkey Survey, Facebook, a newsletter poll, etc… to ask your past guests what they enjoyed during their stay. Key ingredients you need to include are asking the guest really specific questions like;
- During your stay did you rent a: kayak, bike, golf cart, etc…?
- During your stay did you partake in a: fishing charter, eco tour, horseback ride, etc…?
- Did you purchase travel insurance?
- Did you book transportation from the airport?
- Did you rent a car?
- Did you purchase amusement park, sports, concert tickets?
Ensure that the upsell products are compatible with your brand. My vacation rentals are geared towards families looking for a low-key Old Florida lifestyle. I’m super conscious of ensuring my guests have a high-quality experience so I only look for products and experiences that I can trust and are representative of my brand.
Once you compile your data, start from the highest-ranking product and continue with the steps below in order to validate and test the income potential to ensure that it’s a valuable resource to add to your VR Combo.
Step 2. Determining The Upsell Model Right For You
In my research, I've learned that there are different models of upselling: you can go the affiliate route or you can go with actually purchasing the products yourself. It really depends on how much profit you want to make, if you want to invest in products, how much time you want to spend on this branch of your business. I have broken down three examples to help you make your decision:
1. Affiliate Model
For the examples below I will use HomeAway statistics which observe that the average owner grosses $28,000 in annual income. On average HomeAway reports that a vacation rental is booked 36 weeks per year[1. HomeAway Press Release, 2016].
Let’s say you want to start with an easy upsell by creating an affiliate relationship with a local vendor in your area. You can do this by calling the vendor company directly or exploring and requesting prices from affiliate booking platforms like Rezdy, Viator, iTrekkers, Fare Harbor, etc…) Once you have the affiliated supplier in agreement, you need to set up the tracking code on your website or to use in your newsletters and emails in order to get credited. Most booking platforms already have affiliate systems in place where the affiliate fee is paid immediately upon booking into your bank account. This is how you keep track of the referrals.
Testing the Affiliate Model
Let’s say your vacation rental is near the water and your guests often ask you for fishing charter contacts. In Florida, the average 3-hour fishing charter is $550. The average referral fee is 20% on booking platforms (payable to you automatically when your guest books the charter). Florida has a nice long season for fishing and I’m asked about fishing charters a lot. Based on my experience I’m going to low-ball this and say that 25% of the time a guest will book a fishing charter. That’s 9 bookings per year. Based on my calculations the average homeowner can expect an additional $990 annually by offering a fishing charter referral to their guests.
Average Fishing Charter = $550
25% referral fee = $110
9 bookings per year = $990 additional annual income (3.5% increase of total income)
2. "Hiring Out an Experience" Model
Hiring Out is another great way to minimize risk and work and take a little referral business on the side. It’s similar to the affiliate model but you would be building a relationship with and working directly with a local source like a chef, yoga instructor, etc… to serve your guests. You’ll need to set up a negotiated rate and payment system with the trusted vendor beforehand. Here are some examples to think about;
- Horseback riding
- Cooking classes with a local chef
- Yoga classes with instructor
- Specialty classes (painting, wine tasting, photography)
- Hiking guides
3. Purchasing an Upsell Product Model
Let’s do another example of purchasing a product and including it in your rental rate to keep things simple. The key is ensuring you actively market your upsell product(s) to ensure the booking guest understands that you are offering them savings. In the example below, they are saving $200 to avoid renting a kayak on their own.
Testing the Purchase Model
Average Price of Tandem Kayak = $450
2 life jackets + emergency gear (flashlight, whistle) = $95
Total investment to purchase upsell product = $545
There are different methods to purchasing and offering an upsell item. You can consider increasing your rental rates to keep things simple or you can offer the upsell item(s) for an additional rental fee. More of my guests ask for kayaks than fishing charters. I get close to 40% asking for them, which is a percentage that I’ve applied to the example below:
*Including upsell product in rental rate
Average Weekly Tandem Kayak Charge $200
Increase your weekly rental rate for the entire year by $90
Average 36 bookings per year = $3,240 increase in annual income (11.5% increase of total income)
In the example below; you can keep the item(s) in a locked area and offer them the lock code once they have transferred you your additional rate fee. This obviously requires more management and logistics.
*Offering to upsell product as an additional fee
You can charge the guests $150 per week (saving them $50).
Your Tandem Kayak rate $150
14 bookings per year = $2,100 additional annual income (7.5% increase of total income)
4. Offering All Upsell Methods
Imagine offering several of these options to your guests and creating a vacation rental Combo. You can increase your annual income by 15%! After all who doesn’t eat a burger with fries right?
You can even list and rent your car to your guests easily through a booking platform like Turo. It’s super easy to find all sorts of ways to upsize your vacation rental Combo. They provide a $2 million dollar liability insurance, each traveler is prescreened and they provide roadside assistance! Think of an average rental rate of $50- $70 per day depending on your car’s model, year and condition.
But wait! I hear you. You're saying to yourself, “Nancy…. you haven’t included the maintenance, insurance, set-up costs, etc… into your examples.”
Don’t worry I’ve got your back. I use the excel program a LOT to plan and track my business operations. I love to test and track numbers and watch sales grow. For this exercise, I’ve created a simple excel sheet to help you quickly and easily determine if an upsell product is worth the investment.
NOTE: It’s important that you do your research in your own area to accurately project the potential return. My advice is to always be conservative when inputting your data don’t plan on renting a kayak to ALL of your bookings that's just not feasible.
Step 3. Creating An ROI Plan
This is an integral step if you plan on investing in products yourself. It’s also critical in order to understand what type of return you will get for your efforts as an affiliate. You don’t want to lose focus on marketing your core product if the affiliate referral rate is going to give you a low return. Don’t forget -- your time is money!
I have shared above my ROI Calculator to help you make the right choice and get started.
Acquire and Implement Plan of Action
Now comes the part where you actually need to do some work to set all this up. Think logistics, administration, and risk when creating your plan of action.
You’ll need to take the time to research and set up each affiliate program. In most cases, it’s as easy as setting up an account (including linking your banking information and getting verified), applying for vendor prices, getting the links for button icons to place on your website along with some information or to place in your newsletter and reservation drips.
Purchase & Hiring Out Model
This will take a little more work, it’s a good idea to take yourself through the renting process from start to finish to be sure you have everything covered.
In addition to purchasing your product be sure you include all safety equipment required for operation of that product.
In any case, you'll want to create paperwork/information guides to inform your guests about safety, operation and your expectations of treatment of the product as well as guidelines if any.
You will need to set up a system of renting this upsell product to your guests. My advice is to keep it simple and where possible, simply increase rental rates across the board to bypass complications and keep things easy. If you rent upsell items to your guests you will also need to create a secure space or lock the items with a code that is easily delivered to your guests.
You will need to get your cleaning or on-site staff to check the items for damage with each turnover. Where needed (ie: golf cart rental) you may need to train on-site staff to check the product over with the guest and get their signature on the condition of the product as well as instruct the guest how to use the product as well as a review upon return of the product and guest departure.
Don’t forget to think about cases where you will need to add an Appendix to your rental contract with a legal rider to avoid any risk (ie: accidents). At the same time, you should check with your insurance agent to be sure you are covered for any accidental damage, loss of life, etc… It may be worth your while to consider buying the higher risk items with a separate LLC to minimize risk. These logistics you will need to think about and put into place but in most cases, you’ll be rewarded with higher returns on your investment.
Step 4. Marketing Your Combo
There are many, many, many ways you can upsell your Combo product(s) with your vacation rental. Let’s follow the buying cycle to determine where and how you can market them. Before booking, during booking, before arrival, at check-in and post stay. Let’s take it step by step.
Your vacation rental photos should include all of your upsell products. Ensure that the photos are visible on all listing sites, your own website, your social media platforms, and in your newsletters. This is an ideal way to convey your dream vacation offering to potential guests before you communicate with them. Think of this as your greeting. “Here’s how I can help you.”
During Booking Process
Of course, it should go without saying that at every opportunity you should brag shamelessly about these “EXTRA LUXURIES” that you offer and your competitors don’t. Do this within your automatic inquiry response templates as well as on the phone with potential guests. Refer guests to more information with your follow-up template after the inquiry. This could be in the form of a special landing page on your website/Blog.
After Booking (Before Arrival)
I like to send drip emails that get guests excited about their upcoming stays. A great way to do that is to showcase how they can spend their time with your upsell products.
Yes, at check-in even when you are not there. You can showcase brochures, guides, house manual, etc… but also think outside of the box with an in-house iPad with screen savers set to the booking platform. Where possible leave the items locked but where they are visible to ensure the guests see them every day to entice them to want to use them.
Encourage your guests to take photos and tag your vacation rental so others can see what you are offering and the epic time they can have at your home. Continue to post your offerings on all of your social media platforms so that past guests can see them. Send out newsletters and stay in touch. Ask guests to refer your business to others if they enjoyed their stay.
Step 5. Benefits of Upselling
There are serious benefits to upsizing your vacation rental burger into a full on Combo meal.
Selling ‘fries’ with the burger will increase the total number of customers looking for an entire 'meal' aka vacation experience, not just beds to sleep in.
The complete Happy Meal will drive more repeat clients to return AND refer your product to others.
Increasing the average number of 'units' the client is buying is good business practice in any sector. It takes a savvy owner to analyze their potential and increase their income.
Take a page from the burger restaurant giant and start creating your own vacation rental empire. Feel free to list any other ideas that you may have towards upselling products with your vacation rental experience in the comments section below. I hope you take the leap and try out a few and increase your income and bookings this year.
Nancy's post helps us see that everyone -- from a single property owner to a bigtime property manager -- can create a win-win by offering amenities (that the guest would otherwise seek out independently) included in the stay. My response to the idea of upselling had always been, "I prefer to simply refer good business without charging and let the karma come back to me." But when I see that it could have been a difference of tens of thousands of dollars -- not to mention happier guests!!! -- I have a newfound appreciation for this tactic.