Understanding Ancillary Revenue for Hotels

Ancillary revenue refers to the income generated by a hotel from sources other than the core room revenue.

Let’s say, you’re running a hotel. People pay to stay in your rooms, right? But what if you could make even more money by offering them extra things they might want during their stay? That’s exactly what ancillary revenue is all about.

It’s the money you can make from services and goodies that make your guests’ experience better. Such revenue can come from various sources, including:

• Food and Beverage: Restaurants, bars, in-room dining, and catering services can significantly contribute to ancillary revenue. Offering diverse dining options, themed events, and unique culinary experiences helps attract guests and drive F&B sales.

• Spa and Wellness Services: Spas, fitness centres, and wellness programs can be lucrative ancillary revenue sources. You can promote relaxation and rejuvenation with spa packages, fitness classes, and wellness treatments.

• Parking and Transportation: If your hotel offers parking facilities or shuttle services, consider them as potential revenue sources. Offer valet parking, special packages for long-term guests, or transportation partnerships with local attractions.

• Tours and Activities: Partner with local tour operators to offer guests exciting tours and activities. Whether it’s sightseeing tours, adventure activities, or cultural experiences, these can be a significant source of ancillary revenue.

• Concierge Services: You can charge by offering premium concierge services, such as arranging restaurant reservations, event tickets, or private tours.

• Meetings and Events: Host conferences, weddings, and other events at your hotel, leveraging your meeting spaces and event planning services.

Now, you might think why is ancillary revenue so important for hotels? Imagine if a hotel only made money from renting rooms. What happens when fewer people stay there or if they pay less for their rooms during slow seasons? That’s where ancillary revenue steps in as a superhero for hotels.

What Are the Benefits of a Successful Ancillary Revenue Strategy?

Now that you understand what ancillary revenue is and why it’s crucial, let’s explore the incredible advantages it offers to all types of hoteliers.

Whether you’re a seasoned hotelier or just starting out in the hospitality industry, these benefits can make a substantial difference in your hotel’s overall success and profitability.

• Increased Revenue

One of the most obvious benefits is the additional revenue generated. When you offer extra services like dining, spa treatments, or tours, you can earn additional income on top of what you make from room bookings. This boost in revenue can help your hotel during the off-season or slower times, just like how movie theatres rely on popcorn and snacks to keep profits flowing even when there aren’t blockbuster movies showing.

• Enhanced Guest Experience

Guests love it when you go the extra mile to make their stay enjoyable. You can improve their overall experience by offering various services and amenities. Satisfied guests are more likely to return in the future and recommend your hotel to friends and family.

• Diversification Of Revenue Stream

Relying solely on room revenue can be risky, especially when the travel industry faces challenges like economic downturns or seasonal fluctuations. Ancillary revenue diversifies your income sources, making your hotel more resilient to these ups and downs.

Just like how an ice cream shop can struggle in the winter without hot chocolate and cookies on the menu, hotels relying solely on room revenue can face challenges during economic downturns and seasonal lows. Diversifying income with ancillary services helps both businesses stay resilient.

• Community Engagement

Building relationships with local businesses and tour operators for ancillary services can strengthen your ties with the local community. This cooperation can lead to mutual benefits and goodwill, which is great for your hotel’s reputation.

• Competitive Advantage 

In the crowded hotel industry, standing out is essential. A well-planned ancillary revenue strategy can set your hotel apart from the competition. Unique services and experiences can attract travellers who are looking for something special, even if it means paying a bit more.

7 Ideas to Generate Extra Revenue at Your Hotel

Generating ancillary revenue at your hotel requires a thoughtful and strategic approach. It’s not just about offering extra services; it’s about optimizing them to meet the needs and desires of your guests while increasing your revenue.

So, here are some tried-and-true tactics to help you achieve just that:

• Market Your Ancillary Services

Effective marketing is essential to ensure guests are aware of the ancillary services you offer. Use your website, social media, and email marketing to showcase your F&B offerings, spa services, tours, and other amenities. Highlight any unique features or promotions to entice potential guests.

• Upselling and Cross-Selling 

Train your staff to upsell and cross-sell ancillary services during check-in or throughout the guest’s stay. For instance, a friendly front desk agent can suggest a spa treatment upon arrival, or a restaurant server can recommend wine pairings during dinner. Staff should be knowledgeable about the services, their benefits, and any ongoing promotions.

• Create Packages

Create value-added packages that include room accommodations and one or more ancillary services. For example, offer a “Spa Retreat” package that includes a spa treatment, or a “Romantic Getaway” package that includes a candlelit dinner. Bundling services can increase the perceived value and encourage guests to book.

• Building Partnerships with Local Businesses

Local tours, attractions, and events in your area are always looking to sell tickets, right? Well, why not offer those tickets right here at your hotel? Forge partnerships with local restaurants, theatres, and tour operators to offer exclusive discounts or packages to your guests.

Showcase and sell local artisanal products in your hotel’s gift shop. Collaborate with local craftsmen, artists, or food producers to offer unique, locally-made items. This enhances the guest experience and also promotes cross-promotion between your hotel as well as local businesses, benefiting both parties.

• Digital Concierge Services:

Invest in a user-friendly mobile app or online platform that serves as a digital concierge for your guests. This platform can offer services like in-room dining orders, spa reservations, local recommendations, and even virtual tour bookings. The convenience of accessing these services digitally enhances the guest experience and encourages them to explore and spend on additional services.

• Rental Services

If your hotel is situated near an airport or popular attractions, you can provide transportation services. Offer airport shuttle packages or partner with a local car rental service to provide guests with convenient transportation options.

Or you could offer tech rental services for guests who may need gadgets or devices during their stay. This could include renting out laptops, tablets, or even cameras. Business travellers or tourists on workation may find this service valuable, and you get an extra source of revenue.