Beyond Rooms and Rates: Packaging and Promoting Ancillary Revenue Streams

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | May 01, 2011

The global hotel sector has faced a variety of challenges over recent years: increased competition and financial ups and downs have become commonplace, making it an exciting time to be an hotelier. The knowledge, expertise and technology in the industry are evolving so quickly, that the very nature of how we all view individual hotels are fundamentally changing. Progressive hoteliers have realized that it is no longer just about rooms and rates but rather taking into account the total value of your asset and identifying and packaging the ancillary revenue streams that may be available to you.

For revenue management specialists across the world, significant time is spent working closely with clients to analyze their properties and identify areas where revenue potential can be expanded through packaging a range of services while instilling a strong revenue management culture within hotels of all sizes. This is still a fundamental component of success. However, the revenue management industry within hotels globally is moving at such a rate that we are constantly rising to meet new challenges and new demands, while identifying new potential revenue opportunities.

While areas such as food and beverage, spa facilities, conference facilities and even additional leisure options such as golf courses, make up a hotelier’s overall ‘Asset’, often overlooked is the role hotel technology can play in helping to package and promote offerings that expand beyond room rates.

The packaging and promotion of ancillary services is still based on the core themes of revenue management, such as selling the right room rates, to the right customers at the right time based on accurate demand forecasting and pricing. Only this time, we take those lessons and we begin looking at how an hotelier can also begin selling customized ancillary products or packages to the right customers, in the right place at the right time based on the availability of those additional streams on a hotel-by-hotel basis.

Importantly, simply packaging items together will not fit all guest requirements, so the ability for customers to ‘pick and mix’ additional items is ideal. Typically the offering includes items such as champagne, chocolates or flowers, but savvy hoteliers should be more creative with their offering and add spa treatments, golf rounds, water in room, mini-bar in the room etc. In fact, anything that has been identified as something which guests may want. Hoteliers may even want to add a small concession, if guests book ancillaries in advance of their stay, or at least trial the impact on demand of these services. It is important that hoteliers do not wait to be asked for these services by guests, as they could run the risk of customers going elsewhere (if a full range of experiences isn’t promoted by the hotel) which can mean a loss in incremental revenue. Hoteliers should also encourage staff to focus on up-selling ancillary services to arriving guests at check-in, which can contribute significantly to your top line, and ensure that all front of house staff are aware of the full range of services that can be discussed or suggested to guests.

IdeaWorks and Amadeus released a report which showed that results from an analysis of 2009 financial filings made by 96 airlines indicate ancillary revenue increased to a total of $13.5 billion for 2009 . If this report is anything to go by, and the hotel industry continues on the path of developing ancillary revenue streams, then there is substantial proof that this could be the next big profit-generating area for the entire industry.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.