Ancillary revenue: Guide for small hotels

What is ancillary revenue?

Ancillary revenue is defined as any revenue generated by products or services in addition to the hotel rooms that you book on a daily basis.

For example, any extras that you sell at your hotel would be included as part of your ancillary revenue.

Souvenirs, premier services and upgraded amenities are all part of the ancillary revenue that can help you increase the profits that you earn at your hotel.

How often do you think about ancillary revenue?

As a small accommodation provider, your main focus is booking the rooms at your property and keeping your hotel filled to capacity as often as possible.

While selling rooms is your main source of income and the way that you keep your business running, you also need to be open to the idea of other revenue-generating possibilities.

Because when you expand your products and services, you open up the door to additional income and increase the potential for growing your hotel in new and exciting ways.

Why is hotel ancillary revenue important?

Ancillary revenue can be extremely beneficial for your hotel. Your pricing strategy dictates the rates of your rooms, which ensures that you earn the base profit necessary to keep your small hotel in operation.

However, you should always be exploring additional ways to earn income. The more profit you generate, the more you can offer your guests and continue to grow your presence in the community.

Ancillary revenue has the potential to help you boost your revenue significantly, and is an important component in your overall business plan.

Common ancillary revenue examples for small hotels

If you’re creative, your hotel revenue streams can extend far beyond room earnings. Here are a few ancillary revenue examples that your property might consider offering:

• Food and beverage: On-site bars and restaurants offer one of the most effective ways to generate ancillary revenue.
• Spa and wellness: Day spas are particularly effective ancillary revenue streams for resorts. Smaller hotels might consider bringing in a third-party provider and taking a commission on any earnings.
• Meetings and event spaces: From business travellers to weddings, the right spaces can help you not only attract more guests, but get them spending more on room and venue hire.
• Local tours and activities: Share your local knowledge, and broaden your ancillary revenue streams, by offering tours, activities and experiences to your guests.
• Retail shops: A small on-site shop can earn you valuable ancillary revenue. Remote hotels can offer basic consumables, hotels near landmarks can offer souvenirs, or you might take the opportunity to feature and sell the work of a local artist or artisan.
• In-room amenities: Minibar fridges, in-room dining (AKA room service), WiFi upgrades, TV and movie purchases, premium personal care products – purchasable in-room amenities can take a number of forms, and can prove handy passive revenue streams.
• Laundry and dry cleaning services: Another ancillary revenue stream that you can either deliver on-site or via a third party, laundry and dry-cleaning is particularly valuable if you tend to attract longer-term travellers.

Ideas to boost ancillary revenue for your hotel

Now that we have an idea of ancillary revenue’s meaning, and what it looks like in practice, let’s take a closer look at exactly how to generate this extra revenue. Here are nine ancillary revenue ideas, and how you might bring them to fruition.

1. Transportation services

Offer additional convenience services to improve the guest experience while boosting revenue at the same time. These services can include options such as shuttle service from the airport, or transportation services to attractions in your local destination.

2. In-room products to sell

Bed and breakfasts and inns are starting to add additional products to their online stores to increase their presence online and develop their brand. You can use your own logo, theme or atmosphere to create unique products, such as a line of toiletry items, T-shirts, mugs, glassware and more.

3. Open up a restaurant

Other small accommodation providers are expanding their business, and becoming more than just a great place to stay for the night. Consider opening a restaurant, winery or coffee house on your property. Guests who are travelling from other destinations will be pleased to have convenient services available at your location, and local residents will be drawn to your location as well.

4. Packages and product packs

One easy way for small hotels to generate ancillary revenue is to create product packs that are available as an extra upon booking. You might offer baskets of local cheese, wine, jam and crackers, or perhaps you can design a romance package that includes champagne, fresh fruit and flowers. Allow your guests to select these options at the time of booking to boost your ancillary revenue.

5. Gift certificates

Small accommodation providers are also finding that gift certificates are a great option for additional revenue. More people are giving the gift of experience, and a night away is an awesome way to treat someone that you love.

6. Display local artwork and sell it to guests

Guest rooms require decorations in order to appear comfortable and welcoming. Instead of purchasing generic artwork that will remain on the walls, consider partnering with local artists in order to display authentic prints, statues and fixtures that can be sold to guests.

Artwork makes a valuable and authentic souvenir, and guests will be pleased that they can purchase a local product from the convenience of their room. It’s a great way to commemorate their trip, without forcing them to step into every souvenir shop in town.

7. Create experiences that are available for purchase at your property

Transform your hotel from a place to sleep into a place to stay, play, and enjoy. Create a range of different experiences that guests can purchase at your hotel in order to improve their stay.

Some ideas include cooking lessons with the chef at the hotel restaurant, an opportunity to take a private tour of the hotel with one of the managers, or a private yoga lesson from an expert instructor by the hotel pool. Many guests are willing to pay more in order to enjoy a unique experience.

8. Offer upgrades that may enhance the guest experience

Guests are attracted to hotels that offer premier amenities and luxurious rooms, but there’s always room for a few upgrades. For instance, ancillary revenue can be generated at your hotel by offering upgrades such as higher-quality bedding, organic toiletry products or welcome baskets that include fresh fruit, crackers, cheese and local wine.

Guests are often looking to add special touches to their travel experience, and they are willing to pay more in order to improve the atmosphere and enhance their own experience.

Ultimately, ancillary revenue should be used as a way to increase the revenue generated per guest, which can help maximise profits at the property.