With 2017 on the horizon, the thought crossing every hotelier’s mind right now is, “How are we going to improve? What are we going to do differently next year to drive more revenue?”
While there are many strategies a hotel can employ, there is one untapped opportunity that we believe will be crucial next year. It’s called ancillary revenue; generating revenue from goods or services other than a company’s primary product offering.
For hotels, this means looking beyond the rooms and even beyond the guests.
The benefits of offering ancillary products and services include unlocking new and lucrative revenue streams and increased up-sell and cross-sell opportunities, which both contribute to your hotel’s bottom line.
How do we know ancillary revenue offers work?
If we look at other segments of the travel industry, we can see that ancillary services offer significant revenue gains.
Airlines
Ancillary services have established themselves as the bedrock of a financially secure airline industry. Ancillaries have become like merchandise; customer now have the opportunity to choose their specific experience based on individual needs. And it’s working. In 2016, ancillary services contributed more than $50 billion in revenue for the global airline industry.
An example of one airline that does ancillaries very well is Jeju Air, based in Korea. They offer free in-city travel lounges (complete with free refreshments and Wifi) that specialize in the booking of commission-based services for travelers, like airport transfers, car rentals, accommodations, and sightseeing.
Cruise Lines
The cruise industry has always generated a very large ancillary revenue stream from sales of excursions on-shore. Now they’re getting more creative in what they’re selling on-board as well to boost revenue.
Take Norwegian Cruise Line for example. They offer a variety of products and packages that travelers can buy before they even step foot on the ship. You can book dining, spa, romance and party packages, or pre-order products like wine and flowers that will be in your room upon arrival.
They have even started to sell the necessities, like extra diapers and baby wipes for the little ones. Now no parent will be caught off-guard while on their cruise! It also allows for families to pack lighter and buy what they need on-board instead, while opening up a new revenue stream for the cruise line.
How to sell ancillary products and services in your hotel
So you know that ancillary services are your ticket to higher revenues in 2017, but how do you do it? As with all marketing messages, the where and when count. Take these scenarios:
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