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  The Herman Trend Alert

September 6, 2017

Gamification of Upgrades

One type of creativity is the application of a tactic that works in one industry to another. One of the ways that some airlines, including Air Canada, have found to increase revenues involves the gamification of seat upgrades. (Gamification is the application of game mechanics, game elements, and game design to non-game systems and processes.)

How Air Canada gamifies seat upgrades
Passengers purchasing economy tickets on Air Canada receive emails offering them an opportunity to "enhance [their] travel experiences by enjoying the priority services, added comfort, and the in-flight amenities of a higher cabin class" by competitively bidding for the upgrades with other passengers. This upgrade decision is not a commitment at a fixed price, but rather in participating in an auction process, there is an additional feeling of "playing". Passengers are directed to a landing page for the specific flight, where they may bid on the upgrade. Just like in an online merchandise auction in on eBay, passengers are encouraged to raise their bids after competitive higher bids have been placed.

Hotels have a similar opportunity
Generating incremental revenue by selling room upgrades is important tactic for hotels as well. Hotel websites do a fair job of describing the advantages of better rooms, including increased sizes, better views, larger beds, higher floors, better-quality amenities, or a combination of these elements.

The hospitality difference
However, once travelers purchase a specific room type, other than random emails, most hotels only approach travelers to upgrade, upon check-in, once they are physically at the front desk.

Discounted standby upgrades
Several hotel chains now immediately offer all confirmed reservations a "standby upgrade rate", typically discounted from the full upgrade cost---effective in generating additional revenue from guests. The bottom line for hoteliers is that some incremental revenue is better than no revenue and for guests, the perception of a discounted upgrade is attractive as well.

The opportunity for hoteliers
Since the major incentive of this type of gamification is participation, imagine a bidding system for hotel upgrades like those of the airlines? The level of involvement, engagement, and sense of control add to consumer excitement and interest.

What's next?
Given the younger generations' love of games and the desire to generate additional revenue, we can foresee offering customers an opportunity to upgrade their rooms to the next level by creating a bidding system introduced. We see definite value in hoteliers' embracing gamification to their critical advantage. In fact, this type of gamification could be a hotel chain's competitive advantage.

Special thanks to Larry Mogelonsky, writing for for his insight into this important topic.

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