Welcome back, folks. So far, we’ve looked at increasing your reach, increasing your engagement, and increasing your booking rate. Today we’re going to be looking at increasing your average guest spend or your AGS. Now, this is the amount that each of your customers spends in your business when you make a sale. Our goal is to increase this by 10%.
Why is Selling to Existing Customers More Profitable?
Why 10%? Because revenue from existing customers is incredibly profitable. There is a near-zero acquisition cost for this extra revenue. It is potentially almost pure profit. As a bit of an analogy, it’s not about going out and finding new wells but getting more water from your existing well. It’s often overlooked, but this is an incredibly powerful lever that you can pull in your business to increase your overall profitability.
Alright, there’s a common misconception, especially in tourism and hospitality, that you need more customers to grow. But the truth is that maximising each of your existing customer’s value is often easier and a lot more profitable. Acquiring a new customer, depending on the industry and the specifics of your business, can often cost between 5 and 25 times more than retaining or growing a relationship with an existing one.
So your average guest spend, or your AGS, is highly efficient profit. It’s all about small efforts and incremental gains. For example, what would be easier for you if you’ve already got, let’s say, 100 customers, encouraging them to spend an extra $10 with you? That’s $1,000. You’ve seen how much work goes into attracting new customers. What would it take for you to find a new customer and have them spend $1,000 with you?
That is a big and quite often difficult thing to achieve. But if each of your 100 guests spends $10 more, it is smaller and it is much more achievable. So that’s what we’re looking at today.
How Can You Increase AGS with Strategic Upselling?
The first area we’re going to look at to try and increase that average guest spend by 10% in your business is strategic upselling—offering a better version of what your customer already wants. But the key here is to focus on the value, not just the price, because guests will pay more for a perceived benefit. For example, upgrading from a standard room to a suite with a view or offering a premium tour with exclusive access or additional amenities. The key is you can offer this at all the touchpoints. You can offer it through the website at the booking point, you can offer it during the confirmation process, and you can even offer it during check-in.
I know you might be worried that this might feel a little pushy or a little salesy, but not if it’s done in the right way—not if it’s done in a way that genuinely enhances the experience of your guest. It’s about providing options that they might love. To really pull it off well, you need to focus on training your staff on how to offer these upgrades in a way that’s natural and focuses on the guest’s benefit. Identify your top two or three upsell opportunities—areas where there is a different tier of the things that you’re offering—and craft compelling, benefit-driven language.
If you can aim to get a percentage of those relevant customers to choose an upgrade, you’re going to see an increase in your average guest spend. One way of doing this is an automated email that offers an upgrade to our deluxe package for just X amount more, sending that out a couple of days before their scheduled arrival. Track the open rates and track the click rates, and adjust it depending on what works. A direct increase in revenue per customer immediately impacts your profitability.
What is Cross-Selling and How Does it Enhance the Guest Experience?
Beyond upgrading, what else can we add to their journey to increase that average guest spend? What we’re talking about now is cross-selling—offering additional related products and services that complement the products or the services that they’re already interested in. Think of this as the ‘enhance my stay’ mindset. Think about what guests need or desire once they’ve committed to staying with you. For example, spa treatments, guided local tours, airport transfers if that’s relevant, picnic baskets, local products, and equipment rentals. These are things that are related to their booking with you that are different and are an additional purchase.
For example, if you’re running a farm stay, you could be encouraging guests to purchase a local produce hamper during the booking process so that it’d be waiting for them in their room.
The key here is to make the add-ons easier to find and even easier to buy. You might be sitting there thinking we don’t have anything else to sell, but creativity is the key. Look for local partnerships, small merchandise, or convenience services that you can add on and offer to your guests, whether that be in accommodation, hospitality, etc. Map out the guest journey. Identify two or three logical cross-sell points and clearly present options during the online booking or in-person check-in.
Aim for, say, 10% of those customers to add an ancillary service. That could be any of the things that we’ve already spoken about. This is something that really drives new revenue streams from existing customers at a fairly minimal acquisition cost, and it’s something that directly improves your average guest spend.
Why Should You Use Bundles and Packages to Boost Perceived Value?
What about combining these factors for even greater value? This is bundling and packaging—combining multiple different offerings into a single, attractive package. It’s the best of both worlds of upselling and cross-selling because the perceived value is greater than the sum of its parts. For example, the ‘romantic getaway’ package, which includes accommodation, dinner, and a spa credit, or the ‘adventure tour’ bundle: main tour plus your gear rental and a packed lunch, all included.
Having different tiers for different segments is something that’s important to keep in mind. Because some people will be looking for your premium service and some people will be looking for something that’s a little bit more budget, create different bundles to attract these different types of customers. Develop one or two new compelling bundles. Promote them clearly on your website and through direct channels and track the uptake. If you can aim for 10% of new bookings to a selected bundle, that’s going to have a huge impact on your bottom line.
How to Train Your Team for Ethical Upselling and Cross-Selling
How do we deliver these offers seamlessly without feeling intrusive? If you’re looking to increase your average guest spend by 10% successfully, one of the things you need to focus on is your staff empowerment and training. I know I harp on about this a lot, but staff training is incredibly important because they are your ambassadors for your business when you’re dealing with your customers. The key to ethical upselling and cross-selling is to provide clear scripts and guidance to your staff. Ensure they have adequate product knowledge, and if it’s relevant and appropriate, incentivise them.
We keep focusing on how we should be tracking your interactions with your potential customers. But if you have a small team of staff, you should be tracking their performance too and incentivising the ones that are upselling and cross-selling most successfully. It’s not just about your staff; it’s about the systems and processes that you’ve got in place in your business, too. This is where things like digital automation and personalisation really come into their own, with timely, personalised messages delivered between the point of making the booking and checking in. This is where you get the opportunity to upsell to that more exclusive package or add on these other things that they didn’t take the opportunity for when they first made that booking.
How Do You Measure an Increase in Average Guest Spend?
So, how do we know if we’re successful in increasing our average guest spend by that magic 10% that we’re chasing? As always, it comes down to the numbers. You need to find your benchmark for where you’re at now and measure the difference over time. There’s a bunch of different ways that you can measure your average guest spend, but really it comes down to your total revenue against your total number of guests and your number of transactions. Look for things like monitoring sales of specific upgrades or the bundles and ancillary services that you’re going to start offering.
Also, look to compare your average guest spend across different customer segments or different booking channels to see which ones are more profitable. To do this, you’re going to need some tools like your point-of-sale system, your booking engine reports for online bookings, or your CRM data for interactions with your customers. But you don’t need to overly complicate it. A simple spreadsheet and the numbers straight out of your accounting might be all you need.
Keep in mind that this isn’t just measurement for measurement’s sake. By quantifying your average guest spend, it allows you to pinpoint what’s working and it justifies further investment. You can directly see the impact of your 10% gain.
Your 4-Step Action Plan to Increase Average Guest Spend
If you’re ready to unlock more profit from every one of your guests, the first place to start is an audit of your current offerings. Have a look at what you could upsell or cross-sell, and then identify one or two key opportunities and start small.
Focus on high-value items or easy wins. If you’ve got a team behind you, you need to train them and empower them to offer value, not just sell. We’re not looking for that ‘McDonald’s, would you like fries with that?’. You need to optimise your digital touchpoints. Make sure that it’s easy to find and purchase these add-ons that we’re going to start offering.
Unlocking Hidden Profit from Every Guest
Don’t forget the Scott Aussie Profit Power-Up calculator. If you’d like to have a little bit of a play with it and see how all of this work is going to impact your bottom line. Keep in mind that your average guest spend, or your average customer spend, depending on what’s relevant to you, is a very powerful but often underutilised lever for profit. Keep in mind, encouraging your current customers to spend more with you is a lot easier than trying to find new customers to begin with. Next week we’re going to be focused on how to encourage your guests to come back more often—your guest frequency or your customer frequency.
As always, if you need any help with anything that we’ve discussed today, Scott Aussie is here, ready and willing to help. This is what we do day-in, day-out for tourism and hospitality operators across the country. If there’s anything we can do to help, please reach out at scottaussie.com. Next week, as I said, we’re going to look at increasing your guest frequency.
