Identifying new revenue streams in Hospitality: From traditional to new streams of ancillary revenue
Pablo Torres
Help you optimize the Total Revenue of your property | Training, mentoring and consulting | Book author | Top 25 Global Social Media Infuencer in Hospitality
As the hospitality industry continues to evolve, identifying and optimizing ancillary revenue streams has become a top priority for hotels and resorts worldwide. Ancillary revenue presents a significant opportunity for businesses to increase profitability while enhancing the overall guest experience.
In this article, inspired by the second chapter of my book, we’ll explore both traditional and emerging ancillary revenue streams. These revenue streams are crucial for any hotel looking to thrive in today’s competitive market by offering unique, memorable experiences to their guests.
The importance of Ancillary Revenue
Ancillary revenue streams are essential for ensuring financial stability and growth. By identifying diverse revenue sources beyond room bookings, hotels can create new opportunities to engage guests and drive profits. These can range from traditional services like room service and spa treatments to more innovative streams, including wellness programs and sustainability initiatives.
As the needs and preferences of guests evolve, hotels must be proactive in identifying new opportunities for ancillary revenue. The goal is simple: maximize income while providing a better, more personalized guest experience.
Traditional Ancillary Revenue streams
1. In-room dining
In-room dining/room service has long been a staple in the hospitality industry, offering guests the convenience of enjoying meals without leaving their rooms. The service is especially popular in luxury properties, where guests expect a certain level of personalization and flexibility.
While some hotels, particularly in the mid-range market, have scaled back or eliminated in-room dining due to staffing challenges, others have evolved their offerings to increase profitability. For instance, properties like the Four Seasons Hotel in Los Angeles introduced 24-hour in-room dining focused on healthy, locally sourced ingredients. This not only boosted guest satisfaction but also increased dining orders by 20%, showing how strategic modifications to traditional services can drive additional revenue.
2. Spa and Wellness services
Spa and wellness services are another reliable source of ancillary revenue, particularly for hotels aiming to attract high-end leisure travelers. The demand for wellness services has expanded from just massages and facials to full holistic health programs, catering to a growing market of guests looking to rejuvenate during their stay.
The Talise Ottoman Spa at Jumeirah Zabeel Saray in Dubai, for instance, is renowned for its luxurious treatments and bespoke wellness programs. Hotels that create comprehensive wellness experiences can attract a wider audience—from business travelers looking to relax after meetings to tourists seeking a retreat from their hectic schedules-. Spa and wellness services also offer opportunities for cross-promotion, such as bundled accommodation and treatment packages, further boosting revenue.
3. Minibar sales
Minibars have long been a feature in hotel rooms, but their profitability has dwindled in recent years as many properties fail to keep up with guest preferences. However, by stocking minibars with high-quality, locally sourced products or offering customizable options based on guest preferences, hotels can breathe new life into this traditional revenue stream.
For example, properties like The Crane Barbados offer pre-arrival stocking options and local specialties in their minibars, which appeal to guests looking for unique experiences. Customization is key in this area—allowing guests to choose what goes in their minibar adds an extra layer of personalization and convenience.
4. Meetings and events
Meeting and event spaces are a significant driver of ancillary revenue, especially for hotels with large conference facilities. Offering customizable packages that cater to corporate clients or event organizers, means that hotels can enhance profitability in this area.
Beyond simply renting space, hotels can offer additional services like event planning, personalized menus, or high-end audiovisual equipment. Personalization is crucial in this area—taking the time to understand the client’s needs and suggesting enhancements (like barista services instead of standard coffee breaks) can generate higher revenue and create a more memorable event.
Emerging Ancillary Revenue streams
While traditional streams remain profitable, hospitality businesses must embrace new opportunities to stay competitive in a rapidly changing landscape. Emerging trends, such as wellness programs, sustainable tourism, and technology-driven services, present exciting opportunities for innovation and growth.
1. Wellness programs
Wellness has evolved from a luxury offering into an essential service for many hotels. Guests are increasingly looking for wellness-focused stays, which can include fitness classes, meditation sessions, nutritional consultations, and more. And that is a lucrative market.
Westin Hotels & Resorts, for example, has successfully introduced the "RunWESTIN" program, offering guided runs, running maps, and gear rentals. This program attracts health-conscious travelers, boosting revenue and enhancing the overall guest experience. Wellness is a long-term trend, and hotels that integrate these services can benefit from repeat business and increased guest loyalty.
2. Sustainable tourism initiatives
Sustainability is no longer a buzzword but an expectation for many travelers. Hotels that embrace eco-friendly practices can appeal to this growing demographic. Offering sustainable dining options, eco-friendly room upgrades, and green tours are some examples of how properties can integrate sustainability into their ancillary revenue streams.
For instance, Banyan Tree Hotels & Resorts launched the "Stay for Good" program, allowing guests to participate in conservation activities and eco-friendly practices during their stay. This not only appeals to eco-conscious travelers but also reinforces the hotel’s brand reputation, attracting new guests and driving revenue.
3. Retail and merchandise
Many hotels are now offering branded merchandise and local artisan products in their on-site boutiques, which allow guests to take a piece of their experience home whilst hotels can create a profitable retail space within the property.
Collaborating with local artisans can add an authentic touch to hotel retail offerings, giving guests the opportunity to purchase souvenirs or gifts that reflect the local culture. This adds another layer of revenue generation while supporting local businesses and creating a more meaningful guest experience.
The power of personalization
Personalization is a critical strategy for maximizing ancillary revenue. To do so, leveraging guest data is key. That way, hotels can offer customized experiences tailored to individual preferences, significantly increasing the likelihood of guests purchasing additional services.
Accor Hotels’ ALL program is a great example of this. The program uses guest data to offer personalized upgrades, restaurant recommendations, and activity suggestions based on past behavior and preferences.
Marketing ancillary services
A well-rounded marketing strategy is crucial to promoting ancillary services. Hotels should leverage multiple channels, including digital platforms, to reach potential customers and showcase their unique offerings.
Measuring and optimizing Ancillary Revenue
To ensure the success of ancillary revenue initiatives, hotels must continuously track performance and adapt their strategies accordingly. Key Performance Indicators (KPIs) like average revenue per guest, conversion rates for upselling, and guest satisfaction scores are essential for measuring the effectiveness of ancillary services.
Continuous improvement is key—regularly reviewing guest feedback and staying informed about industry trends ensures that ancillary offerings remain fresh, relevant, and profitable.
Recapping
The potential for ancillary revenue in the hospitality industry is vast, and hotels that successfully identify and optimize these revenue streams will be well-positioned for long-term success. Hotels willing to offer a mix of traditional and emerging services, personalizing guest experiences, and employing effective marketing strategies, can significantly enhance both their profitability and guest satisfaction.lary revenue streams are essential for ensuring financial stability and growth. By identifying diverse revenue sources beyond room bookings, hotels can create new opportunities to engage guests and drive profits. These can range from traditional services like room service and spa treatments to more innovative streams, including wellness programs and sustainability initiatives.
As the needs and preferences of guests evolve, hotels must be proactive in identifying new opportunities for ancillary revenue. The goal is simple: maximize income while providing a better, more personalized guest experience.
Traditional Ancillary Revenue streams
1. In-room dining
In-room dining/room service has long been a staple in the hospitality industry, offering guests the convenience of enjoying meals without leaving their rooms. The service is especially popular in luxury properties, where guests expect a certain level of personalization and flexibility.
While some hotels, particularly in the mid-range market, have scaled back or eliminated in-room dining due to staffing challenges, others have evolved their offerings to increase profitability. For instance, properties like the Four Seasons Hotel in Los Angeles introduced 24-hour in-room dining focused on healthy, locally sourced ingredients. This not only boosted guest satisfaction but also increased dining orders by 20%, showing how strategic modifications to traditional services can drive additional revenue.
2. Spa and Wellness services
Spa and wellness services are another reliable source of ancillary revenue, particularly for hotels aiming to attract high-end leisure travelers. The demand for wellness services has expanded from just massages and facials to full holistic health programs, catering to a growing market of guests looking to rejuvenate during their stay.
The Talise Ottoman Spa at Jumeirah Zabeel Saray in Dubai, for instance, is renowned for its luxurious treatments and bespoke wellness programs. Hotels that create comprehensive wellness experiences can attract a wider audience—from business travelers looking to relax after meetings to tourists seeking a retreat from their hectic schedules-. Spa and wellness services also offer opportunities for cross-promotion, such as bundled accommodation and treatment packages, further boosting revenue.
3. Minibar sales
Minibars have long been a feature in hotel rooms, but their profitability has dwindled in recent years as many properties fail to keep up with guest preferences. However, by stocking minibars with high-quality, locally sourced products or offering customizable options based on guest preferences, hotels can breathe new life into this traditional revenue stream.
For example, properties like The Crane Barbados offer pre-arrival stocking options and local specialties in their minibars, which appeal to guests looking for unique experiences. Customization is key in this area—allowing guests to choose what goes in their minibar adds an extra layer of personalization and convenience.
4. Meetings and events
Meeting and event spaces are a significant driver of ancillary revenue, especially for hotels with large conference facilities. Offering customizable packages that cater to corporate clients or event organizers, means that hotels can enhance profitability in this area.
Beyond simply renting space, hotels can offer additional services like event planning, personalized menus, or high-end audiovisual equipment. Personalization is crucial in this area—taking the time to understand the client’s needs and suggesting enhancements (like barista services instead of standard coffee breaks) can generate higher revenue and create a more memorable event.
Emerging Ancillary Revenue streams
While traditional streams remain profitable, hospitality businesses must embrace new opportunities to stay competitive in a rapidly changing landscape. Emerging trends, such as wellness programs, sustainable tourism, and technology-driven services, present exciting opportunities for innovation and growth.
1. Wellness programs
Wellness has evolved from a luxury offering into an essential service for many hotels. Guests are increasingly looking for wellness-focused stays, which can include fitness classes, meditation sessions, nutritional consultations, and more. And that is a lucrative market.
Westin Hotels & Resorts, for example, has successfully introduced the "RunWESTIN" program, offering guided runs, running maps, and gear rentals. This program attracts health-conscious travelers, boosting revenue and enhancing the overall guest experience. Wellness is a long-term trend, and hotels that integrate these services can benefit from repeat business and increased guest loyalty.
2. Sustainable tourism initiatives
Sustainability is no longer a buzzword but an expectation for many travelers. Hotels that embrace eco-friendly practices can appeal to this growing demographic. Offering sustainable dining options, eco-friendly room upgrades, and green tours are some examples of how properties can integrate sustainability into their ancillary revenue streams.
For instance, Banyan Tree Hotels & Resorts launched the "Stay for Good" program, allowing guests to participate in conservation activities and eco-friendly practices during their stay. This not only appeals to eco-conscious travelers but also reinforces the hotel’s brand reputation, attracting new guests and driving revenue.
3. Retail and merchandise
Many hotels are now offering branded merchandise and local artisan products in their on-site boutiques, which allow guests to take a piece of their experience home whilst hotels can create a profitable retail space within the property.
Collaborating with local artisans can add an authentic touch to hotel retail offerings, giving guests the opportunity to purchase souvenirs or gifts that reflect the local culture. This adds another layer of revenue generation while supporting local businesses and creating a more meaningful guest experience.
The power of personalization
Personalization is a critical strategy for maximizing ancillary revenue. To do so, leveraging guest data is key. That way, hotels can offer customized experiences tailored to individual preferences, significantly increasing the likelihood of guests purchasing additional services.
Accor Hotels’ ALL program is a great example of this. The program uses guest data to offer personalized upgrades, restaurant recommendations, and activity suggestions based on past behavior and preferences.
Marketing ancillary services
A well-rounded marketing strategy is crucial to promoting ancillary services. Hotels should leverage multiple channels, including digital platforms, to reach potential customers and showcase their unique offerings.
Measuring and optimizing Ancillary Revenue
To ensure the success of ancillary revenue initiatives, hotels must continuously track performance and adapt their strategies accordingly. Key Performance Indicators (KPIs) like average revenue per guest, conversion rates for upselling, and guest satisfaction scores are essential for measuring the effectiveness of ancillary services.
Continuous improvement is key—regularly reviewing guest feedback and staying informed about industry trends ensures that ancillary offerings remain fresh, relevant, and profitable.
Recapping
The potential for ancillary revenue in the hospitality industry is vast, and hotels that successfully identify and optimize these revenue streams will be well-positioned for long-term success. Hotels willing to offer a mix of traditional and emerging services, personalizing guest experiences, and employing effective marketing strategies, can significantly enhance both their profitability and guest satisfaction.