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.

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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.