Ancillary Hotel Revenue Streams and Why They Work During Slow Seasons

By Lily Mockerman Founder, Total Customized Revenue Management | August 12, 2018

We've all been there – those periods where you feel like you're more likely to see a tumbleweed rolling down the street than another guest walking through the door. It's the dreaded slow season, or perhaps an economic downturn. Owners are looking for cashflow, employees are looking for more hours, and guests are looking for deals! While many hoteliers put much of their efforts into finding ways to steal more market share in room revenue, there is an often overlooked golden opportunity.

During slow periods, ancillary streams are the secret weapon of the savvy hotelier. Every hotel and market is subject to a downturn, but focusing efforts on increasing ancillary spend of existing guests can be invaluable in meeting bottom line goals. Even if not through the traditional rooms revenue segment, these efforts can be driven in conjunction with rooms, such as attractive packages. Do not neglect the opportunity to drive revenues within each outlet individually as well, however, both with hotel guests and locals.

The Challenge of Downturns

Economic downturns can present a more challenging situation for maximizing revenues, as all hotels in the market are generally struggling for revenues. These downturns, such as the crash that impacted hotels in 2009, have a tendency to weed out the stellar revenue managers from those focused only on pricing, because in a downturn, pricing competitively becomes a race to the bottom, and that's simply not enough! In the last market crash, revenue managers had to focus more on mix, opening channels, and ensuring the system was working. Everything that had become somewhat easy, or perhaps the small wins which were being overlooked, suddenly had to be re-inspected. Hotels were suddenly very interested in things like Wholesale or Government business, where before they may have turned up their noses at the rate.

In the next downturn, while this common thread may remain, those who survive will likely be the revenue managers who have a solid grasp on things like channel cost, profitability and ancillary revenue. It becomes crucial to understand where ancillary revenue comes from, how data is collected, and which strategies are effective in driving more spend in these areas. In some ways, ancillary revenues can be easier to promote, because the hotel's guests are a somewhat captive audience. While guests could certainly choose to  leave the hotel to find ways to spend money, it is the job of the entire staff to invite guests to enjoy in-house offerings such as unique experiences, upgrades and add-ons, including highlighting the value and offers of all departments within the hotel.

Crafting Strategies

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Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.