How to Generate Ancillary Revenue in your Hotel or Resort

Hotel room with landscape views

What can you do in your hotel or resort to generate additional income? It often sounds easier than it is in reality. We have been brainstorming and have come up with some great hotel management tips to sell extra services. And then there is the next challenge with upselling and cross-selling. There are several extra services to offer in our hotels but how do you know what is most profitable. Which ancillary revenues bring more income while require less effort in terms of investment, time spent and people dedicated?

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Over the last weeks, we have been racking our brain and plowing through hotel websites to gather best practices for upselling and generating ancillary revenues in hotels. We have looked at our own portfolio, and outside to come up with a list of amazing tips.

Whatever the size of your property, the potential of ancillary revenue is big and the options to get it can be very creative ...

What Ancillary Revenue Opportunities exist in hotels?

Your hotel has high occupancy, the reviews of your resort are good, or your want to increase the average income of your hotel or resort. This is the moment when you ask yourself “What is next?” Annual industry reports say that ancillary sales will account for more than 18% of a ‘tourism business’ total revenues. Want your piece of the pie?

There are 4 different ways to use ancillary revenue opportunities and start with a total revenue management strategy:

1º Create Packages:

Bundle ancillaries (add-on services) with higher category room types. This option is known as “Themed Packages”, and is all about selling an experience. You can call them romance, adventure or family packages.
Be aware that some guests look for the entire travel experience, but others prefer to organize flights and hotels first ... and think about activities after. Address both:

- Offer themed packages on your web so they can choose it during the booking
- A week after a room booking is completed, send an email to the guests offering the activity (with a nice picture and the price), and upsell to them...

Do not limit yourself: if you do not have facilities for activities, partner with local third parties. We talked about this as well in our last article about what hotels can learn from AirBnb.

Examples on How to apply this Ancillary Revenue idea to Resorts

You have a nice hotel or resort in a beautiful location, congratulations! Some guests will choose your location and will find you, but you can do much better…

Use your surrounding to sell a broader experience, that goes beyond your hotel. Add a pack of activities in the form of a package and find one key activity related to each target customer market (young adventurers, couples, seniors). Two awesome examples:

  • Spa:
    Did you know, you don’t even need to have a spa to actually position / market your property as a Spa Hotel? Look at Hotel de Londres y de Inglaterra in San Sebastian, for instance. Here we have partnered with the high-end La Perla Spa and created a wonderful package.

People swimming at the Spa La Perla 

  • Romantic Escape
    It is one of the most looked for searches on Google for your destination. So why not offer it on your website? You can do a simple champagne and chocolate offer, or build a more extensive romantic package with a dinner for 2 in an exclusive location or restaurant. You can let your imagination do the work.
  • Golf & Sports
    A popular sport, with dedicated travelers. Again, there is no need to be on or next to the golf course. Build a package together with the local golf course.

And what other activities can we target just as golf? Hiking, diving, cycling, kite-surfing, paddling, kayak, and many more ...

Other packages that come to mind: culinary, family activities, cultural, city tour, weekend break, etc

2º Target a Client Niche Market

Choose a niche client market and be the best there. To properly cover the niche you will have to adapt your property and your communication. The good part of this strategy is that you can, and should, offer related services to improve the experience and your guests (and charge them for it...)

  • Dog Friendly Hotel
    Pet owners are known for being very generous with their furry friends. But the hospitality industry is slow in getting adapted to cover their needs. Not just in terms of accepting pets at hotels, but also for offering special products for them. So we have put some ideas together for you:

- Offer a pet friendly room rate that includes an extra mini bed for the dog and a pack of plastics bags, a toy and some dry food
- Have a little shop with products that the pet owners might need during the stay
- Partner with a veterinary, so you can easily offer it in case is needed
- Propose services such as dog walking, dog washing, dog daycare, so guests can go to touristic activities while their dog is enjoying too!

Website to find petfriendly accommodation

  • Family & Kid Friendly
    Do you have Family Rooms in your hotel? How will families find your hotel when searching on Google … a fair question to ask, if you want them to stay at your hotel, right?
    Family vacations are expensive, and a cool family friendly hotel is the perfect option. But is your hotel truly kid friendly? What activities inhouse and outside do you offer?
    Some ideas to ponder on ...

- Nursing and childcare service, to help parents to rest some hours a day and enjoy the city by themselves.
- Early check in and late check out, so they can easily adapt logistics to the schedule of the children.
- Propose a daily schedule of paid activities for children at various ages in the city and the nature...and adult activities organized at the same time.
- Sell nice but simple and healthy packed lunch to take out, for a day on the town.
- Offer family rooms to keep their spent low and also to make easy the night care of the little kids. 

  • Precruise
    If you are planning to go on a cruise from Barcelona and want to leave your car at the city, Hotel Grums offers the possibility.

How to Generate Ancillary Revenue in your Hotel or Resort  

3º Get ROI from Underutilized Areas

True, every refurbishment requires money spent but...Have you ever calculated the ROI of any of the actions below?

- Call to advertising agencies and startup incubators to offer them your garden for their events, do it for free the first time, make stunning pictures and get awesome reviews … and after you can start charging for it.
- Are your meeting rooms being used all the time? Could they be used as a space for for photographers to do a photoshoot? Or as a space for companies to conduct interviews, recruiting staff?

You could potentially also turn it into a co-working space … it all comes down to math. The trick is to make the spaces as polivalent as possible, and not just for banquets or weddings ...

4º Creating a Competitive Edge

OTA and Meta-Search are still very focussed on selling rooms. So it is up to you to make your hotel stand out, and add experience to the mix.

The key to succeed is to be an expert on your customer profile and to clearly define which product or service could be interesting for them...at each stage of the customer journey, because if you do it on this way the offer will be seen as a valuable proposal instead of a sales opportunity.

- Offer some low cost service during the booking process:
Stand out from your competitors with a pick up on the airport or a free parking spot. What surprises me the most is the big number of properties that are including this service already but do not highlight it during the booking process!

- Inspiration and planning during and after the booking:
Offer activities for guests who need inspiration and for the ones that think about activities days after the hotel reservation is done. Zoku Hotel sends an email with upgrade offers and San Nicolas Hotel in Belgium offers a delicious chocolate tour on their web.

Email of the Zoku Hotel offering upgrades

 

Website of St Nicholas hotel showing "the Chocolate tour" offer

- Offer paid activities during the stay too. Your front desk can mention it to the guests at the arrival. It could be cooking classes of local recipes on rainy days… or yoga lessons at your lovely rooftop.
- Partner with local artists and decorate your hotel with pieces of art available to buy. See an example of the Omni Hotel in Dallas that is exhibiting more than 7000 artworks at common areas and at guestrooms.

Room of the Onmi Hotel in Dallas and its decoration available to buy

- Send promotions for a second stay, and special offers to guests after their departure.

More Tips to Generate Extra Revenues

Position Your Restaurant to Non-Guests:

Promote it by building an independent website for the restaurant or the spa. One of our customers, Hotel de Londres y de Inglaterra in San Sebastian, has a great Basque Restaurant, which page is on the top menu of the Hotel web and also redirects to the own web of the restaurant. By having a separate identity, you will attract more people from outside...

Website of the restaurant of the Hotel de Londres

Web of the restaurant of the Hotel de Londres showing a nice meal 

Offer Early Check In and Late Check Out:

Think about your customers, are they business people or leisure travelers?

- Business people usually flight very early or very late, to be able to work during office time. And they value easy and fast logistics …
- Leisure travellers spending a single weekend, might be glad to have a nice offer to extend the check out on sunday and enjoy the day before going to the airport. Include this offer on your confirmation email.

Extra tip: Offer room service directly to all guests who have requested early check in or late check out...because restaurants will be closed at very early o very late hours, right?

Sell experiences, not just rooms:

Our hotel hotel Es Moli, located in the beautiful Mallorca, with access to a private cove...offers a private sailing sunset experience.

Web of the Hotel Es Moli showing a nice beach

Sell Merchandising

Hotels could replicate the same strategy than museums. Have you heard that your guests love your pillows? Put a logo, a slogan, and sell them. Do your offer coffee to take away? Sell travel coffee mugs. But please do not go cheap, if you are stamping your logo the quality of the product should be awesome. The Pantone Hotel is frequently visited by fans of the brand, they use their own mugs on the room service and sell them at the hotel store ( and online also…)

Coffee mugs with the Pantone logo

 

Cake and flowers for your family and friends

The Townhouse Hotel Maastricht member of LBG, you can buy a delicious local Maastricht flan pie to take home. You can enjoy it with family and friends talking about you visit to this beautiful town and fun hotel. When they were selling 30 to 40 cakes a weekend and generating an annual profit of €11.000, they decided to extend the idea to week days too.

Cake typical of Maastricht

Motorbikes to rent

Move beyond bike rentals...You can buy 2 or 3 motos and rent them rent per hours and days, or make an agreement with a local company. Make sure you invest on cool models, so your visitors cannot resist to instagram their pictures….with your logo on them. Find some ideas:

- https://www.cooltra.com/
- https://www.getyugo.com/

Vespa package at Hotel Mabi

 
How to properly measure Ancillary Revenue

So which ancillary revenues are more profitable? And which are most popular? I have talked with upselling companies and they all agree that the most requested ancillary services are, sorted:

- Early check in and late check out
- Wifi
- Breakfast
- Dinner
- Champagne
- Chocolate
- Tours

And It is interesting also to have a look to the evolution of the different ancillary revenue stream on the last years:

Graphic representing the evolution on Ancillary Revenue from 2014 to 2017

Graphic representing the evolution on Ancillary Revenue Streams from 2014 to 2017.
Source: Eye for Travel

Let’s talk now about how are revenue managers measuring how profitable is each ancillary service. I read a report online stating that 71% of revenue managers feel that they do not have the tools to properly measure ancillary revenue...

We face this challenge because ancillary revenue tends to be measured on a holistic way, assuming that the spent on ancillary comes just from guests of the hotel or resort. But on the examples above, we have seen that a service such a restaurant, a diving activity or golf course can also bring customers that just pay for the activity, and that could also become into guests of the hotel because of it. All these scenarios should be measured separately.

The main KPI to measure the ancillary revenue spend is Total Revenue Per Available Room (TRevPAR) but the only way to have a proper indication, is to compare it as an index with the RevPAR. GOPPAR also provides good insight, as it gives a more complete view of the entire business and the cost of sales.

 

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Conclusion: The final word

Tracking and managing ancillary revenue is much more than a trend in hotel revenue management. There are clear strategic opportunities to use it in hotels, hostels and resorts.

As revenue managers and hotel managers, at Xotels we have large and proven experience on how to use it, as an income source or to increase the occupancy on low season. Which strategy have you tested? Which example did you like the most? Let me know it on the comments.

Are you getting your piece of the pie?

Cheers,


Patrick Landman @ Xotels

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