How to generate more core and non-core ancillary revenues for your hotel?
— 8 experts shared their view
Maximizing revenues for your hotel in this age of lower occupancies and ADRs is the smart thing to do. Many hoteliers are struggling to create the internal processes and systems to successfully sell ancillary services.
To begin with, the revenue opportunities are gigantic from both core "hotel" ancillary products: room upgrades, early check-in, late check out fees, etc. and "non-hotel" ancillary revenue from selling insurance, tickets to museums, theme parks and theaters, concerts and sporting events, etc.
Hoteliers need to study and copy the airlines' mastery for generating ancillary revenues "out of thin air": in 2019 the airlines' ancillary revenue grew to $64.8 billion from $28.5 billion in 2014. Some airlines like Allegiant Airlines in Las Vegas, Nevada generate as high as 40% of their total revenue from auxiliaries.
Will hotel ancillaries take off? Lessons from the airline industry
As hotels started opening their doors to international holidaymakers earlier this month - although all too briefly – hoteliers around the globe were reminded of the need to do whatever it takes to capture demand as it returns. While that remains the top is a focus, revenue managers could also learn how to boost their revenue from the very airlines that are starting to bring back the tourists.
The hospitality world is no stranger to ancillaries. Offering late check-outs, convenient parking and super fast broadband are all fairly standard. And, pre-Covid the use of packages to increase revenue was on the rise with deals combining extras such as spa treatments, afternoon tea, and on-site activities as well as bed and breakfast accounted for a third of all hotel bookings, according to Profit room.
Yet, is there more that hoteliers could be doing? Hotels often have a love-hate relationship with upselling. Because, over in the airline industry, upselling is a core part of even the most respected brands; they have mapped out the full customer journey, and take every opportunity to sell ancillaries – from paying to choose their seat, for hold luggage, booking flexibility, in-flight retail, as well as non-core ancillaries such as accommodation, car hire and entrance to tourist attractions. Travellers are given multiple opportunities to upgrade, whether booking online or from frontline staff, before traveling or at every step of the journey - through email reminders.
Research by Diggin and Switchfly found that airline ancillary leaders made their biggest gains post-booking, by following up with travellers to share offers and entice them to make additional purchases just before they set off. This is where hotels too have a huge opportunity. Research by Frost & Sullivan and Amadeus for the airline industry found that 76% of travellers were interested in context aware emails and 49% were interested in push notifications.
Drawing on their customer data to create packages and ancillary options that will appeal to their different segments and becoming better at keeping in touch with guests in between booking and check-in. Follow-up emails can offer anything from room upgrades to tickets to nearby attractions or packages that combine an enhanced hotel experience with non-core ancillaries.
Hotels, as with their airline counterparts, are not only having to do more with less but are also facing a fiercely competitive environment. By successfully increasing both core and non-core ancillary sales, hotels have an opportunity not only to boost revenue but with a careful pricing strategy could offset a lower room rate and gain a competitive advantage.
At the heart of all of this though is ensuring that hotels have a granular understanding of their guests to be able to tailor a compelling offering that will generate much needed additional revenue streams.