With growing competition, understanding the impact of ancillary revenue on the bottom line is crucial and, while there is still work to do, hotels are upping their game
Measurement of ancillary revenue streams is up across the board, says the new Aggregating Data Streams for More Effective Revenue Management report from EyeforTravel.
In 2014, and again this year, revenue managers were asked the question: which of the following ancillary revenues can your revenue management system account for?
Back in 2014, food and beverage was the most measured type of ancillary revenue. Today, however, it is more popular for RM systems to measure meetings, incentives, conferences & exhibitions (MICE), and room & service upgrades, with 45.8% and 43.8% of respondents respectively tracking these categories. (Just for the record, MICE is a segment that many travel brands are tapping into – See Expedia, Marriott and MICE on the run, EyeforTravel, July 19, 2017)
In both categories – MICE and room & service – the report finds that the number of systems measuring revenues increased by more than 10%. In an interesting sign where the industry is headed, the tracking of tours, experiences and packages more than doubled, proving that hotel management is not only recognising this as an important revenue stream, but also as a service for customers (for more information on this fast-growing area see Eyefortravel’s The Changing Face of Tours and Activities).
…the tracking of tours, experiences and packages more than doubled [between 2014 and 2017]
What the latest RM report shows is that overall every ancillary revenue stream is being measured more closely than in 2014. In addition, the number of executives who reported that their system could not account for any ancillary revenues fell from 22.8% to 16.7%, which demonstrates that there has been substantial progress in monitoring and quantifying ‘ancillary’.
However, there is still work to be done because, as yet, over 50% of respondents are still not measuring any type of ancillary revenue.
So, although it is encouraging that progress is being made, according to Alex Hadwick, Head of Research at EyeforTravel, “we would probably have expected it to be slightly faster”.
71% of respondents said they did not have the tools to do the job effectively
To further highlight the point, the research also asked revenue managers if they had the tools to do the job effectively, and 71% said they did not. “It seems there are still technical and investment roadblocks,” stresses Hadwick, “and removing these will be vital to hotels achieving their full revenue potential”.
Elsewhere in the report, which is free to download, we consider:
The effect of competitors on pricing, how to account for them and what strategies to take to get a competitive edge
Understanding and constructing predictive analytics
Understanding the costs of a business’s channel mix and how to win direct bookings
The state of the industry’s approach to ancillary revenues
The key metrics every revenue manager should be working toward
The future of a revenue manager’s role and the skills they will require