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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Coming up in February 2019...

Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.