What is a Value-Add Package? It's is an amenity, product and/or service bundled together with an overnight stay. The price point should reside over BAR and the amount over BAR can be flexed based on individual hotel revenue goals. The value-add amount should be given careful consideration and the cost of the elements closely reviewed before the amount is determined.
A well-designed package may not require any discounting at all. A package in peak season built to drive revenue likely does not need to be discounted either. On the other hand, if the goal is to drive occupancy in a down time and steer more guests to the brand.com then pricing the package slightly below what the elements of the package cost might be the best approach.
For example, if the elements of the package cost $25 and the hotel is in dire need of occupancy then maybe the upcharge should be $15 instead of the full $25 to make the offer more appealing to the consumer. The goal is that the customer needs to be able to see a real value in it. When the package elements are discounted ultimately the difference comes out of the room rate.
Even when discounting the elements, Value Add Packages drive profitability because the upcharge is being added to our highest rate with one of the lowest cost margins thus generating more profit and it is also potentially creating a new loyal guest. Once a busier season is reached or if the package is very successful the amount of the premium can be increased to full value or even more!
To drive even more profit consider only paying commission on the room portion of a commissionable package. Another profit driving measure within a package that includes breakfast is to limit the breakfast items served or change out the breakfast items for more cost-effective items. An example of this is to serve bulk cereal with pitchers of milk instead of individual boxed cereal and small cartons of milk. For packages that include local services or attractions such as a Spa or Golf package let the local attractions take over on their end once the package is booked. They can finalize their part of the reservations, scheduling, guest questions or other details removing the front desk from the equation and limiting that labor expense on the hotel.
One additional strategy is to negotiate with attractions for better ticket pricing or other perks. Many mall offices give out coupon bags or coupon books and these make a great amenity within a shopping package. There is no cost to the hotel, but it has a huge perceived value to the customer. Along that same line, many amusement parks offer discounts for bulk ticket purchases. The hotel can pass the savings onto the guest to make the package more attractive or if the goal is to drive revenue the hotel can increase the package price and take the savings to their bottom line. The pricing strategy is going to vary greatly based on the hotel and what the overall revenue goal is.
A good starting point is to identify what day or days we want to target as needing additional revenue through packaging. Since the weekday customer is different than the weekend customer in most hotels it is also critical to create a package with the correct guest in mind. A road warrior package that includes a grab and go breakfast, free WIFI and a ride to the airport shuttle stop would be an effective weekday package while a wine tasting package with a shuttle to the local winery, late checkout and a souvenir from the winery would have more appeal to a weekend guest.
An example of a package that can be used any night to drive shoulder night occupancy is a large Bonus Point offer with a mandatory night stay. A large bonus point offer is sure to stand out and get noticed if driving Sunday night occupancy is the goal. The benefit of this type of offer is a shoulder night stay that may not have stayed otherwise, more guests booking direct to the brand site and a healthy profit margin on a night that needs it. A shoulder night offer promoting a Buy One Get One with a mandatory need night stay is another example. The threshold could also be set up to stay 2 or three nights to get the free night.
Coming up with three creative packages is a great starting point and once created the packages should be given every opportunity to sell. By this, I mean that packages should not be overly restrictive with excessive restrictions like min stays, non-refundable deposits or booking windows or guests will simply shy away. It is important to note that certain packages do require tighter restrictions such as a package where the guest attraction experience requires pre-payment or a package that was designed to drive occupancy on a specific night.
Another good practice when creating packages is to do something to really draw attention or do something fun that makes the hotel stand out from competitors. Many hotels offer a breakfast package or a package with local attraction tickets. While these packages are proven winners, many hotels are using the same ones and they no longer stand out from the crowd.
It is best to consider a package that is a unique attention grabber, fulfills a guest or hotel need or drives revenue on shoulder days. An attention- grabbing package might rely on an attraction in the local market or it might be fun to think outside the box and create packaging around a National Holiday or National event such as Super Bowl or Kentucky Derby. Another idea would be to design a package around a silly Holiday like Fortune Cookie Day or National Piano Month. A Romance Package that has amenities other than the standard chocolates such as a unique gift basket or a couple's spa experience will definitely spark some interest.
An example of a package that fulfills a need might be a Puppy Package that includes a dog bed, puppy treats and food and water bowls in the room. Pet owners absolutely love this kind of treatment when they travel with their favorite furry friends and pet owners are loyal to hotels that welcome their pets. Another example might be an Amusement Park package that includes a "Fun in the Sun" kit that contains band aids, sunscreen, towelettes, bottled water and snacks. While an amusement park package does not necessarily stand out by itself, including some much-needed amenities for busy parents with kids will make get it noticed! Another good exercise when creating Value Add Packages is to see what competitors or similar hotels are doing and let the creative juices flow!
Another element to incorporate in packages are the perks that cost the hotel very little or nothing yet have value to the consumer. For example, an early or late checkout costs the hotel nothing, but has value to the customer. If the hotel is already offering a local shuttle service then offering a ride to a local attraction has very little cost associated with it and is a huge draw for the customer. In house movies, mini bar or WIFI are other in-house perks than can be applied.
Bonus Reward points are another great tool when adding value to a package because the points have a higher perceived value than what they actually cost the hotel. This allows us to stretch our profit margin within a point package. Again, use rational pricing and price packages over the Bar rate, otherwise customers will only book the package instead of booking Bar.
To assure their success packages should be promoted on hotel vanity websites, on special offer pages, landing pages or package tabs on the brand.com or in email blasts to get the word out. When partnering with a local attraction that attraction can also be enlisted to assist with package promotion. Can the package be added to the attraction's website? Does the attraction have a customer list that they market to and can they include our package in their next eblast or mailer?
Local Convention and Business Bureaus and Chambers of Commerce are another great way to get the word out. Many of these organizations do monthly or quarterly mailers to their members or have Package or Offers tabs on their websites. Three to six months is a good time frame to give a package to work and then review production. If a package does not sell as expected the elements of the package might need to be reworked or more elements might need to be added or it might be time to come up with something new.
In conclusion driving revenue and increasing profit does not necessarily mean deep discounting rates or even discounting at all. Guests are not necessarily looking for the lowest room rate. They are looking for value and convenience in booking and Value Add Packaging checks off both of these boxes! It's a win-win for both the customer and hotel with more money going straight to the bottom line for the hotel.