In today's fast-paced and ever-evolving hospitality industry, hotels are constantly looking for innovative ways to drive revenue and deliver unforgettable guest experiences.
Whether they’ve maxed out their Average Daily Rate (ADR) or need to weather seasonality through ancillary revenue, hoteliers are increasingly looking toward non-room income sources to enhance their offerings and profitability.
This becomes more challenging as the industry faces evolving consumer preferences and increased competition.
Daniel Berman, President & CEO at AD1 Global, notes: "The hospitality industry is a constantly evolving realm, shaped by swiftly changing trends and consumer preferences, particularly in the digital age. In my experience, staying ahead of the curve involves a strategic focus on market research and data analytics."
Below, we outline actionable insights and real-world examples for hoteliers aiming to navigate these opportunities effectively. Through strategic partnerships, enhanced on-site offerings, dynamic pricing strategies, technology utilization, sustainable practices, and the innovative use of space, we showcase how leading hotels reinforce their market position and enrich the guest experience.
Maximize Ancillary Revenue with Enhanced On-Site Offerings
While room sales remain the cornerstone of revenue for hoteliers, did you know that ancillary sales can boost your bottom line by a substantial 25 percent?
A recent EyeforTravel report highlights that nearly one-third of hotels see a 25% increase in their bottom line due to ancillary sales. Despite the global market for these hotel services being valued at over $100 billion each year, a significant number of hotels still haven't tapped into the lucrative opportunities that ancillary services, such as spa treatments, fitness classes, dining experiences, and event hosting, have to offer.
The key is to get creative and cater to current trends. Wellness retreats, farm-to-table cooking workshops, sustainable living seminars — the possibilities are endless.
A prime example of this strategy in action is The Cosmopolitan in Las Vegas, which boasts over 20 distinctive dining concepts. These range from high-end restaurants to more relaxed eateries, significantly enhancing its food and beverage revenue and sets a benchmark in the hospitality industry for effectively capitalizing on ancillary services.
Leverage Local Partnerships for Exclusive Experiences
One of the most effective strategies for generating additional income is by forging partnerships with local businesses and attractions.
Imagine private wine tastings at nearby vineyards, hands-on workshops with area artists, or adrenaline-pumping adventures with local outfitters — all seamlessly packaged and delivered to your guests.
The Ritz-Carlton, Kapalua in Hawaii, has mastered this approach through its partnership with Jean-Michel Cousteau's Ambassadors of the Environment program. It offers guided snorkeling excursions, hikes, and underwater photography classes that showcase the area's natural wonders while supporting conservation efforts. It's a win-win that adds value for guests and the local community.
Adopt a Dynamic Pricing Strategy for Ancillary Services
When it comes to dynamic pricing, hotels have long been leveraging this strategy to optimize room rates based on factors like seasonality, day of the week, and occupancy levels. However, many hotels miss out on opportunities to apply this same strategy to their ancillary offerings.
"Dynamic pricing for ancillary services allows hotels to capture more value from each guest by offering the right price at the right time," says Darko Vasic, a spa revenue management expert
For example, hotels could charge premium prices for spa treatments or golf tee times during peak periods while offering discounts during slower times to stimulate demand. Prices could also be adjusted based on the guest's length of stay, room type booked, or loyalty program status. Tools like Book4Time's spa and ancillary revenue software equip hotels with the data necessary to make well-informed decisions regarding yield management through dynamic pricing.
Marriott International provides a compelling case study of the power of dynamic pricing for ancillary services. Suzanne Holbrooke, Marriott's Senior Corporate Director of Spa Operations, launched a company-wide program over a decade ago called Spa Plus. This initiative financially incentivized front desk staff and therapists to offer treatment upgrades like face masks, CBD treatments, and scalp massages for an additional cost. "This increased revenue by $8 million in 2019 with an 80% profit," Holbrooke revealed in an interview with Spa Executive magazine.
By expanding this proven strategy beyond room rates to ancillary offerings, hotels can unlock significant untapped revenue and take their profitability to new heights.
Utilize Technology to Offer Unique In-Room Experiences
Technology is also transforming the in-room experience and opening up exciting new revenue streams. From VR tours of local hotspots to on-demand fitness and wellness content, hotels can monetize premium digital offerings that enhance the guest’s journey.
Take Aloft Hotels' robot butler, Botlr, which delivers essentials to guest rooms 24/7, or Yotel New York's Yobot, a robotic luggage concierge that streamlines the check-in process. These tech-driven touches not only create buzz and differentiate the brand but also open the door to additional revenue opportunities.
With the rise of smart room technology, guests can personalize everything from lighting and temperature to entertainment options, paving the way for tailored upsell possibilities that enrich the stay experience. By leveraging data-driven insights and automation, hotels can present the right offers to the right guests at the optimal time, driving ancillary revenue while delivering a superior, highly customized experience.
Promote Sustainable Practices for a Competitive Edge
Increasingly, sustainability is no longer a niche concern — it's a major deciding factor for a growing number of travelers. By implementing and promoting eco-friendly practices, hotels can attract a higher-paying, environmentally conscious clientele.
Six Senses Resorts has gone all-in on this trend, empowering guests to offset their carbon footprint and engage in conservation initiatives. The approach has been a resounding success, drawing in a devoted following of green-minded guests and generating additional revenue in the process.
Capitalize on Space as a Service
Finally, don't overlook the untapped potential of your hotel's physical spaces. With remote work on the rise, properties can monetize underutilized areas by converting them into coworking hubs or event venues.
Accor's Wojo brand has led the charge in this arena, transforming hotel lobbies and meeting rooms into vibrant coworking spaces that attract a whole new segment of customers. By thinking outside the traditional guest room box, hotels can unlock fresh revenue streams and create buzz-worthy offerings that resonate with today's mobile workforce.
Innovate for Profitable Growth
At the end of the day, exploring ancillary revenue streams is all about creativity, adaptability, and a deep understanding of your market and guests. By focusing on experience-driven offerings, strategic partnerships, cutting-edge technology, and a commitment to sustainability, hotels can uncover new avenues for growth and profitability.
The most successful brands are those that stay nimble, listen closely to guest feedback, and relentlessly seek out ways to stand out in a crowded marketplace.
With the right mindset and approach, your hotel can boost its bottom line and cultivate a unique identity and loyal following that will keep guests coming back for more.
Ready to take your hotel's revenue strategy to the next level? TripFusion's innovative technology solution drives revenue by seamlessly packaging spa, golf, & other experiences into your hotel bookings. Visit TripFusion.com today to discover how our cutting-edge solutions can transform your hotel's profitability and guest experience. Your journey to revenue success starts now!
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