According to SciTech Today, the global short-term rental industry generated revenue of USD 109 billion in 2022. It is expected to reach USD 228 billion by 2030. Europe leads the earnings (33%), followed closely by North America and Asia (approx. 21% each).
While market research indicates year-over-year growth in the vacation rental space, external pressures are squeezing profitability for many hospitality operators. These challenges are local regulations, rising bank lending rates, and cost-of-service inflation. AirDNA reports that the average revenue for an Airbnb property in the U.S. is about $33,000 per year. Top-performing properties can earn significantly more. However, many once very profitable properties are now at risk due to these threats to their bottom line.
In the competitive world of short-term rentals, it’s safe to say that many rental property managers are feeling the pinch. So, how can your property become a top performer? The key lies in effective upselling strategies.
Those short term rental operators that do offer upsells drive 34-50% more revenue per guest.
Hesitant about upsells in your STR business? You’re not alone. Many property managers had doubts before seeing the results. Let’s bust the top 5 myths holding you back from this extra revenue stream.
The Unit Economics of Upselling
Understanding the potential of upselling can transform your business model and help maximize profit margins. Let’s break it down by looking at how small, medium, and large vacation rental operators get new revenue streams.
Short-term Rental Owners and Airbnb Hosts
For operators with a few properties, the potential may seem limited, but even a modest strategy can yield impressive results. For instance, offering operational upsells like early check-in and late checkout, can generate an additional $500 – $1500 annually per property. This may not seem like a lot, but for small operators, that’s an extra $1,500 to $4,500 each year. This is a significant amount of revenue that can be reinvested into marketing or property improvements.
Medium Operators
As hospitality businesses scale up to a portfolio of 10 to 100 properties, the revenue potential grows substantially. By implementing a mix of operational and experiential upsell options, operators with 50+ units could add $25,000 – $75,000 per year. This not only boosts revenue but also enhances the guest experience, creating loyal customers who return for future stays. Repeat guests and direct bookings are key factors for a hospitality business’s independence from online travel agencies and overall success.
Large Operators
For short-term rental property companies, managing 100 or more properties, the potential for revenue growth through upselling is immense. An operator with 250 units could see additional revenue upwards of $125,000 – $375,000 annually with effective upsell strategies. They have enough information to make data-driven decisions and personalize offers for guests based on their preferences and behaviors. This could significantly enhance conversion rates and guest satisfaction. The question is whether their data is organized effectively enough to provide an exceptional guest experience and drive revenue.
For property managers, increasing gross margins is crucial – and strategic upsells provide a powerful solution.
Want to see how we calculated these numbers? Dive into our in-depth analysis of vacation rental upsell economics.
What to Upsell?
Often, vacation rental professionals who start implementing upsells struggle to identify the most relevant upsell offers for their guests.
Let’s dive into the two most common types of upsells: operational and experiential stay enhancements.
Operational Upsells
These upsells are typically related to the day-to-day operations of the rental property. They are typically straightforward and can be automated using technology. Here are the examples of the most common and popular short-term rental upsells,
Early Check-In and Late Checkout
Flexibility is a top priority for many travelers, and most will pay a fee to optimize their stay. Offering early check-in and late checkout provides convenience for your guests. This can be a deciding factor for those who prioritize their time.
In-Room Upgrades
While you aren’t likely to charge for a better view like in hotel industry, you can charge for additional services. These services or amenities might include snacks, welcome baskets for special occasions (anniversary, birthday), and even fluffy robes and slippers. If your property has amenities like a fire pit or hot tub, you have options for premium packages. Consider creating a ‘VIP’ service that includes special preparations before guest arrival.
Mid-Stay Cleaning
Offering mid-stay cleaning services can be a valuable upsell, especially for families. This not only generates more rental income but also enhances the guest experience, making them feel well taken care of.
Gap Nights
Offering slightly discounted rates for gap or orphan nights is another excellent way to increase occupancy rates and maximize revenue. Fill your vacant calendar dates with special offers and exclusive discounts for extended stays.
Pet Friendly
Properties that welcome pets can earn 11% or more than their non-pet-friendly counterparts. They also enjoy higher occupancy rates, appealing to travelers who want to bring their furry friends along.
According to KeyData research, pet-friendly rentals outperform their non-pet-friendly competition.
Experiential Upsells
In contrast, experiential upsells are more nuanced. These involve offering unique experiences – think guided local tours, cooking classes, or special dining experiences.
These can be more complex to coordinate. However, they often yield higher returns because they cater to the growing demand for personalized and memorable experiences.
Over 72% of guests who choose vacation rentals are looking for unique experiences along with their stay.
Most Popular Experiential Upsells
Based on data from our most successful users, here are the top three experiential add-ons that create memorable stays.
Local Experiences and Tours
Partnering with area tour operators to offer local attractions adds value to the guests’ stays. It can also drive revenue for you while supporting local businesses—a true win-win.
Restaurant & Shopping Recommendations
Collaborating with local businesses and providing guests with curated recommendations ensures they explore and enjoy the region. This approach can often earn you a referral bonus in the process.
Airport Transfers
Offering airport transportation can significantly enhance the guest experience, providing convenience and reducing stress for travelers. This is another opportunity for revenue generation that can easily be integrated into your list of additional products.
Managing operational upsells can be time-consuming for hosts if they need to promote and coordinate guest services. The right technology transforms this complex process into a seamless experience, similar to e-commerce stores. Modern tools, like Enso Connect, automate promotion, coordination, and guest communication, making upselling effortless for property managers. Experiential add-ons can help create memorable stays that distinguish your properties and encourage repeat bookings.
What hospitality industry pros say about the impact of vacation rental upsells
”“Upsells drive revenue and lead to higher guest satisfaction and have also driven repeat bookings”
Hakim ParrFounder of The Upgrade Authority
Read the full case study for quick rental startup growth.
”“We were told it’ll take six months to see ROI, but we started making money in just six days and broke even after 18.”
Daemion GlantzDirector of Operations, GoodNight Premium Stays
”“We were really surprised because we didn’t expect much from upsells. But in the first month, we earned €1,000 with add-ons!”
Jordan Boissière-NavarroCEO and Managing Partner of Keytoko
Key Takeaways
Upselling presents a significant opportunity for vacation rental operators to increase their revenue while enriching the guest experience. By understanding the unit economics, leveraging both operational and experiential upsells, and engaging with guests thoughtfully, you can ensure your property thrives in a competitive market.
The Non-Upseller
This operator chooses not to implement any upselling strategies. While they may enjoy steady bookings, their revenue potential remains limited. On average, they might earn around $33,000 annually per property, with little room for growth. By not considering upsells, they leave significant revenue on the table, ultimately impacting their bottom line.
The Operational Upseller
This STR Operator incorporates operational upsells like early check-in, late checkout, and in-room amenities. By automating many of these processes with the right technology, they can enhance the guest experience while saving time. This operator could potentially increase their annual revenue by an additional $1500 to $5000 per property. With automation, they not only streamline their operations but also boost their gross margins by up to 30% without adding substantial workload.
The Comprehensive Upseller
This operator goes a step further by integrating both operational and experiential upsells. They offer early check-in, local tours, dining experiences, and more. By leveraging technology to manage these upsells effectively, they can significantly enhance guest engagement and satisfaction. This comprehensive approach can lead to an impressive increase in annual revenue—potentially $50,000 or more across multiple properties. By focusing on upselling, this operator could boost their gross margins by as much as 50%.
The data clearly shows that with the right technology and systems in place, focusing on upsells can dramatically increase revenue potential. Whether you’re starting from scratch or looking to enhance your existing strategy, prioritizing upsells can unlock substantial opportunities for growth. Embrace the power of upselling to transform your vacation rental business and maximize your success!
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