MARCH 2025BUSINESSMANAGEMENTREVIEW.COM8ANCILLARY REVENUES: INVESTING IN THE FUTURE OF HOTEL DISTRIBUTION By Rhett Hirko, Senior Vice President, Revenue Optimization & Distribution, Preferred Hotel GroupA recent meeting with fellow members of the HSMAI board included a survey on the "hot topics of 2022." Among the many submissions was ancillary revenues. As the meeting host opened this up for discussion, groans were heard across the room, coming from everyone in Revenue Management. One particularly established and well-respected leader both visibly and vocally shared her frustration with the topic, summed in a similar phrase well received by all: hotels are not airlines.Let's recognize that this is a hot topic across the discipline, which is continuing to gain traction in recent years as airlines have this well entrenched ­ and, for good reason. Hotels are replete with opportunities to turn their predominantly room and F&B-based products into something more akin to the retail space. Whether selling room-related policies or attributes such as "early arrival" or "high floor" to more stand alone products such as beer from the on-premise brewery or tickets to a high-demand concert, every property has an opportunity to drive more revenue beyond just maximizing accommodations.The challenge is not in the awareness of the opportunity, but rather the required technological investment. This can be summed multifold, as follows:- Hotel systems were built primarily to sell rooms. While dynamic packages broadly exist to attach ancillary offerings to an accommodation, this requirement limits stand-alone offerings that a hotel may wish to offer without reserving a room.- Many reservations systems require a one-night stay. The advent of the COVID-19 pandemic brought attention to the value of day-use rooms to attract local customers, but the lag in technology has hindered the ability to achieve this. This further limits the ability to sell ancillary offerings that may require only daytime inventory (i.e. "Pool Cabana and Guest Room from 11am-4pm").- Not all hotels are created equal. From the roadside motel outside Topeka to the luxury resort in Tahiti, ancillary needs are widely varied. In this example, perhaps the roadside motel's offerings would be limited to early arrival and fresh morning coffee, whereas the Tahitian resort would include anything from recreational and cultural activities to keepsake souvenirs and a romantic dinner cantilevered over a lagoon. The hotel rates expectedly fall in line with the hotel class and offerings, hence the investment in the technology would be limited.- In the minds of many a general manager, products and services go hand-in-hand with technology ­ a necessary means to an end. When budget season comes, decision making for that $20,000 investment between the latest system upgrade or a new oven invariably leads to the oven, not to the technology. This leads to less opportunities for the needed investment at the ground level and harder to aggregate funds to the higher level for an unproven technology.- Airlines have rightly brought this to the fold. But unlike with airlines that have a limited and, therefore, defined area of ancillary opportunity that can be replicated from plane to plane, hotels are vastly different for the reasons shared above and with very different ownership arrangements. This makes the topic of ancillary standardization difficult for the industry without the influence and investment from a technology leader that impacts multiple hotel brands and types.Rhett Hirko
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