Building An Ancillary Revenue Strategy

By Sarah McCay Tams - Director of Content, EMEA at Duetto

Visit us at HITEC booth 2507
11 November 2019
McCay Tams

Ancillary revenue is everything that is not rooms. It can range from ledger accounts to car parking, F&B, Wi-Fi and more. Ancillary is playing a more important role in driving revenue for hotels, as more hotels look to embrace a total revenue strategy.

It was a hot topic up for debate at the recent Dublin Revenue Lab, organised by Avvio and Duetto, in a panel discussion moderated by Jutta Moore, Managing Director, Moore Hotel Consulting.

Emmanuel Lacour, Group Director of Revenue, Edyn Group, who came to the hospitality industry from airlines, pointed out how airlines were the early adopters of ancillary revenue, with budget providers such as Ryanair and easyJet driving up to 40% of revenue from ancillaries.

"I'm sure that nobody in the room is making more than 5% of their revenue with ancillaries. So, you can see how much money that represents. IAs a hotel group, we'll probably never achieve 40% of revenue as ancillary. But the size of the opportunity for me for an hotel group is around 10%-15% of the revenue can be ancillaries. And that's what I'm trying to achieve in my current position," he said.

The opportunities are there, it's all in the way you package your ancillary offerings.

Nicola Rhone, Chief Commercial Officer, Great National Group, talked to the audience about those opportunities.

"It's finding profits in all sorts of experiences that you want guests to have in your hotel. That's what the airlines are incredibly good at, actually. It's just finding the simple things and making them sound like it's something new and something fantastic that you really must experience," she said.

"Take something like a bottle of wine in your room on arrival. Quite often when we're working with a hotel, they will list it during the booking process as just that: a bottle of wine in your room on arrival. And usually it might be something like £25.

"Customers aren't silly. They're thinking, 'Well, there's a really nice win in Waitrose round the corner'. So, it's about how you sell that bottle of wine that will be the difference between whether I choose to buy it through the booking process or whether I choose to sneak it in my suitcase.

"It's finely chilled or it's served at room temperature and it has glasses and there might be an extra treat, and here's a little bit of information about the wine and where we've sourced it. All of a sudden I'm a lot more interested than you've got a bottle of house wine in your room," Rhone explained.

Thinking Out Of The Box

From full service hotels offering wine on arrival, the conversation switched to how to squeeze ancillary out of a limited service offering, such as Yotel. The cabin hotels, inspired by first-class air travel, offer a very pared down hospitality experience. However, Sushrut Athavale, Director of Revenue Management, Yotel, explained how the company has diversified its offering with shower rooms and lounges at its seven airport hotels.

"I try to resell my shower rooms on an hourly basis," Athavale said.

"It's basically a bedroom without a bed so people can actually go and do whatever they need to do to get ready for the next flight. We give them lounge access, which gives them coffees, teas, gets them ready for the next flight. So in that respect it becomes a different sort of an offering. We need to think out of the box on how we're going to optimize that."

The session continued with the panellist discussing how ancillary spend cannot be a one size fits all approach, and how hotels need to have a very clear strategy for each type of guest to really see the benefits.

"There is something to be said for having a proper strategy that starts with revenue but is backed by marketing and then the actual service staff on property level at the hotels. It needs buy-in from the whole operation if ancillary is really going to work as a revenue stream," concluded Rhone.

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Sarah McCay Tams

Sarah joined Duetto in 2015 as a contributing editor covering Europe, Middle East & Africa (EMEA). In 2017, she was promoted to Director of Content, EMEA. An experienced B2B travel industry journalist, Sarah spent 14 years working in the Middle East, most notably as senior editor – hospitality for ITP Publishing Group in Dubai, where she headed up the editorial teams on Hotelier Middle East, Caterer Middle East and Arabian Travel News. Sarah is now based back in the UK.