What are the upcoming hotel revenue streams for the next 5 years?
“How can we optimize our sales to gain more revenue? What’s the upcoming hotel revenue stream for the next 5 years? Are there any new ways to generate additional revenue?” These are the most asked questions by experienced hotel owners and managers at hotel conferences in the past 2 years.
There are multiple ways to improve a hotel’s existing revenue; segmenting your guests and booking sources, dynamic pricing, effectively managing inventory, etc. Among others, there is a new revenue opportunity that has drawn the attention of hotel owners and GMs, it is called Hotel Ancillary Revenue. This idea surfaced about 3 years ago and many hoteliers are now trying to employ this in their hotels to increase overall revenue.
Why do hotel ancillary services have a huge potential to be the new revenue stream?
When we hear about something new, “Does it work?” is the first question that pops into our heads. Looking at other travel industry segments, you will find that both airlines and cruises are already taking advantage of technology solutions to increase revenue for ancillary services.
According to data from a Phocuswright Report, the global airline ancillary revenue is close to $100B in 2018 and United Airlines has earned over $5.7B of ancillary revenue in 2017. Genting Cruise reported over $400M of non-ticket revenue which constitutes over 40% of total revenue in their 2017 annual report.
Based on a report by EyeForTravel, global hotel ancillary potential revenue is estimated to be at $80-130B. In a survey conducted among hotel general managers, 57% planned to increase the investment into ancillary services in the coming years, and 23% of GMs said that their revenue management system (RMS) doesn’t account for any ancillary spending, and 20% of GMs indicated that they don’t have any RMS.
Another survey conducted among guests, 60% said they would like to purchase ancillary services/products during their stay. 63% of guests who did not purchase add-ons felt that the products or services offered by hotels were not relevant to them.
How should a hotel approach their ancillary revenue strategy?
To start, you have to take a look at the What, How and When to form a great strategy for ancillary revenue.
What to offer - Characteristic.
Different hotels have different characteristics, depending on the hotel owner, hotel location or hotel marketing position. The best practice of upselling in the travel industry is enhancing the stay and travel experience for your guests by offering them the right ancillary services that suit their needs. Hotels must offer the most relevant products that amplify the hotel’s character or culture of the destination, bringing about a more holistic guest stay experience. Guests are more willing to explore products which provides them with a deeper understanding of the local culture.
How to sell - Personalized.
Although 60% of guests would like to purchase ancillary services during their stay, there are still a significant number of guests who mention that the services offered were not relevant to them. If a hotel could personalize the services and products that are offered to each individual guest, the conversion rate will definitely increase.
It is also good to note that hard selling is no longer an effective way to target new generation customers. These customers are more willing to pay for services to enhance their experience besides only considering services that are on offer. Hotels should personalize their guests’ stay experience according to their stay preferences by offering relevant services.
When to engage – Segmentation.
The entire guest journey should be segmented into different stages as there are different needs from your guests during each segment of their journey.
Pre-arrival - Guests are still in the planning stage and are researching more information about your hotel’s facilities and services that you are offering. At this stage, guests might get in contact with your hotel for any special requirements for their stay. This is the best time to gather more information about your guests and their stay preferences through a pre-arrival survey. Additionally, there will be an increase in guest satisfaction through pro-active engagement.
In-property - Guests are experiencing their stay and are looking for more ancillary services and products to enhance their overall experience. Hotels should provide a simple and effective way for guests to access and purchase these personalized services and products.
Post-stay - Engaging guests at the post-stay stage will help hotels to manage unsatisfactory reviews and improve online reputation. This is also a great opportunity to drive more direct bookings for returning and new guests.
Hotel ancillary revenue is becoming the new revenue stream and plays an important role in revenue contribution for hotels in next 5 years. To improve your hotel’s revenue strategy and stay competitive, hotel owners and managers should take advantage of solutions to automate personalized guest engagement.
This article is from KAI Hotel Solution’s Customer Success Team.