Question for Our Revenue Management Expert Panel:

The importance of Ancillary Revenue Management is growing. What ARM strategies can be used to increase room revenue / revenue per guest?
(Question proposed by Pablo Torres)

Industry Expert Panel

Our Industry Expert Panel exists out of professionals within the hospitality & travel Industry. They have comprehensive and detailed knowledge, experience in practice or management and are forward-thinking. They are answering questions about the state of the industry. They share their insights on topics like revenue management, marketing, operations, technology and discuss the latest trends.

Theresa Prins
Theresa PrinsFounder, Revenue Resolutions

“I try to promote what I call ‘keeping the money in-house’. To increase room revenue through demand, we can either offer a discount or a value add. I recommend you take the value of the discount and turn it into a revenue-generating value add. For example, if you were to give a 10% discount and this amounts to $20, why not keep your rate, but offer a $20 voucher to be spent on drinks in the restaurant with their meal.

The guest enjoys better value for their money and the hotel can keep the revenue in-house. Plus, if the guest spends this value-add, they will also buy dinner to qualify for it and in turn grow the revenue per available guest.”

Nikhil Roy
Nikhil RoyRevenue & Pricing Manager, Key Hospitality B.V.

“Examples of Ancillary Revenue Management can be:

  • Web shop (can be connected with the hotel WiFi, enabling guests to order items and add it to their bill, e.g., breakfast delivered to room, room service, food & beverage, etc.)
  • Late check-out and early check-in
  • Room upgrade (a week prior to check-in, hotels can email their guests offering the chance to upgrade their reservation for a fee. This can be used when the demand is low)
  • Partnering with establishments located around the hotel, e.g., spa, a salon, restaurant/cafe, travel agency, car rental service, etc.
  • Hotel merchandise and souvenirs, gift boxes
  • Areas such as meeting rooms can be rented out to companies who are looking for short term office spaces
  • Create packages for guests that include F&B, spa, recreational activities, etc. 
  • Entertainment on-demand (e.g., Netflix and a subscription to Spotify) for instant access to quality content and music apart from the regular TV channels that are complimentary”

Daniel Feitosa
Daniel FeitosaRevenue Management Specialist

“There are many opportunities to grow ancillary revenue with guests in-house. The upselling strategy is a real opportunity to be managed. How many suites are empty when guests could avail of them if they receive an attractive offer to fit their needs?

Front office staff being trained in Sales to understand guests and the products they can offer can be useful to make guests aware of the F&B environments. If we have also some incentives to the staff based on Ancillary Revenue, we are creating a Revenue mindset amongst all the staff. Every team member needs to know the answers to these questions: What brings this guest here? What we can do to provide them with a better experience?

Let’s think about it. I’ve seen great Front Office staff sell suites based on a good understanding of the person in front of them and a smooth check-in conversation.”

Chaya Kowal
Chaya KowalDirector of Revenue Management, Potato Head Family

“Over the past years, Revenue Management has been evolving from the traditional Room Revenue Management to a Total Revenue Management (TRM) approach. As hotels are now starting to re-open after closure due to the pandemic, cost control and effective staffing are one of the main focuses. Directly related to this is “Ancillary Revenue Management” (ARM).

ARM consists of optimizing every revenue-generating stream of a hotel. It is both about controlling the costs and optimizing / maximizing revenue generated in all sectors. It consists of looking into the small loopholes and all those untapped profit-generating potentials. The same principles applied to rooms can also be applied to other revenue-generating areas.

ARM is not only about packaging other elements like F&B or Spa with the rooms; but it means going into real detail about every revenue-generating point of the hotel; like Events space optimization (revenue per available sqm, Revenue per participant, enquiry conversion), F&B (seat efficiency, Revenue and Profit per available seat per hour, inhouse and external guests), Beach club (daybeds bookings and efficiency per hour, Revenue per day bed and per guest), Spa and wellness (Revenue per available treatment hour) and also look into factors like peak hour, time of the day, day of the week vs weekend, inhouse guests and external guests, etc.

Creative thinking:
The above mentioned elements are still the standard way of doing things in ARM. If we would like to think outside of the box, we would go one step further and look into more creative / innovative solutions. For example:

  • Sell rooms for a few hours. Some airport hotels are already doing this and city hotels with large inventories could also do something like this for business travellers who need to rest and recharge between meetings (when they are on a day trip for example).
  • Showroom for rent – maybe there is a room that is too noisy for someone to sleep in (too close to a restaurant for example) but it would be perfect for an event. Instead of keeping it on an “out of order” status, it could probably be used by people who need a temporary showroom (for their jewellery business for example) / or travelling jewellers.
  • Special rates for rooms can be offered for day guests at the resort’s Beach club for example. For resorts with a casino or a golf course, they can offer additional services to their guests based on consumption. If rainy days affect the beach club revenue, what could be done about it? A special offer for rainy days combining spa maybe?

Profit management:
I think it is also the right time to start analyzing (if you are not already doing it), the COS (Cost of Sale) per segment / channel. How much are you spending on each OTA for example vs the Revenue and profit that you are generating? This leads to the NRevPar – Net Revenue per room and allows you to account for expenses. A lot of hotels are shifting KPIs towards GOPAR – Gross Operating Profit per room and TRevPAR – Total Revenue per Room.

Revenue Management is not all about numbers and analytics:
Especially right now, it is important to understand what the customer wants. For example, adapted by launching a travel sustainable badge.

An integrated system across all POS would enable the hotel to collect and analyze data more easily and take correct actions with regards to optimizing total revenue generated.

A holistic approach to revenue management:
Build a Revenue Management Culture across the whole hotel / company. It is important for everyone to understand the principles of Revenue Management in order to work together as a team.

ARM doesn’t stop at a Revenue Manager’s role! Upselling or cross-selling for example can be done at every level and at different stages (pre-arrival, upon check-in and also during the stay). Staff incentives can be put into place for added motivation. There are various ways to increase a guest’s spend during the stay – special offers for slow hours, spa deals, etc.

In summary, every hotel is different and you can be creative in the ways you approach ARM.”

Krunal Shah
Krunal ShahCluster Director of Revenue, Dorsett Hospitality International

“For me, Ancillary Revenue Management is a part of Total Revenue Management. Hotels/Resorts having conferencing, meetings and events, Weddings, Restaurant & Bar facilities all depend heavily on Ancillary Revenue Management.

Profit margins on such revenues generated are much higher, which helps achieve more revenue per guest. It’s very important to do displacement analysis for Groups including Ancillary Revenue depending on the “day of the week” pattern. This has a direct impact on your TrevPAR and GOPPAR. It also helps hotels/resorts to diversify their revenue streams. It is very important to identify the services that add value to your package offered.

For example, I previously worked at a resort and we were heavily dependent on Ancillary Revenue streams and rooms were sold with packages. Obviously, I would prefer a guest spending on F&B services in the hotel/resort against a guest having a room with breakfast. But again, this depends on the requirements and seasonality of the hotel/resort at different times of the year.”

Tanya Hadwick
Tanya HadwickGroup Revenue & Yield Leader, SunSwept Resorts

“An interesting question when working in ultra inclusive resorts, as it takes some real thought on how you can increase Ancillary Revenue. It comes down to what you have available to offer at additional costs, and what the guest is prepared to spend. For many, the aim of an all-inclusive is to have already budgeted the cost of the trip. From an F&B perspective, some examples include high-end specials, such as surf and turf with lobster and steak, champagne, high-end wines and exclusive wine paring menus. We typically use a variety of methods to update the guests, i.e., from using the in-room tablets to the team upselling.

As a resort, we are lucky to have great spa facilities, where additional treatments can be suggested. We also have various water sports and one-on-one classes on offer. Having spent time looking at all the costings, we are also aware of when and how to mix and match with the rooms to secure the best results. It does however, all come down to the team’s engagement, how familiar they are, their level of comfort in suggesting items to the guests and whether or not they are incentivised to make such suggestions.”

Sergio Sartori
Sergio SartoriGroup Senior Manager Revenue, Ruby GmbH

“You could offer an extended service, e.g., in-room service or in F&B service. Furthermore, small unused conference rooms could be offered as co-working spaces. Also, unused space could be offered as an event stage for local artists.”

Daphne Beers
Daphne BeersOwner, Your-Q Hospitality Academy

“Packages that are focused on local knowledge and products, sustainability initiatives and health & safety packages (in-room dining) can drive revenue/decrease cost. One example is the “hotel for trees” initiative where you donate part of the savings in cleaning costs to planting trees if a guest decides to skip daily cleaning, increasing total NET results.”