Ancillary Revenue and Personalization: 2018 Revenue Management Best Practices, Part II

Author: Avanti Joglekar

New trends emerge every year in hospitality revenue management (RM). By keeping track of what consumers and industry insiders are talking about, we’ve determined the top five trends in RM. In part one of our series, we looked at loyalty-based pricing and advances in group revenue management. Part III of the series covers the impact of alternative accommodations and provides an infographic of the Top Revenue Management Trends for 2018. In this, our second of three posts, we’ll examine the opportunities in ancillary revenue and personalization as a key to driving direct bookings.


Opportunities for Focusing on Ancillary Revenues

There’s a huge opportunity for profits when hotels focus on their guests’ ancillary spending as a way to grow revenue. A report done by Eye for Travel estimated total ancillary revenues worldwide at $80-130B. In a survey conducted among general managers, 57% planned to increase their investment into ancillaries in the next 12 months, and 23% of general managers said their RMS does not account for any ancillary spending, while another 20% indicated they do not have an RMS at their property.

In a survey conducted among hotel guests, 60% said they would purchase add-ons during their stay, but 40% said they still needed to be convinced. For guests that wouldn’t purchase add-ons, 58% felt that the property is simply trying to make more money off them, and 63% felt that the products or services offered were not relevant to them.

The opportunities to expand profitability with ancillary revenues can happen at any type of property, from a roadside inn to a casino or mega-resort. You’ll need to use your RMS to assess your ancillary opportunities and then determine how to maximize their potential. You’ll also want to examine your data needs and collection methods, whether you capture data solely via folio charges or if you have other means of capturing ancillary spend data. You could even provide an incentive for guests to help you with the effort of collecting ancillary spend data, like an F&B credit for filling out a survey. Finally, use the data and customer feedback that you receive to better understand your customer and their needs.


Personalization as a Key to Driving Direct Bookings

Hotels have an opportunity to shift bookings away from 3rd party channels to direct channels by offering their guests a more personalized experience. You can achieve similar booking volume results at a potentially higher price by understanding and anticipating guest needs. Personalization can start in the booking experience and last throughout the guest’s entire stay, even past checkout.

It’s important to note that this doesn’t necessarily require a customer database with preferences or specific data on what your customers did on previous stays. Likewise, it does not depend on your customers being repeat guests. There are approaches where you can predict a customer’s needs or what they are likely to purchase based on some of the characteristics or attributes of their stay. For example, things you might be able to glean from a single guest making a one-night midweek stay versus three guests in a room staying three nights including a weekend.

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Data from customer behavior should be used to drive revenue decisions and actions. Be sure to adopt a consistent strategy around collecting the right data. Consider your customer touch-points, where you have the opportunities to make a personalized sale to a customer beyond the point of booking. The graphic above illustrates touch points where you can identify the optimal time and place to communicate with customers and offer them something more personal that results in additional purchases.

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