In the hospitality industry, revenue management is not just about optimizing room rates. A crucial component to increasing overall revenue is ancillary revenue, which refers to the income generated by additional services offered to guests. These services can include everything from meals at the hotel’s restaurants to spa treatments, organized excursions to special event packages. In this article, we will explore in detail the strategies to maximize ancillary revenue, offering practical insights and tips for hoteliers.
What is Ancillary Revenue?
Ancillary revenue refers to all the income generated from services and offerings not directly related to room sales. These additional services not only increase revenue but also enhance the overall guest experience, contributing to customer satisfaction and loyalty. Examples of ancillary revenue include:
- Restaurants and bars: meals, drinks, and room service.
- Spa and wellness treatments: massages, beauty treatments, access to pools and saunas.
- Events and conferences: renting conference rooms, catering for events, audiovisual equipment.
- Recreational activities: excursions, bike rentals, yoga classes.
- Transport services: transfers to and from the airport, car rentals.
- Special services: laundry service, parking, premium Wi-Fi access.
The Importance of Ancillary Revenue
Revenue Diversification
Ancillary revenue offers hotels the opportunity to diversify their income streams. Relying solely on room sales can be risky, especially during low occupancy periods. Additional services provide a steady revenue flow that is less subject to seasonal fluctuations.
Enhancing the Guest Experience
Offering a range of additional services can significantly enhance the guest experience. Guests appreciate the convenience of having access to various services directly at the hotel, which can increase their satisfaction and the likelihood of return visits. A satisfied guest is more likely to leave positive reviews and recommend the hotel to others.
Increasing Loyalty
Ancillary services can help build a stronger connection with guests. Loyalty programs that offer exclusive benefits for using additional services can encourage guests to return and spend more during future stays.
Strategies to Maximize Ancillary Revenue
Data Analysis and Personalization
Using a RMS
A Revenue Management System (RMS) can help monitor and analyze data related to the usage of ancillary services. Analyzing guests’ spending behavior can provide valuable insights into which services are most in demand and which ones can be improved. For example, if data shows that the hotel restaurant is busy during breakfast but less so at dinner, specific promotions can be developed to attract more guests during the evening.
Market Segmentation
Segmenting the market based on customer behaviors and preferences allows for personalized offers. For example, business travelers may be interested in laundry services and conference rooms, while tourists might prefer excursions and spa treatments. Creating customized packages for different customer segments can increase the appeal of ancillary services.
Promotions and Packages
Themed Packages
Creating themed packages that combine several services can encourage guests to use more services. For example, a wellness package might include a room stay, a healthy breakfast, a spa treatment, and access to the gym. These packages offer a higher perceived value and can increase the average spend per guest.
Special Offers and Discounts
Offering discounts on ancillary services during low-demand periods can increase the use of these services. For example, a 20% discount on spa treatments during weekdays can attract more guests to book. Additionally, promotions like “book two nights and get a free spa treatment” can incentivize longer stays.
Improving Communication
Upselling and Cross-Selling
Training hotel staff in upselling and cross-selling techniques can make a significant difference. Front desk staff can suggest room upgrades or wellness packages at check-in, while restaurant staff can promote special dishes or wine pairings. The key is to present the offers naturally and unobtrusively, highlighting the benefits for the guest.
Digital Communication
Using digital communication to promote ancillary services is essential. Sending personalized emails prior to arrival with information on available services and special promotions can prepare guests to make the most of their stay. Additionally, using hotel mobile apps to send push notifications with exclusive offers can encourage service usage during the stay.
Collaborations and Partnerships
Local Collaborations
Collaborating with local businesses to offer unique experiences can enrich the hotel’s offerings. For example, partnerships with local restaurants, tour operators, and wellness centers can provide guests with a wider range of options. These collaborations not only increase revenue but also strengthen ties with the local community.
Loyalty Programs
Integrating ancillary services into loyalty programs can encourage repeated use of these services. Offering reward points for using hotel services, which can be redeemed for future stays or free services, can increase guest loyalty. Well-structured loyalty programs encourage guests to spend more to accumulate points and benefit from rewards.
Innovation and Adaptation
Technology and Automation
Adopting innovative technologies can improve the efficiency and attractiveness of ancillary services. For example, implementing online booking systems for spa treatments or recreational activities can make the process easier and more convenient for guests. Additionally, using chatbots and virtual assistants to answer questions and manage bookings can enhance the guest experience.
Adapting to Market Trends
Staying updated on market trends and adapting the service offering accordingly is essential. For example, the growing demand for healthy and sustainable options can be met by offering organic menus in the hotel restaurants or eco-friendly spa treatments. Continuous innovation and adaptation to customer needs can keep the hotel competitive and appealing.