Ancillary revenue refers to additional revenue sources generated by a hotel beyond room revenue. These can include fees for services like Wi-Fi, parking, spa treatments, room service, or the sale of merchandise. Ancillary revenue can significantly contribute to a hotel’s overall profitability, making it an important area for revenue managers to focus on.
Here are some key aspects of ancillary revenue:
- Variety of Sources: Ancillary revenue can come from a wide range of sources, allowing hotels to diversify their income streams and reduce reliance solely on room revenue.
- Guest Experience: Ancillary revenue opportunities are often tied to enhancing the guest experience. For example, offering premium Wi-Fi or spa services can provide added value to guests and encourage them to spend more.
- Seasonality: Ancillary revenue can be seasonal, with certain services being more popular during specific times of the year. Revenue managers must consider seasonality when planning and pricing ancillary offerings.
revenue management activities related to ancillary revenue
- Product Bundling: Revenue managers can package ancillary services with room bookings to create attractive value propositions for guests. For example, they may offer a package that includes a room, breakfast, and spa treatment at a discounted rate.
- Dynamic Pricing: Similar to room rates, revenue managers can use dynamic pricing for ancillary services to adjust prices based on demand and market conditions. This can help maximize revenue and optimize profitability.
By effectively managing ancillary revenue, revenue managers can increase hotel profitability, enhance the guest experience, and gain a competitive advantage in the market.