Beyond Rooms and Rates: Packaging and Promoting Ancillary Revenue Streams
By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | May 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.