Since 2008, airline revenue generated from ancillary services such as meals, onboard WiFi and preferred seating has almost quadrupled. Hotel companies haven't been nearly as fortunate.
Lodging operators who have long counted on high-profit revenue streams from services such as phone calls, WiFi and parking are finding that milking those cash cows has become progressively more difficult.
The reason, according to a recent report by PKF Consulting, is that as room rates rise, guests are looking to save elsewhere.
While revenue from room rates rose 4.4% last year, accounting for almost 68% of total hotel revenue, sales from food and beverage and revenue from leasing hotel space to vendors such as magazine racks and gift shops were little changed in 2012. Revenue from what PKF calls "other operated departments" – a catch-all for things like WiFi, parking, phone charges and in-room entertainment – also was virtually unchanged, falling just 0.8% from 2011.
Some of this decline has been self-inflicted, as hotel owners looked to recoup losses from the recession, first by dropping rates, then by throwing in complimentary services like parking, local phone calls and business provisions such as fax services.
"Up until now, 90% of the focus has been getting the guest into the hotel," said Robert Mandelbaum, director of research at PKF. "We're just starting to see room rates rise above their long-run average."
Terming the trend "a real problem," Rick Swig, president of hotel consultant RSBA & Associates, said, "We're giving stuff away that we used to charge for, and incremental revenues are slipping."
Additionally, while leisure travel has bounced back, group travel has been less robust as businesses continue to hold back on their travel spending. While the Global Business Travel Association last month boosted its 2013 U.S. spending-growth forecast to 5.1% from its prior estimate of 4.6%, business-travel spending rose just 1.8% last year, according to the association.
That means that hotels have less opportunity to generate revenue through renting out meetings rooms or catering business conferences.
But while freebies and group spending may be a cyclical effect, there could be more permanent factors forcing hoteliers to look beyond room charges for revenue. The most notable factor is technological, as the ubiquity of mobile phones has all but eliminated the need for hotel room phone calls.
There's more… continue reading the complete article "Unlike Airlines, Hotels Failing to Cash In on Ancillary Charges " on the Travel Weekly website
