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.