Ancillary revenue generation in the hotel sector remains a complex issue. Not only are there organisational challenges, like the conflict of interest between the revenue management department and operations team, guests today also have higher customer service expectations. Progress is being made but hotels have a long way to go.

Ancillary revenue generation transcends departmental boundaries so there must be close cooperation between the various teams. Roles and responsibilities of the people involved must also be defined, as well allocation of resources. This is easier said than done. Driving new revenue streams is hard work and to complicate matters, in the hotel sector the definition of ancillary revenue can differ depending on the type of property. For example, revenue from an in-house spa in a city hotel may vary greatly from that generated from a spa located at a resort hotel.

In this exclusive interview, EyeforTravel’s Ritesh Gupta talks to Chhavi Malhotra, regional director, revenue management – Thailand, Vietnam, Cambodia, Starwood Hotels & Resorts Worldwide who says some of the key considerations are technology, talent and process definition.

EFT: How should you prepare to generate ancillary revenue today?  

CM: The airline industry leads the headlines when it comes to ancillary revenue generation, particularly the low cost airlines. Hotel companies are increasingly showing more interest and focus in ancillary revenue generation as the revenue potential is currently under-exploited. The task is a bit more complex for hotels considering high guest expectations of services provided by hotels.

Some of the key considerations when preparing for working on ancillary revenue are technology, talent and process definition. A hotel company could adopt different yet complementary ancillary revenue strategies. There are two possible approaches.

1.       Incorporate ancillary sales as part of the modus operandi. For example, promote upsells to every guest at check-in.

2.       Focus on the increasing demand from today’s guests for personalised services and generating ancillary sales around what the customer really wants.

EFT: What are the major challenges that RM teams face while implementing their ancillary revenue strategy?  

CM:The challenges would be:

·          Defining ownership and accountability

·          Re-engineering business processes

·          Resource allocation

EFT: How can technology help to create ancillary demand?

CM: As ancillary revenue becomes more mainstream in hotels, hotel companies are investing in upgrading their technology to meet the needs of the business. Some progress has been made, however, we are still away from the perfect solution. Technology enhancements are being made based on a piece-meal approach as the industry carefully evaluates each ancillary revenue opportunity versus the cost investment.

Automated revenue management systems which primarily forecast demand for rooms are being enhanced to include algorithms and models for ancillary revenue demand.

EFT: What are the operational challenges associated with maximising ancillary revenue generation?  

A key issue to address is defining the ownership for ancillary revenue generation. Is it the responsibility of the revenue manager who then works with the various departmental leaders? Or does it fall under the remit of the various departmental leaders who seek inputs from the revenue management team? This dilemma is a key operational challenge associated with ancillary revenue generation.

In an industry comprising of various departments, ancillary revenue generation presents itself as an unique opportunity which encompasses the entire hotel. One needs to work on developing synergies amongst the various departments, re-engineering business processes, and providing the team appropriate tools and resources to support successful adoption and implementation of ancillary revenue strategies.

EFT: How has the industry gone about working on tactics for RevPASM (revenue per available square metre), RevPASH (revenue per available seat hour) and RevPATH (revenue per available treatment bed hour)?  

Even though the industry is equipped with a strategy toolkit for optimising RevPASM, RevPASH and RevPATH, my observation is that there is still a lack of a clear definition and understanding of how will the hotel team go about implementing these strategies.

Since ancillary revenue generation transcends departmental boundaries, it requires close cooperation of the various teams working together to achieve a common goal. The roles and responsibilities of the people involved have potential overlaps and this presents challenges like ownership, control and resource allocation. There is more work to be done in this regard.

EFT: What are your recommendations when it comes to optimising RevPASM, RevPASH and RevPATH?

Keep the customer at the heart of decision making. Understand your customers well – what do they buy, when do they buy, how do they buy? Data analytics can provide some deep insights into understanding customer behaviour. This understanding plays a crucial role in ancillary revenue strategy formulation. Harness the power of information.

EFT: How do you expect ancillary revenue management and associated metrics to shape up?

We can expect following developments:

·          Guest expectations are high in terms of what services they should receive from a hotel. Customer experience will be at the heart of ancillary revenue generation.

·          Digital innovation like social media will be a key driver of ancillary sales as hotels engage in a deeper relationship with their guests and promote personalized services and enhance their travel experiences.

·          Ancillary revenue forecasting will become more automated with the availability of enhanced revenue management software providing total revenue management solutions.

·          Analytics and the metrics associated with ancillary revenue management will gain wider acceptance in the years ahead and total revenue management dashboards will become more popular.

·          Revenue management will evolve to total revenue management. Ancillary revenue management will become an integral part of this advancement.

Disclaimer: These are the views of Chhavi Malhotraand does not represent that of their employer, Starwood Hotels & Resorts Worldwide.