Mr. van Meerendonk

Revenue Management

Beyond Rooms and Rates: Packaging and Promoting Ancillary Revenue Streams

By Paul van Meerendonk, Director of Advisory Services, IDeaS Revenue Solutions

The global hotel sector has faced a variety of challenges over recent years: increased competition and financial ups and downs have become commonplace, making it an exciting time to be an hotelier. The knowledge, expertise and technology in the industry are evolving so quickly, that the very nature of how we all view individual hotels are fundamentally changing. Progressive hoteliers have realized that it is no longer just about rooms and rates but rather taking into account the total value of your asset and identifying and packaging the ancillary revenue streams that may be available to you.

For revenue management specialists across the world, significant time is spent working closely with clients to analyze their properties and identify areas where revenue potential can be expanded through packaging a range of services while instilling a strong revenue management culture within hotels of all sizes. This is still a fundamental component of success. However, the revenue management industry within hotels globally is moving at such a rate that we are constantly rising to meet new challenges and new demands, while identifying new potential revenue opportunities.

While areas such as food and beverage, spa facilities, conference facilities and even additional leisure options such as golf courses, make up a hotelier's overall 'Asset', often overlooked is the role hotel technology can play in helping to package and promote offerings that expand beyond room rates.

The packaging and promotion of ancillary services is still based on the core themes of revenue management, such as selling the right room rates, to the right customers at the right time based on accurate demand forecasting and pricing. Only this time, we take those lessons and we begin looking at how an hotelier can also begin selling customized ancillary products or packages to the right customers, in the right place at the right time based on the availability of those additional streams on a hotel-by-hotel basis.

Importantly, simply packaging items together will not fit all guest requirements, so the ability for customers to 'pick and mix' additional items is ideal. Typically the offering includes items such as champagne, chocolates or flowers, but savvy hoteliers should be more creative with their offering and add spa treatments, golf rounds, water in room, mini-bar in the room etc. In fact, anything that has been identified as something which guests may want. Hoteliers may even want to add a small concession, if guests book ancillaries in advance of their stay, or at least trial the impact on demand of these services. It is important that hoteliers do not wait to be asked for these services by guests, as they could run the risk of customers going elsewhere (if a full range of experiences isn't promoted by the hotel) which can mean a loss in incremental revenue. Hoteliers should also encourage staff to focus on up-selling ancillary services to arriving guests at check-in, which can contribute significantly to your top line, and ensure that all front of house staff are aware of the full range of services that can be discussed or suggested to guests.

IdeaWorks and Amadeus released a report which showed that results from an analysis of 2009 financial filings made by 96 airlines indicate ancillary revenue increased to a total of $13.5 billion for 2009 . If this report is anything to go by, and the hotel industry continues on the path of developing ancillary revenue streams, then there is substantial proof that this could be the next big profit-generating area for the entire industry.

The additional revenue that can be generated from strategically thinking about ancillary revenues and planning and executing strategies correctly is substantial, and can go a long way to boosting overall revenue across the estate.

So what should hoteliers be considering when looking to maximize their ancillary revenue potential? The following check-list is a good starting point:

  • Understand the profitability of all your offerings - packages, food, drinks, spa - as well as what the demand for each of these are
  • Identify the biggest revenue opportunities - food & beverage, conference facilities, spa, golf etc
  • Prioritize by revenue and ease of implementation
  • Set the targets and define a clear action plan
  • Make sure you have the right information and the key support needed to achieve your goals

By understanding what each customer from any given market segment is likely to use, you can make better decisions about which customer should receive that last available room, who should be offered free or discount breakfast options, complimentary spa treatments for a limited time to drive demand in low periods etc. For example, one customer's demand may result in high revenues but low profits, whereas another customer could provide lower revenues but much greater profits. Usually, profit maximization is the goal. Systematically having this data available will speed up or automate significant parts of the decision making process, and is just as relevant to group business as it is to transient bookings.

This leads us into one of the major areas that often emerges when looking at your hotel with a view to maximizing ancillary revenue streams, which is, of course, group bookings. The core strategic thinking that governs successful group bookings, for any hotelier is, the ability to systematically and quickly determine which business to accept and which business to reject based on the overall value to the Asset with regard to rooms, restaurants, catering, phones, spa, casino, golf etc. The challenging questions that hoteliers must ask themselves in this area should we accept a group and, if so, at what price? What other business do we displace? What are the ancillary revenues and costs? Are there alternative dates available? Is there a consistency throughout sales and reservations in evaluation process? And what will it be a time consuming booking, sometimes to the detriment of other guests at smaller hotels?

Ancillary revenue presents hoteliers around the world with clear opportunities for incremental business growth. By focusing efforts on better understanding your customers and training your staff to promote the full range of services your facility can offer guests - savvy hoteliers stand to benefit from incremental revenue streams that industries like the airline sector have learned to tap into for some time.

As Director of Advisory Services for IDeaS Revenue Solutions, Paul van Meerendonk leads a global team of revenue management advisors focused on hotel revenue optimization projects. Mr. van Meerendonk is responsible for global development, management and operations of the Advisory Services team. He oversees the hiring, training and management of industry-leading consultants located in London, Beijing, Singapore and Atlanta. Mr. van Meerendonk also represents IDeaS on industry thought-leadership initiatives related to trends and best practices within revenue management, including authoring a number of white papers, conducting public speaking engagements, as well as leading key client webinars with an average audience of over 200 global representatives. Mr. van Meerendonk can be contacted at +44 (0) 118-82-8100 or Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:

AUGUST: Food & Beverage: Multiplicity and Diversity are Key

Larry Steinberg

The foodservice industry is one of the oldest and most important. Consumers from all demographics rely on it virtually every day for sustenance. In fact, in the U.S. alone, itís a nearly $800 billion industry thatís extremely competitive, with hundreds of new establishments popping up every year, and much of this new business is the result of increased consumer demand. Consumers want more options. For every practiced chef, there is a collective of guests eager to spend their hard-earned dollars on something exotic and different. They want to experience a bit of culture by way of their next meal, and they want to find it using the latest technology. READ MORE

Frank Sanchez

About two years ago, I started my career at the Chicago Marriott Downtown Magnificent Mile. I came from San Diego, California, the apparent capital of farmerís markets. When I moved to Chicago in late-October, the number of farmerís markets had already begun to taper off and all that was left of the hotelís rooftop garden was the sad remnants of a summer full of bounty. However, I was in for a pleasant surprise. The Chicago Marriott Downtown operates a year-round experience to create food from scratch that gives customers fresh and nutritional options. I was thrilled to join a team that can tell a customer that the very greens on their plate were grown just floors above them. READ MORE

Thomas  McKeown

To serve todayís eclectic, socially engaged and sophisticated guests, hotels and chefs need to get creative, change their thinking and push back some walls Ė sometimes literally. The fun thing about meetings hotels is that they are a different place just about every week. One week weíre hosting a bridge tournament, the next a corporate sales team, or a dentistsí conference, or sci-fi fans in costumes, or cheerleaders jumping for joy. You name the group, and our hotel has probably welcomed them. READ MORE

Elizabeth  Blau

Over the past several years, many of us have watched with excitement and interest as the fast-casual restaurant segment has continued to boom. More and more, talented chefs with fine dining pedigrees are bringing their skills, creativity, and experience to concepts built around speed, approachability, and volume. Right now, the ability to offer a gourmet experience at all price points is as compelling to restaurateurs and diners alike. READ MORE

Coming Up In The September Online Hotel Business Review




{300x250.media}
Feature Focus
Hotel Group Meetings: Blue Skies Ahead
After a decade of sacrifice and struggle, it seems that hotels and meeting planners have every reason to be optimistic about the group meeting business going forward. By every industry benchmark and measure, 2017 is shaping up to be a record year, which means more meetings in more locations for more attendees. And though no one in the industry is complaining about this rosy outlook, the strong demand is increasing competition among meeting planners across the board Ė for the most desirable locations, for the best hotels, for the most creative experiences, for the most talented chefs, and for the best technology available. Because of this robust demand, hotels are in the driverís seat and they are flexing their collective muscles. Even though over 100,000 new rooms were added last year, hotel rates are expected to rise by a minimum of 4.0%, and they are also charging fees on amenities that were often gratis in the past. In addition, hotels are offering shorter lead times on booking commitments, forcing planners to sign contracts earlier than in past years. Planners are having to work more quickly and to commit farther in advance to secure key properties. Planners are also having to meet increased attendee expectations. They no longer are content with a trade show and a few dinners; they want an experience. Planners need to find ways to create a meaningful experience to ensure that attendees walk away with an impactful memory. This kind of experiential learning can generate a deeper emotional connection, which can ultimately result in increased brand recognition, client retention, and incremental sales. The September Hotel Business Review will examine issues relevant to group business and will report on what some hotels are doing to promote this sector of their operations.