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Driving Profit in the Hotel Industry with Ancillary Products - Fusion

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Driving Profit in the Hotel Industry with Ancillary Products

For years, airlines have been introducing fees for services in addition to the price of a ticket. RyanAir notoriously once considered charging customers to use the restroom. More recently, Frontier Airlines has started charging passengers to bring carry-ons, in addition to charges for checked luggage (which is now an industry standard).

What might appear to be an inefficient model of charging passengers for add-ons is actually an enormously successful business model worth $31.5 billion a year. From paying for extra leg room, to charging extra for aisle and exit row seats, the model has allowed airlines to reduce overall ticket costs while increasing sales and acquiring more passengers than ever.

While many airlines have come to embrace ancillary products, hotels have struggled to achieve similar success. However, unlike airlines, hotels can offer value through a bevy of upscale and luxury options as ancillary products for customers to enjoy during their stay or even after they check out. Ancillary options enable hotels to provide services that enhance a vacation or trip while simultaneously avoiding the negative press that has been associated with airline fees.

Hotels still feel some sting from the 2008 economic downturn as businesses and large groups continue to limit their travel. According to the Global Business Travel Association, business spending on travel rose just 1.8% last year. Hotels also face the mounting pressure of making Wi-Fi service free to guests because they increasingly expect free Internet access. These market realities underscore the growing importance of ancillary hotel sales.

A few options that could boost ancillary revenue for hotels include:

  • Upgraded beauty products such as name-brand shampoo, conditioner, oils and cleansers;
  • Perks such as spa treatments, massages and facials;
  • Shoe-shining services;
  • Laundry and same-day dry cleaning services;
  • All-inclusive bar and meal opportunities;
  • Local activities such as tours, excursions and sporting events;
  • Self-service bars and vending machines; and
  • Resort fees that cover a range of ancillary offers.

Many hotels have cooled to the thought of offering ancillary products to customers because revenue from Wi-Fi, phone calls and parking has mostly dwindled. That does not mean the model doesn’t work, it means hotels must better understand what individual customers actually want when traveling. Offering guests tailored, relevant opportunities to enhance their stay has grown more vital than ever. Anticipating your customer needs isn’t just about the customer experience anymore; it’s also become a highly effective method for increasing your bottom line.

What type of add-on products or services would you like to see available during your next hotel stay?

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