The economics of vacation rental upselling [infographic]

How much can professional property managers earn with vacation rental upselling? Let’s calculate!

Let’s talk numbers of vacation rental upselling

To grasp the potential of upsells as a significant revenue generator, it is crucial to examine the numbers closely and understand the financial dynamics at play.

While it might seem straightforward to compare the cost of a mid-stay cleaning to the overall booking value and consider it as an additional expense, the math is more nuanced. The true impact of upselling and additional services needs a deeper analysis of profit margins and revenue sharing.

Typically, a professional property manager earns a percentage of the booking value, which covers their service fees and operational costs. On average, depending on the level of service provided to property owners and the competitiveness of the market, a property manager’s gross margin compared to what the guest pays is around 25%. This means that for every dollar spent by the guest, approximately 25 cents contributes to the property manager’s gross profit.

By incorporating upsells, such as premium services, enhanced amenities, or special experiences, property managers can significantly increase their revenue without proportionally increasing costs. These upsells not only enhance the guest experience but also improve the profitability of each booking. For instance, offering mid-stay cleanings, early check-ins, or exclusive local tours as optional add-ons can lead to additional revenue that contributes directly to the property manager’s bottom line.

Understanding these financial dynamics highlights the importance of strategically implementing upselling opportunities and optimizing service offerings. By effectively leveraging upsells, property managers can maximize their revenue potential while providing added value to guests, leading to a win-win scenario for both parties.

Let’s look at the economics of a 2000$ booking:

The ancillary revenue is 100% yours

Accommodation typically accounts for only 30% of a traveler’s overall budget, leaving a substantial 70% of their spending potential to be tapped into. This remaining portion represents an incredible opportunity for property managers to boost their revenue.

Given the hyper-local nature of the property management business, you are uniquely positioned to partner with top local providers and services. Your intimate knowledge of the area allows you to identify and recommend the best dining, entertainment, and activity options to your guests. Since guests are more likely to trust the recommendations of their hosts, these referrals can lead to increased spending at local businesses.

By establishing referral agreements or partnerships with leading local providers, you can generate additional income through commissions or referral fees. For example, collaborating with popular restaurants, tour operators, or adventure companies can create mutually beneficial relationships where you earn a share of the revenue generated from your guests’ bookings. This ancillary revenue stream is entirely yours to capture, significantly enhancing your gross margins.

Moreover, offering curated recommendations and exclusive deals can enhance the guest experience, making their stay more memorable and enjoyable. This added value not only boosts guest satisfaction but also increases the likelihood of repeat bookings and positive reviews. By capitalizing on this 70% of the travel budget, you can effectively transform your property into a hub for local experiences, driving revenue and strengthening your position in the market.

The easy way to increase your vacation rental revenue

To achieve the same by growing your portfolio, you need to hire, train and onboard more staff. You will also need to review your internal procedures to ensure they can support this additional volume of work.

This is 10 times more demanding than striking deals with local services providers. They also want to sell their services during the best months of the year.