While selling rooms is likely your hotel’s main revenue driver, it’s probably not the only one. In fact, finding ways to generate additional revenue has helped many properties pull through (or even thrive) during the pandemic.
Whether demand is high or low, having an ancillary revenue strategy can help you lift your bottom line and boost profitability. Upselling and cross-selling are two major parts of such a strategy.
But of course, there are also other ways to generate extra revenue. Read on to discover nine things you can start doing today to bring in more ancillary revenue at your hotel.
What is ancillary revenue at hotels and why is it important?
Ancillary revenue is the money you make from everything that’s not your core offering. For example, a streaming service generates its bulk of revenue from subscription fees. Other revenue such as advertising income is considered ancillary revenue. For hotels, rooms are the core product. That means ancillary revenue comes from F&B, the spa, add-on services, special offers, packages, etc.
To find out how much ancillary revenue you’re generating right now, subtract your room revenue from your total revenue. What’s left is your ancillary income. Depending on your current efforts, your star rating and target market, you may have quite a lot of room for growth here.
Putting in the work to drive more non-room sales is worth it not just for the sake of the extra revenue. Offering a variety of add-ons for your different guest segments can improve their experience at your hotel. Having unique offers or packages is a powerful way to elevate your marketing efforts and make your hotel stand out. Together, these benefits can help your hotel fare better during tough times and recover faster afterwards.
9 ways to boost ancillary revenue at your hotel
Before you get started, it’s important to get clear on your USP and which of your offers or services are already popular. This can be the base for your ancillary revenue strategy. Then look at areas where you have untapped revenue potential. How could you make the most of it?
Here are some ideas to get you going.
1. Go from giving free room upgrades to charging for upsells
Free upgrades don’t contribute to your bottom line and often represent lost revenue. Instead of just handing them out, offer upgrades at a discounted rate. That way your guests get a good deal on an amazing experience at your hotel, and you boost your earnings. Have you ever wondered how much you could earn from your hotel’s free upgrades?
2. Put together upselling offers and deals
These are a fantastic way to increase average guest spend and you can get started quite easily. Simple offers like paid upgrades, early check-in or late check-out are among the most popular upsells and require little extra work from your side. Get your offers’ timing right to further increase your results. Pre-arrival upselling works best since that’s when travellers are willing to spend extra on things that will make their stay more fun and memorable.
3. Implement cross-selling
Cross-selling at hotels means you offer add-on services or amenities that complement a guest’s stay. Usually, these cross-sells come from departments other than rooms. They could include F&B deals, spa treatments or recreational activities. You can also create packages that bundle services from several departments.
For the best results, you must suggest deals that are relevant to each guest. A record of past bookings and a look at a traveller’s profile provide valuable clues that help you customise your offering.
4. Create packages tailored to each guest segment
The better you know your target audience, the better you can reach them with attractive deals and packages that suit their needs. Segmentation is the best tool for this. It involves grouping your guests based on attributes such as length of stay, party size, age, country of origin, etc.
Once you’ve segmented your guests, you can offer each group a tailored selection of deals based on their known behaviour and preferences. For example, families with children will see an offer for an extra bed or connecting rooms while a business traveller will be promoted to book club lounge access.
Doing this by hand is possible but extremely time-consuming and error-prone, especially for larger properties with high guest turnover. Save time and always get it right with an upselling platform that automates segmentation. It pulls information from your PMS and directly sends travellers the perfect combination of offers.
5. Work with local businesses
Work with local partners to offer a broader range of services and create new upselling opportunities at your hotel. Everyone benefits from this setup. You and your partner will generate extra income while your guests have more options to customise their stay.
6. Get creative with events and conferences
Every space including your public areas, outdoor areas and banqueting rooms has the potential to bring in revenue. Think of new ways to monetise these areas apart from the traditional business meetings or weddings. New options could include hosting local artist performances, renting out areas for photoshoots or setting up a co-working space in a function room. This attracts guests who may not stay with you but are still open to spending money at your hotel. They might have a drink at your bar before or after an event or eat lunch at your restaurant when using your co-working space. And don’t forget your parking lot! Even this can drive extra income from guests who want secure parking close to the venue.
7. Open a gift shop
Travellers love souvenirs so why not offer them a selection right at the hotel? Apart from the usual items, this could also include local food and drinks or work by local artists. Again, this is an opportunity to work with your community and promote your partners.
8. Examine your results and identify your top-selling deals
Go through your results to find your bestsellers and most profitable offers. Is there a way you could further optimise them or promote them even more effectively to maximise your results? This exercise can also give you ideas for how to improve other offers that aren’t doing so well yet.
Wouldn’t it be great to see how other hotels are doing this and which offers work best for them? You can find all that in the latest Hospitality Market Report of Best Upselling Deals and Trends 2022 which analyses the top-performing deals in several regions worldwide. For instance, data shows that one property in the UK was able to generate £350K in ancillary revenue by selling upgrades and add-ons. Check the report to see how exactly they did it.
9. Leverage an upselling solution to maximise ancillary revenue
Implementing an ancillary revenue and upselling strategy may sound difficult and time-consuming. But today’s modern hotel upselling platforms do most of the heavy lifting for you. Leading providers automate everything from guest segmentation and pre-arrival messaging to approving deal requests and updating bookings accordingly. That way you can maximise your incremental revenue without having to put in a lot of extra time and effort. And the best thing is that travellers enjoy decking out their stay with fun add-ons and having the chance to fully personalise their experience.
As you can see, there are many ways to generate more income from your existing facilities and services. And adding a few new ones can be easy and have a positive impact on your guest’s stay.
Even promoting your offer can be quick and straightforward with the right tool.
Now the only question that remains is: which of these nine points will you start implementing at your hotel?