What’s the first thing that comes to mind when you hear of hotel revenue? Probably selling rooms, since that’s a hotel’s core business model.
And what about increasing revenue? Your first thought might be to try filling more rooms at higher prices. While that’s a good idea, it’s not always possible, especially during low season or economic downturns.
Luckily, there are many effective ways to increase earnings in hospitality by driving hotel ancillary revenue
What Is Hotel Ancillary Revenue?
Ancillary revenue is income you generate from selling items and services other than your primary product. In a hotel’s case, that’s rooms. Ancillary hotel revenue can come from food and beverage (F&B) services, the spa, early check-in, events, and more.
The ancillary revenue streams you choose will depend on your hotel’s facilities, service level and location. It might seem easiest to generate extra earnings for five-star resorts since they usually have many services and venues they can leverage. But there are also lots of opportunities for airport hotels, downtown boutique properties and even limited-service establishments.
In short, whatever hospitality business you operate, we have plenty of hotel ancillary revenue ideas for you. But before we get to those, there’s one more important question to answer: Why should you invest time and effort into driving more ancillary revenue?
Why Is Ancillary Revenue So Important for Hotels?
Low seasons, economic downturns and unforeseen crises (e.g. the pandemic) make it harder to reach your hotel’s revenue goals.
That’s where ancillary revenue comes in. You can significantly lift your topline with smart and strategic ancillary revenue management. But an increased topline isn’t the only benefit.
Here are a few more ways how an ancillary revenue strategy can support your property:
KPI boost: As you drive more ancillary revenue, you move the needle on key performance indicators like revenue per available room (RevPAR), total revenue per available room (TRevPAR) and gross operating profit per available room (GOPPAR).
Differentiation: Offer intriguing add-on services to set your hotel apart from the competition. It gives guests more reasons to book with you and makes it easier for your marketing team to promote your property.
Growth and resilience: Extra income from ancillary services gives you more chances to invest in your business – staff incentives, new equipment, repairs, paid ads, and more.
Here are some hotel ancillary revenue ideas to help you survive tough periods and maximize income during peak times.
12 Hotel Ancillary Revenue Ideas to Try at Your Hotel
Now that we’ve gotten you excited about generating additional income for your property, here are 12 hotel ancillary revenue ideas to inspire you.
1. Maximizing profits with paid room upgrades
Instead of giving them away for free, why not try to sell upgrades instead? Offer upgrades pre-arrival, so travelers have time to think about it. This saves everyone time at reception and increases the chances that guests opt in. Why? Because your offer reaches them while they’re looking forward to their trip and are ready to splurge on extras. Of course, you can also suggest upsells in-person or even via a contactless check-in process.
“It’s basically free money. As guests go through the contactless check-in process, they can select room upgrades and other upsells entirely on their own without front desk agents needing to do anything. Last month, we had £10,000 in upsell requests.”
Each successful upsell brings you extra income and allows you to resell your lower-category rooms. And if necessary, you can still give free upgrades to regulars or when guests experience a problem.
2. Early check-in and late check-out
Give travelers more flexibility and convenience by letting them choose their own check-in and check-out time. Many are willing to pay for this in advance if it means that this service is guaranteed.
3. Enhancing restaurant experiences in hotels
The classic way to drive extra F&B revenue is by promoting your restaurant to guests and offering them a reservation. The more elaborate option is to draw in clients with special set menus complete with wine tastings or an aperitif. Sit down with your chef and get creative! Bonus: Restaurant experiences have the advantage of attracting local residents in addition to in-house guests, making this revenue stream a worthwhile investment.
4. Spa services that boost profit
Promote single treatments or full-day packages to drive more business in your spa. Advertise via flyers in the rooms, posters in public areas or automated guest messages. Consider special seasonal packages or spa experiences for couples or friends traveling together.
5. Ancillary transportation services
Offer airport transfer options such as a limousine, van or sedan for arriving and departing guests. That makes travel planning easier for them and gives you another way to boost revenue. If you don’t have in-house drivers, work with a local chauffeur service on a commission basis.
6. In-room amenities and surprises
Let guests upgrade their in-room experience with fancier toiletry sets or a special welcome. That could be anything from balloons and cake for guests celebrating a birthday to champagne and roses for a romantic surprise.
7. Hosting profitable hotel events
Functions are popular revenue drivers in the hospitality industry. But they don’t always have to be big corporate gatherings or fancy weddings. Could you make your property an attractive choice for smaller events, like family get-togethers or school reunions? This can help you win more local guests and become an important part of the local community.
8. Space rental strategies
If you think outside the box, almost all areas in your hotels could be used to generate ancillary revenue. Unused function rooms or your lobby lounge could double as co-working areas. Your terrace or pool could be repurposed as an outdoor event venue. And your rooftop terrace may be ideal for a romantic pop-up dinner. Look at your property with new eyes and see what you can come up with!
9. Increasing revenue with hotel classes and workshops
Does your chef or pastry chef have a knack for teaching? Maybe they can host a cooking class, be it private or for a small group. Or your florist might be able to do a session on flower arrangements. Check with your in-house team and external vendors to come up with interesting activities.
10. Bundling services
Combine add-ons into value-packed bundles. They could sell year-round or for special occasions like Christmas or Mother’s Day. For example, a couples’ or Valentine’s Day package may include a romantic in-room welcome with roses and champagne, a four-course dinner and a couple’s treatment at the spa. If you want to create best-selling offers, analyze your guests’ interests. Which services are they already booking separately? Play around and try different combinations to see what works best.
11. Ancillary revenue through hotel gift shops
Set up a gift shop at your hotel where guests can buy local products as souvenirs. Work with local craftspeople and artists to differentiate your offerings and make guests feel like they found a special rarity.
You can also include items from the hotel in your selection. Think branded slippers, bathrobes or bedding. You can even make these things available online. Big-name brands like Marriott have been doing this for a long time. But even smaller chains like Ace Hotels are seeing success with this approach.
12. Local experiences that add to your hotel's ancillary revenue
Partner with local service providers, such as travel guides, tour operators, farmers, yoga instructors, personal trainers or babysitters. The list of options is endless. This lets you offer guests a wider choice of services and activities than you could provide directly in-house. Plus it’s another great way to support and be part of your local community.
Now that you have all these new revenue-generating ideas for hotels, it’s time to implement and start promoting them.
But obviously, not all these offers will work at your property or for all your guests. Follow these four steps to determine what works for you and get the right offer to the right guest:
1. Start simple
Implement easy add-ons like early check-in, late check-out and paid upgrades first. See how that goes and fine-tune your processes to create a smooth experience for your staff and guests alike.
2. Research and check your data
Check which services guests already request and book a lot at your hotel. Look at competitors as well. What are they offering that you could do even better? Or have guests repeatedly asked for special services that you don’t provide yet?
3. Come up with new deals and offers
Use your findings from the last step to inspire your brainstorming session. Feel free to get creative and involve your team as well. Maybe they have some hotel ancillary revenue ideas you wouldn’t have thought of.
4. Segment your guests
Once you’ve set up new deals and services, it may be tempting to tell all your guests about them. But avoid the mistake of bombarding all travelers with a long, generic list of offers. This would only overwhelm them and lower your conversion rates.
Instead, segment guests by demographic, type of traveler (e.g., family, couple, business, solo…), source market, rate code, recorded preferences, and/or length of stay. Then send each segment targeted offers to increase relevance and boost conversions.
5. Automate upselling and cross-selling
Reach out to guests with relevant offers automatically before their stay. The easiest and most cost-effective way to do this is to use an upselling solution like Canary. It doesn’t add additional work to your team’s to-do list and you still see extra ancillary revenue come in. Before you protest, this doesn’t have to become pushy or mean you’re nickel and diming your guests for every request. Instead, it allows you to be smart about how you promote your services. That way guests can enjoy an even better stay while you generate more ancillary revenue.
“Since implementing Canary, we’ve increased the amount of upsell packages we’ve sold to guests by 200%,” said David Thomson, former chief information officer at StayPineapple. “It used to be that we’d ask our front desk agents to help us push upsells when guests arrived, but the results were lackluster; with Canary we can drive more revenue without our staff having to worry about it.”
6. Stay in touch
Communicate with guests throughout the guest journey to see what you can do to make their stay extra memorable. Is there something you can do to prepare for their arrival? Have they got questions? Did they face an issue that you can address while they’re still in-house? Or is there a special offer that perfectly matches their profile? Use automated guest messaging to scale your communication and ensure travelers can reach you whenever they need.
It’s All About Data and Testing
After you’ve been actively promoting your extra services for some time, evaluate your performance. Look at conversion rates and revenue generated by various offers. Read guest feedback to see what they thought of your add-ons.
Then start optimizing. Maybe you can retire offers that didn’t work. Or you can tweak them to make them more attractive. Look at your segmentation as well to ensure guests receive only relevant offers. Finally, perhaps a few seasonally inspired options would do well.
Sometimes it can take several rounds of testing to find the ideal approach for your property. But once you get it right, you’ll be rewarded with happier guests and extra ancillary revenue.
Now It’s Your Turn To Increase Your Hotel’s Ancillary Revenue
With the above-mentioned tools and revenue-generating ideas for hotels, you’re ready to get strategic with your ancillary revenue management.
Sure, it can feel like a lot to wrap your head around if you’re just starting out. But there’s no need to implement everything in one go. Move at your own pace and see what works best for your hotel. But most importantly, stick with it and use the right tools. Then you’ll inevitably see your topline grow.
For the best results, implement a strategic approach to generate more income and improve the guest experience while you’re at it.
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