Need for new revenue streams for hotels.

Ms. Swapnila Mishra Purecha – SwapsCouture
November 6, 2019
The Gratitude Post- 2019
December 1, 2019

Need for new revenue streams for hotels.

This article first appeared in the hospitality journal, the Hospitality Biz, October 2019 edition. Reproducing the article here with due credits to the magazine.

Recently I was travelling to Goa by Spicejet and I noticed that there were ad banners on the sides of the window panels; this was in addition to the ones put on the seat back. It made me think how airlines were using every option available to them for pushing revenues. In fact I also remember the early days when hotels replicated the revenue management tactics from the airlines. Today one can’t imagine hotels not having a revenue manager; before that was GDS and CRS which also came from the airline companies. While on the flight I was wondering can hotels look at ways to generate additional revenues by pushing sales or should they focus on creating experiences that’ll fetch better revenues and loyal clientele. Airlines are very transactional; hotels are experience based. An experience should cost higher than a commodity as we have a zillion things to be out of the box.

A perspective I hadn’t considered before, maybe it is time for hotels to follow suit. I was meeting my batch mates from catering college after 22 years; most of them are hoteliers and working around the globe; I posed this question to them and here are the outcomes of the discussion we had. A few possible ways hotels can generate revenues beyond the Point Of Sales:

  • Possibly start off with a basic hotel room at a base price and then charge each element separately. For example, a separate price for a toiletry kit or TV channels should one choose it. Basically a guest starts off with a room and then builds his package around the level of ‘luxury’ that he chooses. This would only work in budget to mid range hotels; but an interesting concept nonetheless. Subtle selling of hotel amenities, restaurants, spa, laundry etc. have been giving extra revenue to hotels. Some hotels have excellent toiletries and amenities one wouldn’t mind buying to take back home for personal usage.
    • Personalised holiday options, concierge services guiding guests especially the long-stayers; who’d love it if the hotel helped them plan their weekends with short vacations.
    • Hilton is doing a pilot program known as the premium package. They charge anywhere from $25- $40 extra for an amenity tray with high end snacks and drinks included in their room rates. So far it’s been successful and they might roll out to other hotels.
    • Hotels can offer ultra all inclusive- such as meals, high tea, midnight buffet and open bar throughout the day (if law permits it).
    • Hotels can stock items such as protein bars that guests can buy. These are optimising in-market offers trying to get the differentiated ‘experience’.
    • Selling of memorabilia at the hotel gift shop or items like flowers, chocolates and festival goodies can add up to the revenues.
    • Hotels can curate memorable experiences such as food walks, showcasing culture of a destination etc.

If hotels want to truly push the envelope beyond their traditional playing ground then they need to lift themselves out of the tactical moves and attack adjacent markets. Marriott is already starting to work on it; they’re clawing back into the rental market to dislodge the disrupter.

Why stop there? In fact become an ecosystem player (food, travel, entertainment, gaming, music, etc) and open up new revenue streams than just focusing on the traditional business.

Looking at a slightly larger picture as how hotels can drive preference for their brand and make a larger impact to their bottom line. One idea is to align to issues that matter to people. Sustainability is a big concern and if hotels can align their marketing, brand purpose and operating strategy toward making themselves more sustainable; then more people may chose that brand over others. The question is what does the brand stand for and how does everything ladder up to that? This is a differentiator! By all means differentiate, build a solid loyalty base and then monetise it. The world is rapidly getting into a connected ecosystem; pick your partners now and offer a smorgasbord of hospitality and travel related offers. This is how hotels can unlock new revenue streams, whilst still maintaining their core. Also, use technology to have an unmatched customer experience and own the customer!

To broaden its base a hotel needs to bundle products and simplify the overall experience. They’ll need to think on how to create value by escalating their standards; creating a ‘wow’ at everything that they do- safety, security, hygiene, sustainability, curated experiences etc. are the way forward.

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