In this edition, Pablo will take a deep dive into how ancillary revenues are no longer just about upselling or cross-selling but have evolved into a guest-centric approach that enhances the entire customer journey. 

His article is a must-read for anyone looking to explore innovative ways to boost profitability while creating meaningful guest experiences.

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Mastering hospitality ancillary revenue

According to the dictionary, ancillary means “supplementary, additional, or auxiliary”.

Applied to the hospitality industry, when we speak about Ancillary Revenue, that would translate into the revenue generated by other sources of income besides the main one. 

In a hotel, the additional could be anything that is not rooms (debatable), or in a Restaurant, auxiliary would be any add-ons to a set menu, for example. A customer might come to your premises (check in, sit for a meal) and the team would do their best to upsell or cross sell other items, so called ancillary.

 Is that so? Let’s dive in:

Unlocking the full potential of ancillary revenue in Hospitality

Ancillary revenue has gone from a nice little extra, the cherry on top of the cake, to represent in some cases over 50% of all revenue. 

It has become the secret weapon for businesses aiming to enhance guest experience while significantly boosting profits. 

But ancillary revenue is no longer just about traditional upselling and cross selling.

It has evolved into a sophisticated, guest-centric strategy that can elevate the entire customer journey, creating memorable touchpoints that increase loyalty and brand value.

A 2023 report from Deloitte highlighted that, for hotels that capitalise on ancillary services, these revenues account for over 30% of total income, a figure that is expected to grow with the adoption of more data-driven and personalised approaches.

 The key to unlocking this potential? Innovation, integration, and customization.

The shift from price-focused to experience-centric

Traditionally, ancillary services were an afterthought — a convenient add-on rather than a core component of a guest's stay. However, with the rise of the experience economy, guests today seek more than just a place to sleep; they want a holistic, memorable journey from start to finish. 

Whether it's a bespoke cocktail-making class, a local culinary tour, or a wellness retreat curated by experts, ancillary services are becoming pivotal in shaping the guest experience.

A study by Cornell University Hotel School of Hotel Administration revealed that guests who engage in at least one ancillary service during their stay are 35% more likely to return. 

This highlights the growing demand for personalised, value-added services that complement the core offering of a hotel.

Hotels must look beyond merely upselling their current offerings and start integrating these services as part of a total guest experience strategy.

This involves understanding guest preferences through data, offering tailored suggestions, and integrating technology to make the process seamless.

Key strategies for maximising ancillary revenue

1. Data-driven personalization

In an age of digitalization, leveraging guest data to offer customised ancillary services has become more effective than ever. By analysing previous stays, preferences, and behaviour, hotels can offer personalised recommendations — be it a spa service, a specific room upgrade, or a special dinner package — that align with the guest’s desires. 

AI-driven tools and CRM systems allow hoteliers to anticipate guest needs even before they step onto the property. Remember, data is the XXI century gold.

2. Seamless integration of technology

Digital concierge services and mobile apps are a game-changer when it comes to ancillary revenue. 

Apps allow guests to access services like room service, spa bookings, and even external activities, all in one place. Hotels that integrate these platforms not only streamline the guest experience but also make it easier to upsell services. And for those concerned about downloading apps, there is always the web-app version, so there is not excuse not to achieve widespread use of it by your customers!.

3. Wellness and health offerings

The post-pandemic world has seen a tremendous rise in wellness tourism, and this is where hotels can find lucrative opportunities. 

Offering services such as yoga classes, personalised wellness retreats, or partnerships with local fitness experts can add immense value to the guest experience. Even more traditional offerings, like spas and in-room fitness equipment, can be positioned as premium services for health-conscious travellers.

Also, keep in mind that wellness now extends to nutrition and mental health, opening many new revenue streams for the industry.

4. Food & Beverage as a revenue engine

Beyond room service, the hotel restaurant and bar offer numerous possibilities to drive ancillary revenue. And in some hotels, generating as much revenue as rooms do. 

Creative dining experiences, such as chef’s table dinners, wine pairings, and local ingredient-based tasting menus, can attract both guests and external customers (opening the Hotel restaurant’s door to the external guest is a must nowadays). 

Offering branded merchandise — think exclusive wines, coffee blends, or gourmet meal kits — can also serve as an additional revenue stream, while allowing guests to take a piece of the experience home.

Recent surveys indicate that 60% of guests are willing to spend more on premium dining experiences, especially those that offer a unique or immersive element. 

Hotels that align their F&B services with local culture and culinary trends can position themselves as not just a place to stay but as a destination for gastronomy.

5. Strategic partnerships with local businesses

Hotels that collaborate with local businesses can expand their ancillary revenue streams while enhancing guest experience. 

This could mean partnering with local tour operators, artisan shops, or cultural venues to offer curated experiences that allow guests to explore the destination in a more authentic way. 

Not only does this add value to the guest stay, but it also strengthens ties with the community, benefiting both the hotel and local economy. 

The role of Revenue Management in ancillary services

The best-performing hotels know that effective revenue management extends beyond rooms.

Dynamic pricing can be applied to ancillary services just as it is with room rates, adjusting the pricing of services based on real-time demand, time of day, or seasonality.

For example, offering discounts on spa services during off-peak hours or bundling services into special packages during low seasons. 

Restaurants applying higher  prices to the same items on weekends is another example gaining traction.

Revenue management systems (RMS) are becoming more sophisticated in factoring in the revenue potential of all services, not just rooms, and can help identify opportunities where ancillary services can make the biggest impact on the bottom line.

Overcoming barriers: Staff training and mindset shift 

While technology and data are important, none of this works without staff buy-in. Hotels need to ensure that all staff — from front desk to housekeeping — are trained not just to sell but to recognize the value of ancillary services in enriching the guest experience. And as I always say, “every team member with contact with customers -be it direct or indirect, face to face or via email- must be a seller”.

 This requires a shift in mindset, viewing ancillary services not as an “extra” but as a core component of the guest journey.

By empowering staff to suggest personalised experiences, based on guest preferences, hotels can create more meaningful interactions that lead to increased loyalty and revenue. Incentivizing staff through commission programs or recognition can also encourage this behaviour.

Looking ahead: The future of ancillary revenue in Hospitality

The future of ancillary revenue lies in a more connected and tech-driven ecosystem where all aspects of the guest experience are integrated. 

From in-room technology that allows guests to seamlessly book experiences to personalised AI-driven recommendations, hotels are on the brink of a revolution in how they approach non-room revenue.

 Moreover, as sustainability continues to become a priority for travellers, hotels have the opportunity to introduce eco-friendly ancillary services — from carbon-offset programs to partnerships with local sustainable brands — which not only enhance the guest experience but also contribute to a more responsible business model. 

The key takeaway for hoteliers is that ancillary revenue is no longer just an add-on. It's a crucial component of a modern hospitality strategy, allowing businesses to diversify their income streams while delivering greater value to guests.

 Those who can successfully integrate ancillary services with personalization, technology, and staff empowerment will be the ones to lead the industry into the future.

Pablo Torres

ABOUT PABLO

Pablo Torres is a dynamic hospitality consultant with over two decades of hands-on experience in the industry. His journey began in hotel rooms operations and revenue management, and since 2011, he has dedicated himself to helping hotels maximize their total profit through innovative ancillary revenue strategies. 

With more than 10,000 hours of consulting and training delivered to 300+ hotels in over 30 countries, Pablo has empowered over 4,000 hospitality professionals to drive better results. His love for sharing knowledge extends beyond consulting, as he also serves as a visiting lecturer at various renowned international institutions, where he inspires the next generation of hospitality leaders. 

This article is an excerpt from my book “Mastering hospitality ancillary revenue”, which covers the foundations of introducing ancillary revenue management into hospitality businesses, and offers over 100 real-life examples of how this can be applied to businesses globally. Follow me online to get more news on its publication date!

The views and opinions expressed in this newsletter are solely those of Fernando Vives and collaborators and do not necessarily reflect those of any company or organization he works for or is affiliated with, nor those of their partners or suppliers. The data sources used are mostly public, ChatGPT may have been used for research assistance, copywriting or editing. If you find any discrepancies or errors in the data or insights shared, please reach out via LinkedIn for necessary adjustments. Thank you for following and being a part of this community