Hotel ancillary revenue refers to the extra money hotels make from services other than room bookings. This revenue is critical in today’s competitive hospitality industry.
For instance, hotels can boost their earnings, given that revenue from hotel ancillary services is projected to grow by 10% annually.
By offering additional services like spa treatments, restaurant meals, or guided tours, hotels increase their income and improve the guest experience. These additional services make guests’ stays more enjoyable and memorable.
Understanding hotel ancillary revenue can help hotels stay ahead and provide better value to their customers. This strategy is vital for hotels to maximize profits and stand out among competitors.
What is Hotel Ancillary Revenue?
Hotel ancillary revenue is the extra money hotels make from services and amenities other than room bookings. This revenue comes from non-room services that hotels offer to their guests and is an essential hotel KPI. Examples include food and beverage sales, such as meals at the hotel’s restaurant or drinks at the bar.
Other examples are spa services, renting out event spaces for meetings and parties, and room upgrades where guests pay extra for better rooms.
These additional services, known as hotel ancillary products, help hotels make more money and provide a better experience for their guests.
By understanding hotel ancillary revenue, hotels can explore various revenue streams to increase their income and improve their overall business.
Understanding How Pricing Works
More than Basic Pricing:
An innovative hotel pricing strategy isn’t just about setting prices. Hotels encourage guests to go for extra services during booking or check-in. By showing why these add-ons are worth it, hotels make more money while giving guests better choices.
Making Stays Special:
Personalization isn’t a one-size-fits-all thing. Hotels use what they know about guests to offer unique experiences, from room preferences to special treats. These personal touches make stays memorable; getting great reviews and more bookings means more money for the hotel.
Exploring Clever Marketing
Magic of Marketing:
Hotels use online ads, hospitality social media marketing, hotel mobile marketing, and special deals to tell you about extra services. Newsletters and messages about loyalty programs let you know about exclusive offers. By getting the word out smartly, hotels make more money from new and returning guests.
Tricks for More Money:
Clever Marketing for More Money means understanding who’s interested. Hotels create eye-catching ads that show why extra services are excellent. They share stories and reviews, building trust and making guests want to try out more services.
Types of Ancillary Revenue Streams
Ancillary revenue streams are the various ways hotels can earn extra money besides room bookings. These additional services help hotels increase their income and improve guest satisfaction. Here are some common types of ancillary revenue streams in hotels:
1. Food and Beverage
One primary source of ancillary income for hotels is food and beverage sales. This includes revenue from restaurants, bars, and room service.
Hotels can attract more guests by offering a diverse menu with various cuisines and special promotions, such as happy hours or themed dinners.
For example, a hotel restaurant with local dishes can provide a unique experience that guests will remember. By focusing on menu diversity and special promotions, hotels can boost their ancillary sales in the hospitality industry.
2. Wellness Services
Another significant ancillary revenue stream is wellness services, such as spas and fitness centers. These services are popular among guests looking to relax and stay healthy during their stay. Standard offerings include massages, facials, and fitness classes.
Hotels can attract more guests by creating packages combining different services, such as a weekend spa retreat. By providing high-quality wellness services and boosting the guest experience, hotels can increase their ancillary income.
2. Events and Meeting Spaces
Hotels can also earn significant revenue by renting conference rooms and organizing events. This includes hosting business meetings, weddings, and parties. Offering customizable event packages can make the hotel more appealing to different types of clients.
For example, a business meeting package might include catering, audio-visual equipment, and a dedicated event planner. By providing flexible and personalized event options, hotels can increase their ancillary revenue streams and attract more clients.
3. In-Room Services
Mini bar fridge in a hotel
In-room services are another way hotels can generate ancillary income. This includes minibars, in-room entertainment, and other personalized services like breakfast in bed. These services offer convenience and exclusivity, making the guest’s stay more enjoyable.
For example, a minibar with premium snacks and drinks can tempt guests to indulge. High-quality in-room services can help hotels boost their ancillary sales in the hospitality industry and improve guest satisfaction.
4. Retail
Retail is another significant ancillary revenue stream for hotels. This includes revenue from gift shops and branded merchandise. Offering unique, local products can make the hotel’s retail space more appealing to guests.
For example, a gift shop selling local crafts and souvenirs can provide guests with memorable keepsakes. By focusing on unique and high-quality products, hotels can increase their retail sales and enhance the overall guest experience.
5. Other Services
Finally, hotels can generate additional revenue from other services, such as parking, transportation, and guided tours.
These services add value for guests by making their stay more convenient and enjoyable. For example, offering a shuttle service to and from the airport can save guests time and hassle.
Providing guided tours of local attractions can give guests a deeper understanding of the area. Hotels can increase their ancillary income and improve the guest experience by offering additional services.
Benefits of Ancillary Revenue for Hotels
Ancillary revenue plays a crucial role in the success of hotels in Singapore’s competitive hospitality market.
1. Diversification of Revenue Streams
Ancillary revenue provides hotels with additional income streams beyond room bookings, reducing dependence on traditional revenue sources. This diversification improves financial stability and resilience, especially during fluctuating demand.
2. Enhanced Guest Experience
Ancillary services and offerings create a memorable guest experience, leading to higher satisfaction and repeat business.
For example, hotels in Singapore often offer curated local tours and cultural experiences, such as guided food tours in popular neighborhoods like Chinatown or Little India, boosting the overall guest experience and generating additional revenue.
3. Competitive Advantage
Hotels that effectively leverage ancillary revenue strategies gain a competitive edge in the market.
When offering unique amenities and services, such as personalized wellness programs or exclusive access to rooftop bars with panoramic city views, hotels differentiate themselves from competitors and attract discerning travelers seeking added value.
4. Revenue Maximization
Ancillary revenue allows hotels to maximize revenue potential from existing assets and infrastructure.
For instance, hotels in Singapore may partner with local transportation providers to offer seamless airport transfer services, generating additional income while enhancing guest convenience.
5. Examples of Successful Strategies:
Some hotels in Singapore have successfully implemented ancillary revenue strategies, such as offering “staycation packages” that include spa credits, dining vouchers, and complimentary city tours.
For instance, the iconic Marina Bay Sands Hotel offers guests exclusive access to its renowned infinity pool and Skydeck, generating significant ancillary revenue while providing a unique selling point in the competitive market.
10 Strategies to Maximize Hotel Ancillary Revenue
Maximizing hotel ancillary revenue involves implementing effective strategies that improve the guest experience and increase income from non-room services.
Here are ten actionable tips for hotels to boost their ancillary revenue, with real-life examples from the hospitality industry, especially in Southeast Asia.
1. Personalized Offers
Using data analytics to tailor offers to individual guests is a powerful way to increase ancillary revenue. Hotels can create personalized promotions that resonate with each guest by analyzing guest preferences and behaviors.
For example, the Mandarin Oriental Hotel Group uses guest data to offer personalized services such as customized spa treatments and dining experiences tailored to individual preferences.
This approach allows the hotel to cater to each guest’s specific needs and desires, making their stay more enjoyable and memorable.
Personalized offers can range from special discounts on preferred services to complimentary upgrades and exclusive access to hotel amenities. These not only increase sales but also develop guest satisfaction by making them feel valued and understood.
By leveraging data analytics, hotels can anticipate guest needs and proactively offer services that guests will likely appreciate.
Moreover, personalized offers can be communicated through various channels such as email, mobile apps, and in-person interactions. This multi-channel approach ensures that guests receive relevant promotions at the right time, encouraging them to take advantage of the offered services.
2. Bundling Services
Wellness Kit offered at Ritz-Carlton Hotel
Bundling services together at a discounted rate is an effective strategy to boost sales and increase ancillary revenue streams. For instance, the Ritz-Carlton Bali offers a “Wellness Package” with a spa treatment, yoga session, and healthy dining options at a reduced price.
This encourages guests to take advantage of multiple services during their stay, providing a comprehensive and improved experience.
Service bundles can be tailored to various guest segments, such as couples, families, or business travelers.
For example, a family bundle might include discounted tickets to local attractions, breakfast for the whole family, and a babysitting service. This adds value to the guest’s stay and increases the hotel’s revenue from multiple services.
By offering bundled packages, hotels can fill gaps in service utilization during off-peak times and maximize the use of their facilities.
Successful bundling strategies can significantly increase ancillary revenue streams by providing value and convenience to guests, making them more likely to choose to use additional services.
3. Cross-Selling and Upselling
Training staff to suggest additional services is crucial for effective cross-selling and upselling, which can significantly boost ancillary revenue.
For example, the Marina Bay Sands in Singapore trains its staff to recommend room upgrades, dining packages, and spa treatments during check-in and throughout the guest’s stay.
By being knowledgeable and proactive, staff can help guests discover additional services they might enjoy, thereby increasing ancillary income.
Effective cross-selling involves understanding the guest’s needs and preferences and suggesting relevant services that enhance their stay.
For instance, if a guest books a room for a romantic getaway, staff could recommend a couples’ spa treatment or a special dinner at the hotel’s fine-dining restaurant.
Upselling, on the other hand, might involve offering a room with a better view or additional amenities for a slightly higher rate.
Training programs for staff should include role-playing scenarios and information about all the hotel’s services. This ensures that staff are confident and capable of making personalized recommendations that guests will appreciate.
Additionally, providing incentives for staff who successfully upsell or cross-sell services can motivate them to promote these services actively.
4. Promotions and Discounts
Time-limited deals and discounts can drive sales by creating a sense of urgency among guests. For instance, the Grand Hyatt Kuala Lumpur offers a 20% discount on spa services during off-peak hours to encourage bookings.
This strategy boosts spa usage during quieter times and attracts price-sensitive guests who might not otherwise use the spa.
Successful promotions can significantly increase ancillary sales in the hospitality industry by keeping guests engaged and encouraging them to spend more on additional services.
Regularly offering attractive discounts and promotions can make guests feel they are getting added value, which can develop their overall experience and loyalty.
Promotions and discounts can be advertised through various channels, such as email newsletters, social media, and the hotel’s website. By creating a buzz around these offers, hotels can increase the likelihood of guests taking advantage of them.
5. Digital Marketing
Digital marketing plays a vital role in promoting ancillary services. Hotels can utilize email campaigns, social media, and hotel apps to reach guests with targeted promotions.
For example, the Shangri-La Hotel Jakarta uses email campaigns to highlight special weekend packages, including breakfast, spa treatment, and late checkout.
This direct communication with guests helps effectively convey the hotel’s offers and entice guests to book additional services.
Hotels can showcase their amenities through social media platforms and create engaging content that attracts potential guests.
By leveraging digital marketing, hotels can reach a broader audience and drive more bookings for their ancillary services. This approach increases revenue and builds a stronger relationship with guests by keeping them informed and engaged.
6. Partnerships with Local Businesses
Collaborating with local businesses can create unique and attractive offers for guests. For example, the Andaman Resort in Langkawi partners with local tour operators to offer exclusive island tours to their guests.
These partnerships can augment the guest experience by providing them with curated, local experiences they might need help discovering.
Such collaborations provide additional revenue streams for the hotel and create a win-win situation for the hotel and the local businesses. Guests benefit from a more enriched stay with various activities and services, making their visit more memorable.
By integrating local experiences and services, hotels can provide added value to their guests, differentiate themselves in a competitive market, and boost ancillary revenue streams.
7. Dynamic Pricing
Dynamic pricing strategies can optimize revenue by adjusting prices based on demand and seasonality. For instance, the Banyan Tree Phuket adjusts the prices of its spa services based on peak and off-peak seasons.
By using dynamic pricing, hotels can maximize their ancillary income and ensure they are charging the optimal price for their services at any time.
Dynamic pricing can also help manage inventory more effectively, as it offers discounts to encourage higher usage of ancillary services during off-peak times.
This approach increases ancillary revenue streams and improves guest satisfaction by providing value for money. Moreover, hotels can analyze booking patterns and guest behavior to fine-tune their pricing strategies, thereby staying competitive in the hospitality industry.
8. Mobile Apps and Online Booking
Having a user-friendly mobile app and online booking system for ancillary services can greatly enhance guests’ convenience.
Features like exclusive app-only deals, easy booking of spa appointments, and ordering room service through the app can increase ancillary sales in the hospitality industry.
For example, the Ritz-Carlton App allows guests to book spa treatments and dining reservations directly from their smartphones, offering exclusive deals for app users. These hotel ancillary product examples illustrate how technology can drive ancillary revenue streams by providing a seamless booking experience.
A well-designed app can also offer personalized recommendations based on guest preferences, further boosting ancillary income. Integrating push notifications and loyalty rewards into the app can keep guests engaged and encourage repeat usage.
By leveraging mobile technology, hotels can improve guest satisfaction and tap into new revenue opportunities through increased ancillary sales.
9. Loyalty Programs
Integrating ancillary services into the hotel’s loyalty program can increase guest engagement and repeat business. For instance, Marriott Bonvoy members can earn and redeem points for ancillary services like spa treatments and dining at the hotel’s restaurant.
This encourages guests to use the hotel’s services and increases their overall spending. A strong loyalty program can significantly boost ancillary revenue streams by rewarding guests for continued patronage.
Hotels can make their loyalty programs more attractive by offering exclusive benefits and discounts on ancillary products. Additionally, personalized offers based on guest preferences can drive higher ancillary sales.
These programs improve the guest experience and create a sense of loyalty and connection to the brand.
In the competitive hospitality industry, a well-structured loyalty program that includes ancillary services can be a crucial differentiator, leading to increased ancillary income and long-term business success.
10. In-Room Technology Enhancements
Innovative technology in rooms can facilitate easy booking of services. Features like in-room tablets for ordering room service, booking spa appointments, or arranging transportation can boost the guest experience and increase ancillary sales.
For example, Peninsula Hotels uses in-room tablets that allow guests to explore and book various services with just a few taps. By investing in in-room technology enhancements, hotels can provide a unified and convenient way for guests to access ancillary services.
These technologies can also offer personalized recommendations and promotions, further driving ancillary revenue streams. Implementing smart tech solutions modernizes the guest experience and opens up new avenues for ancillary income.
Additionally, in-room technology can streamline operations and reduce the workload on hotel staff, allowing them to focus on delivering exceptional service.
Technology and Tools for Enhancing Ancillary Revenue
Technology plays a crucial role in enhancing ancillary revenue in the modern hospitality industry. Various tools and systems can help hotels personalize guest experiences, rationalize transactions, and offer convenient services.
Here are some key technologies and tools hotels can use to maximize their ancillary revenue, along with real-life examples from the industry.
1. CRM Systems
Customer Relationship Management (CRM) systems are essential for managing and analyzing customer interactions and data throughout the guest lifecycle. CRM systems help hotels personalize guest experiences, leading to increased satisfaction and loyalty.
By collecting and analyzing data on guest preferences, booking history, and feedback, hotels can create tailored offers and services that meet individual needs.
For example, the Mandarin Oriental Hotel Group uses a sophisticated CRM system to track guest preferences and personalize their experiences.
When a returning hotel guest arrives, the hotel can offer a welcome back message, their preferred room type, and amenities they enjoyed during previous stays. This level of personalization boosts the guest experience and encourages repeat business.
CRM systems also enable hotels to segment their customer base and target specific groups with relevant promotions. By leveraging CRM systems, hotels can effectively boost their ancillary income and improve customer satisfaction.
2. POS Systems
Point of Sale (POS) systems are vital for managing transactions across various hotel outlets, such as restaurants, bars, and gift shops. A robust POS system allows for seamless and efficient transactions, increasing the guest experience and revenue.
For example, the Marina Bay Sands in Singapore uses an integrated POS system that connects all its dining and retail outlets. This integration allows guests to charge their meals and purchases directly to their room, making the transaction more convenient.
Integration with other hotel systems, such as CRM and property management systems (PMS), further enhances POS systems’ capabilities. By linking the POS system with the PMS, hotels can streamline billing processes and provide a cohesive guest experience.
This integration ensures that all guest charges accurately reflect their final bill, reducing errors and improving operational efficiency.
3. Booking Engines
Integrating ancillary services into booking is a powerful way to increase sales. By offering guests the option to book additional services, such as spa treatments, dining reservations, or airport transfers, during the initial reservation process, hotels can boost their ancillary revenue streams.
For example, the Banyan Tree Phuket integrates its ancillary services into its online booking engine. Guests can select various add-ons, such as spa packages, cooking classes, and excursion tours while booking their stay.
This smooth integration encourages guests to purchase additional services in advance, increasing the hotel’s revenue.
Integrating ancillary services into the booking process can also boost the guest experience by providing a one-stop shop for all their needs.
Hotels can use booking engines to offer bundled packages that combine room stays with other services at a discounted rate. This strategy not only increases sales but also provides added value to guests.
4. Mobile Apps
Hotel mobile apps are becoming increasingly popular as a tool for enhancing guest convenience and driving ancillary revenue. A well-designed mobile app can offer a range of features that improve the guest experience and encourage the use of additional services.
Mobile apps can also offer exclusive deals and promotions to app users. For instance, a hotel might discount room service orders placed through the app or offer a complimentary drink at the hotel bar for app users. These exclusive deals incentivize guests to use the app and take advantage of the hotel’s ancillary services.
In addition to driving revenue, mobile apps can improve the overall guest experience by providing real-time updates and personalized recommendations.
For example, Peninsula Hotels uses its mobile app to send guests personalized notifications about upcoming events, special offers, and local attractions based on their preferences and behavior.
Conclusion
Understanding hotel ancillary revenue is essential for profitability and guest satisfaction. By leveraging CRM systems, POS systems, booking engines, and mobile apps, hotels can personalize services, update operations, and provide greater convenience.
Personalized offers, bundling, effective cross-selling, digital marketing, dynamic pricing, and local partnerships are vital to boosting ancillary income. Integrating these services into loyalty programs and mobile apps enhances guest engagement.
Adopting these methods increases hotel ancillary revenue and ensures sustained growth in the competitive hospitality industry.
