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Glossary

What is Hotel Ancillary Revenue

January 2, 2024

Table of Content

Understanding hotel ancillary revenue is crucial for hoteliers and industry professionals in Singapore. Ancillary revenue is the income generated by selling extra products and services in addition to hotel room bookings.

In today’s competitive hospitality industry, maximizing ancillary revenue has become essential for maintaining profitability and sustaining business growth.

In Singapore’s bustling hospitality domain, ancillary revenue spells success. With ancillary income accounting for up to 10%  to 30% of a hotel’s total revenue (depending on the hotel type and location), savvy hoteliers know it’s more than just room bookings.

By using innovative strategies like upselling room upgrades and crafting unique packages, hotels can develop new revenue streams and outperform competitors.

In this cutthroat market, mastering ancillary revenue isn’t just a choice—staying profitable and ahead of the game is necessary.

What is Hotel Ancillary Revenue?

Hotel Ancillary Revenue

Ancillary revenue in the hotel industry is the income generated from selling extra products and services beyond room bookings. These additional offerings may include a buffet breakfast, spa treatments, early check-in or late check-out, parking fees, and more.

By offering these additional services, hotels can enhance the overall guest experience and increase customer satisfaction, which can lead to repeat bookings and positive word-of-mouth referrals.

Ancillary revenue supplements core hotel revenue streams and adds to the overall profitability in several tangible ways:

  1. Diversification of Income: By offering ancillary services like spa treatments, tours, or in-room dining, hotels can diversify their income sources beyond room bookings. For example, a hotel might offer guided city tours for an additional fee, which contributes directly to ancillary revenue.
  2. Maximizing Revenue per Guest: Ancillary services allow hotels to upsell additional amenities to guests, increasing the revenue per guest. For instance, a guest may choose a premium internet package for faster Wi-Fi access, providing an additional revenue stream alongside the room charge.
  3. Operational Efficiency: Ancillary revenue can help hotels cover fixed costs associated with maintaining facilities, such as gym equipment or pool maintenance. For example, a hotel may charge a fee for access to its fitness center, helping offset operational expenses.
  4. Competitive Advantage: Offering unique ancillary services or amenities can differentiate a hotel from competitors and attract guests willing to pay for premium experiences. For illustration, a hotel might offer exclusive access to a rooftop lounge with panoramic views, creating a premium experience that commands higher prices and boosts ancillary revenue.
  5. Seasonal Revenue Boost: Ancillary services can help hotels capitalize on seasonal demand fluctuations. A beachfront hotel might offer equipment rentals for water sports during the summer season, supplementing revenue during peak times.

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.

Ancillary Revenue in Different Hotel Segments

In hotels, making extra money follows different rules for every place. Whether in a fancy luxury hotel, a budget-friendly spot, or a cozy boutique inn, each type has tricks to boost income. Let’s take a closer look at how these different types of hotels do it:

Ancillary Revenue in Fancy Hotels

Big, luxurious hotels use special tricks to make their guests feel extra special:

1. Amazing Experiences:

These hotels create exclusive experiences like private dinners, spa getaways, and personal concierge services to make guests feel pampered.

2. Fancy Dining and Spa Treatments:

Fancy Dining in a hotel

High-end restaurants and top-notch spas are a big deal here. Guests pay extra for Michelin-starred meals, spa treatments, and personalized fitness plans.

3. Personalized Services:

Luxury hotels offer personalized services like chauffeur-driven rides and custom event planning to make guests feel like VIPs.

Ancillary Revenue in Budget Hotels

For more budget-friendly hotels, they have intelligent ways to make extra money without breaking the bank:

1. Affordable Add-Ons:

Budget hotels offer low-cost extras like shuttle rides, city tours, or discounts on local attractions to give guests more value without a hefty price tag.

2. Smart Technology:

They use technology for quick check-ins, keyless entry, and digital services to keep costs down while making things easy for guests.

3. Partnerships with Locals:

Budget hotels team up with local businesses for good deals on food or transportation, giving guests more without costing the hotel too much.

Ancillary Revenue in Boutique Hotels

Charming boutique hotels, with their unique style, have their way of making extra money:

1. Themed Experiences:

These hotels offer unique experiences or packages tied to the local culture, making the stay memorable for guests.

2. Unique Amenities:

Boutique hotels might focus on exceptional, locally-made items in rooms, like handmade soaps or snacks, to give guests a taste of the local scene.

3. Community Connections:

By getting involved with local artists, businesses, and events, boutique hotels create authentic experiences that boost income through partnerships.

Ancillary Revenue Examples in Hotels

Upgraded-hotel-room-for-ancillary-revenue

Let’s explore the diverse ancillary revenue examples in the hospitality industry, illustrating how hotels maximize profitability beyond room bookings.

1. Accommodation Upgrades

Hotels generate ancillary revenue through accommodation upgrades, offering guests opportunities to improve their stay for an additional fee.

These upgrades may include options for room enhancements, such as premium views, larger spaces, or exceptional amenities like jacuzzis or balconies. Suite bookings, offering more luxurious accommodations with separate living areas and added perks, also contribute to ancillary revenue.

2. Food and Beverage Sales

Ancillary hotel revenue extends to food and beverage sales, incorporating on-site restaurants, bars, room service, and catering events.

Guests often indulge in dining experiences during their stay, whether enjoying a gourmet meal at the hotel’s restaurant, grabbing a quick bite at the bar, or ordering in-room dining for added convenience.

Catering services for events hosted at the hotel further contribute to ancillary revenue.

3. Spa and Wellness Services

Hotels generate ancillary revenue through spa and wellness services, providing guests with relaxation, rejuvenation, and self-care opportunities. These services may include massages, facials, body treatments, fitness facilities, yoga classes, and wellness programs.

Guests seeking holistic experiences and wellness-focused amenities are willing to pay for these additional services, contributing to the hotel’s overall revenue.

4. Parking and Transportation

Ancillary revenue for hotels covers parking and transportation services, which provide guests with convenient vehicle storage and mobility options. Hotels may charge fees for on-site parking facilities, valet services, and transportation arrangements such as shuttles or car rentals.

Guests value the convenience and security of hotel parking options and are willing to pay for these services as part of their overall stay experience.

5. Concierge and Tour Services

Hotels generate ancillary revenue through concierge and tour services, assisting guests with various travel-related arrangements and experiences. Concierge services offer personalized assistance with dining reservations, entertainment bookings, transportation coordination, and other guest requests.

Additionally, hotels may provide guided tours or ticket sales for local attractions, allowing guests to explore their destination conveniently.

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.

Strategies for Maximizing Ancillary Revenue

Maximizing ancillary revenue is vital for hotels to boost their bottom line and stay driven in the hospitality industry. Here are some simple yet effective strategies to achieve this goal:

1. Upsell Room Upgrades

Upsell-room-upgrade-services

Upselling room upgrades is a valuable strategy for hotels to increase ancillary revenue and guest experience. One practical approach is to highlight the benefits of upgrading to a higher room category, such as premium amenities or better views.

For example, guests may be enticed by the promise of a room with a breathtaking city skyline or ocean view or by including additional amenities like a jacuzzi tub, complimentary minibar, or plush bathrobes.

Hotels can incorporate this option into booking to successfully upsell room upgrades or offer it at check-in. During the booking process, guests can upgrade their rooms for an additional fee, with inviting descriptions of the enhanced features and amenities.

At check-in, front desk staff can inform guests about available upgrades and offer them the chance to add to their stay on the spot.

It’s crucial to make the upselling process seamless and personalized, ensuring that guests feel valued and that the upgrade aligns with their preferences and budget.

2. Offer In-Room Amenities

Offering in-room amenities is a strategic approach for hotels to boost ancillary revenue while providing guests with added convenience and comfort during their stay. One effective way to offer in-room amenities is by stocking minibars with snacks, beverages, and alcoholic beverages.

Guests appreciate the convenience of having these items readily available in their rooms, and hotels can generate revenue by selling these products.

In addition to minibar offerings, hotels can provide special toiletries or amenities that augment the guest experience. This could include premium bath products, plush bathrobes, or personalized welcome gifts.

When offering these extra touches, hotels can differentiate themselves from competitors and create a memorable stay for guests, potentially leading to positive reviews and repeat business.

To effectively implement in-room amenities, hotels should ensure that items are prominently displayed and easily accessible to guests.

Clear signage and pricing information can help guests make informed purchasing decisions, while regular restocking and inventory management ensure that amenities are always available when needed.

Furthermore, hotels can leverage technology to augment the in-room amenities experience.

For example, mobile apps or in-room tablets can allow guests to conveniently order additional amenities or request services with just a few taps, further adding to the guest experience and driving ancillary revenue for the hotel.

3. Enhance Food and Beverage Offerings

Breakfast-in-bed-offered-by-hotel

Expanding food and beverage offerings is a tactical attempt for hotels to maximize ancillary revenue while providing guests memorable dining experiences. Here are some effective strategies to improve food and beverage offerings:

  • Introduce unique dining experiences: Create themed dining events or pop-up restaurants to offer guests something unexpected and attract new customers.
  • Develop themed menus: Offer specialty menus for holidays, seasons, or cultural events to add variety and excitement to the dining experience.
  • Craft specialty cocktails: Create signature cocktails that showcase local flavors or incorporate unique ingredients to persuade guests and encourage beverage sales.
  • Incorporate local cuisine options: Highlight regional dishes or partner with local vendors to showcase authentic cuisine and appeal to guests seeking an immersive culinary experience.

Additionally, promoting these offerings through targeted marketing campaigns and social media channels can attract diners from the local community, further boosting revenue opportunities.

4. Host On-Site Events

Hosting on-site events presents hotels with a lucrative opportunity to generate ancillary revenue while leveraging their facilities and services. Here’s how hotels can maximize revenue through event hosting:

  • Utilize hotel facilities: Use banquet halls, meeting rooms, outdoor spaces, and amenities to accommodate various events, from weddings and corporate meetings to conferences and social gatherings.
  • Offer comprehensive event packages: Create customizable event packages that include venue rental, catering services, audiovisual equipment, decor, and accommodation options for attendees.
  • Provide value-added services: Improve the event experience by offering additional services such as event planning assistance, transportation arrangements, and entertainment options.
  • Implement dynamic pricing strategies: Adjust pricing based on event size, seasonality, and demand to boost revenue while remaining competitive.
  • Promote event spaces: Market event venues through targeted advertising, social media campaigns, and partnerships with event planners or industry organizations to attract clients and maximize bookings.

5. Facilitate Digital Experiences

Hotels can boost ancillary revenue by embracing digital experiences that engage guests and offer unique monetization opportunities. Here’s how to facilitate digital experiences effectively:

  • Virtual Tours: Provide virtual tours of the hotel’s amenities, rooms, and surrounding attractions to give guests a preview of their stay and encourage bookings. Consider offering premium virtual tour packages with exclusive access or behind-the-scenes content for an additional fee.
  • Online Cooking Classes: Host virtual cooking classes led by hotel chefs, where participants can learn to prepare signature dishes or local cuisine from their Charge a fee to access these classes and offer ingredient kits or recipe cards as optional add-ons.
  • Live-Streamed Events: Stream live events such as concerts, workshops, or wellness sessions directly from the hotel’s premises to online audiences. Offer tickets, or access passes for viewers to join the live-streamed events, with options for premium seating or interactive features at an additional cost.

6. Promote Spa and Wellness Services

Hotel-spa-and-massage-service-set-up

To maximize ancillary revenue, hotels can strategically promote spa and wellness services to guests seeking relaxation and rejuvenation. Here’s how to effectively promote these offerings:

  • Highlight Wellness Benefits: In promotional materials and on the hotel website, emphasize the health and relaxation benefits of spa treatments, fitness classes, yoga sessions, and wellness packages. Showcase testimonials or reviews from satisfied guests to build credibility and trust.
  • Package Deals: Create appealing package deals that combine multiple spa services or wellness activities at a discounted rate. For example, offer a “Pamper Package” that includes a massage, facial, and access to fitness classes for a bundled price.
  • Special Events: To attract guests interested in health and wellness experiences, host special wellness events or workshops, such as yoga retreats, mindfulness seminars, or spa days. Promote these events through targeted marketing campaigns and partnerships with local wellness influencers or organizations.
  • Personalized Recommendations: Train staff to provide personalized recommendations for spa treatments and wellness activities based on each guest’s preferences and needs. Offer tailored experiences that cater to individual interests, whether stress relief, fitness goals, or holistic healing.

7. Promote Gift Cards and Vouchers

To maximize ancillary revenue, hotels can promote the sale of gift cards or vouchers for various services, offering guests the opportunity to purchase in advance or as gifts for others.

Hotels can increase revenue and attract new guests by effectively promoting these offerings. Here’s how to promote gift cards and vouchers:

  • Online Promotion: Feature gift cards prominently on the hotel’s website, allowing guests to purchase them online easily. Create dedicated landing pages or banners highlighting the benefits of purchasing gift cards, such as flexibility in choosing dates or services.
  • Social Media Marketing: Utilize social media platforms to promote gift cards and vouchers through engaging posts and targeted advertising campaigns. Showcase the value of the gift cards as thoughtful and versatile gifts for special occasions or holidays.
  • Email Marketing: Send out email newsletters or promotional campaigns to existing guests and subscribers, promoting the availability of gift cards and vouchers. Offer exclusive discounts or incentives to encourage recipients to purchase or redeem gift cards.
  • Partner Collaborations: Collaborate with local businesses or online platforms to expand the reach of gift card promotions. Offer joint promotions or discounts with partner businesses to attract new customers and increase sales.

8. Monetize Parking Facilities

To maximize ancillary revenue, hotels can monetize parking facilities by introducing parking fees or valet services for guests with vehicles. By offering convenient parking options, hotels can strengthen the overall guest experience while generating additional revenue from parking facilities.

Implementing parking fees is a straightforward way to capitalize on parking facilities. Hotels can set reasonable parking fees for guests who require parking during their stay, offering different pricing options such as hourly, daily, or overnight rates to accommodate varying guest needs.

Additionally, hotels can provide valet parking services for guests seeking convenience. Valet services involve hotel staff parking and retrieving guests’ vehicles, offering a premium service that commands higher fees to reflect the added convenience and personalized attention.

Hotels should promote parking options and fees throughout the guest journey to effectively monetize parking facilities.

Clear communication about parking availability and rates during the booking process, check-in, and throughout the stay ensures that guests are informed about parking options and can make informed decisions.

9. Introduce Concierge Services

Personalized-concierge-services-being-offered

Hotels can add to their ancillary revenue by introducing personalized concierge services to assist guests with various arrangements, such as transportation, tours, restaurant reservations, and ticket purchases.

By offering these services, hotels not only elevate the guest experience but also have the opportunity to generate additional revenue through service fees or commissions.

Personalized concierge services provide guests convenience and peace of mind during their stay.

From arranging airport transfers to booking sightseeing tours or securing reservations at popular restaurants, the concierge caters to guests’ needs and preferences, ensuring a unified and enjoyable experience.

Hotels can charge service fees for arranging bookings or securing reservations to monetize concierge services. Alternatively, hotels can earn commissions from partner businesses for referrals or bookings through the concierge service.

Promoting concierge services throughout the guest journey, from pre-arrival communications to on-site interactions, ensures that guests know the available services and can take advantage of them during their stay.

10. Sell Merchandise and Souvenirs

Hotels can boost ancillary revenue by setting up a hotel-branded merchandise or souvenir shop, offering clothing, accessories, local crafts, and specialty products.

When creating a dedicated space within the hotel, guests are attracted to browse and purchase souvenirs during their stay, increasing their overall experience.

To maximize revenue, hotels can design merchandise that reflects their brand identity and resonates with guests, ensuring that items are appealing and relevant. Additionally, offering various products ensures something for everyone, catering to different tastes and preferences.

Promoting the souvenir shop through signage, in-room materials, and digital channels encourages guests to visit, explore the offerings, and make purchases.

Conclusion

In wrapping up our discussion on hotel ancillary revenue, let’s highlight the key points we’ve explored. Ancillary revenue is crucial for hotels, representing the extra income from services beyond room bookings.

We’ve seen how this additional income contributes significantly to a hotel’s overall financial health.

We delved into the operational nuances, understanding that ancillary revenue comes from various sources such as room service, spa treatments, parking fees, and more.

It’s not just about booking a room; it’s about the extra services and experiences hotels offer to make a guest’s stay exceptional.

Furthermore, we discussed the diverse approaches hotels can take to enhance their financial performance. Whether creating special packages, offering unique experiences, or providing convenient services, hotels have multiple avenues to boost their ancillary revenue.

In conclusion, ancillary revenue is not just a side note; it’s a strategic aspect that smart hotels leverage to improve their overall financial picture.

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