Ancillary revenue: Meaning and examples for hotels

What is ancillary revenue?

Ancillary revenue is when you earn income from additional services or products offered at your hotel, for example, a relaxing spa treatment after a long day, a convenient shuttle service to the local attractions, or a romantic dinner at your in-house restaurant; anything that makes the hotel stay extra special for guests.

By offering these added touches, you’re not just boosting your revenue; you’re creating memorable experiences that make your hotel stand out. It’s a win-win for both your business and your guests.

Ancillary revenue is also a good way to win back some of the money you lose to OTA commission fees. In order to optimise this, you need to think of your hotel as more than rooms and rates, but in a more holistic way that leans towards complete revenue generation.

Although it should be a secondary consideration to making sure your guests receive quality service and value for money, it is still a clever and effective method to boost your revenue while also offering guests an even more enriching experience.

Key takeaways

Ancillary revenue is extra income from add-on products or services that support a company’s main business, helping it grow and stay strong.
In the hospitality industry, common examples include room upgrades, mini bar sales, spa services, parking fees, in-room dining, laundry and dry cleaning, and more.
Ancillary income streams help offset OTA commission costs, lifting profit without raising room rates.

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Why is ancillary revenue important for independent hotels?

Ancillary revenue is important as it becomes a creative and strategic way to level the playing field by leveraging the uniqueness of an independent hotel while also generating additional revenue from a loyal audience. Independent hotels often operate with a unique charm and personalised touch, setting them apart from larger chains. However, they also face challenges in competing with the extensive marketing and brand recognition of larger, international players.

This is why ancillary revenue is nearly always part of a successful revenue management strategy that produces consistent year-on-year results, avoiding stagnation. The more revenue you have streaming in, the more flexibility you have to make improvements to your hotel and offer guests new or additional exclusive services. It’s a virtuous cycle.

Ultimately, implementing ancillary revenue ideas will lead to a more fulfilling experience for the guests who accept them and flood your hotel with a whole new source of revenue.

Before you employ any ideas, you need to ask three questions:

What is unique about your hotel – the setting, the geographical location, the theme?

What do guests praise the most – the amenities, the restaurant, the convenience?

Why do they choose it over others – for luxury, for service, for other features?

Once you start to analyse these questions, you’ll start to see opportunities for extra revenue arising from your hotel’s story.

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What are some hotel ancillary examples used today?

Ancillary revenue comes in many forms, with hotels of all types and descriptions finding new ways to generate revenue from services and add-ons, including food and beverage, activities and tours, transportation, events and meetings, merchandise, to name a few. Large or small, hoteliers can take inspiration from the examples below to build their own strategy.

Food and beverage services: From elegant on-site restaurants to casual cafes and bars, food and beverage services offer guests the convenience and pleasure of dining without leaving the hotel. Room service adds an extra touch of luxury, allowing guests to enjoy meals in the comfort of their rooms.
Activities and tours: Many hotels collaborate with local tour operators or even host their own activities, such as cooking classes, wine tastings, or guided hikes. These experiences allow guests to explore the local culture and attractions, adding value to their stay.
Transportation: Offering shuttle services to airports, nearby attractions, or shopping districts can be a significant convenience for guests. Some hotels even provide luxury car rentals or chauffeur services for an elevated experience.
Events or meetings: Hosting events, conferences, or meetings can be a lucrative revenue source. With well-equipped meeting rooms and banquet halls, hotels can cater to both business and social gatherings, providing catering, audio-visual equipment, and coordination services.
Merchandise: Gift shops or boutiques within the hotel offer guests the opportunity to purchase souvenirs, local products, or even branded merchandise. It’s a way to extend the hotel’s brand and provide guests with tangible memories of their stay.
Entertainment options: From live music in the lobby to movie nights by the pool, entertainment options add a fun and vibrant atmosphere to the hotel. Some hotels even host art exhibitions or cultural performances, enriching the guest experience.
Pet friendly services: As more travellers choose to vacation with their pets, pet-friendly services such as pet-sitting, grooming, or special pet menus can set a hotel apart. It’s about extending hospitality to the furry family members as well.
Parking and valet services: Offering parking facilities, especially in urban areas, is a practical necessity. Valet services add a touch of sophistication, making the arrival and departure process smooth and hassle-free.

While these are tried and true examples that have been successful for many hotel chains, creativity can be key to stand out in terms of ancillary revenue options. Don’t be afraid to go weird, wonderful, or wacky – ultimately, it’s the unique experiences that stand out the most in the market, even for guests who ultimately don’t indulge in that specific activity. At the very least, it captured initial attention.

Key takeaways

Bundle convenience-led add-ons like on-site dining, shuttle transport and valet parking so guests spend more without ever leaving the property.
Collaborate with local tour guides, artisans and event hosts to create memorable experiences that set your hotel apart and generate shared revenue.
Monetise everyday touchpoints such as pet-friendly perks, branded merchandise and meeting room hire to turn guest requests into steady profit streams.

What are the top ancillary revenue ideas that increase hotel revenue streams?

What to know first:

Guests crave local flavour, 86% of travellers want to eat regional cuisine, and 82% expect a quality restaurant on-site.
With 65% of consumers preferring gifts from small local businesses, in-room retail of linens, artwork and produce slots perfectly into today’s souvenir-spend shift.
As 84 percent of U.S. business travellers plan to tack holiday days onto their next work trip, conference packages and extended-stay offers become premium-margin upsells.

There’s a wide range of revenue-boosting ideas you can use, such as partnering with local producers, adding activities and adventures to your standard offering, merchandising, becoming the “go to” place for meetings (business or otherwise), and offering amenities that no other hotels nearby can. Here are five of the best ones…

1. Partner with local producers

The simplest form of this idea is to contact local artists and hang their paintings in your hotel. You may choose to turn the common areas into mini galleries or even put the paintings in guest rooms.

In exchange for the exposure, your hotel would receive a percentage of the selling price on any pieces that are purchased by guests.

You might even go so far as to offer the art for purchase online via your website or a separate website if you have a dedicated gallery space.

Depending on the location of your hotel, this could extend to other craftspeople and farmers.

Think surfboard builders, sculpture artists, potters, jewellery makers, fresh produce farmers etc. Your guests are predominantly tourists, so give them a gift shop.

2. Offer adventure and entertainment

Once again, take the local angle. Surrounding tours, attractions, and events need to sell tickets, so why not at your hotel?

Partnering with them makes your hotel an all-inclusive resource for guests and is an equally lucrative opportunity for your hotel and the other businesses.

Additionally, you might have your own events, such as live music on weekends or comedy once a month.

Whatever it may be, you could entice guests to stay by offering a package deal on these events, meaning you get revenue for a booking and the event instead of just through one revenue stream.

3. Let the guests take your hotel home

When you get feedback from guests during or after their stay you might notice them raving about the quality of your sheets or pillow cases, or they may adore the wallpaper, or love your china, or crave the shampoo you stock. The list is endless. A lot of this you have to buy anyway so why not also partner with your supplier to offer it for sale to guests?

Not only will your guests be reminded of your hotel even in their own home, but it’s a simple way for you to get a little extra revenue on top of your reservations. As with the artwork, this could also be sold online.

4. Install a cellar

Perhaps the most obvious idea. Stocking local wine or beer for sale is a surefire winner in generating revenue. As always, this could be combined into some sort of package or extra deal for the guest.

While discussing beverages, don’t forget food. If guests can’t get enough of your restaurant, make your own cookbook to sell for them to take home.

5. Become a meeting place

And finally, don’t ignore the corporate sector. Business travellers converge from all over the world for their meetings so having a space such as a conference room to hire out will make it easier for them to conduct their business and give you another steady stream of revenue.

Even better, they might add a couple of days to their stay as the ‘bleisure‘ trend continues.

Next steps

Partner with local creators such as painters and brewers to sell artwork, crafts, wine and produce both on property and online, giving guests authentic keepsakes while sharing the revenue.
Bundle adventure tours, live entertainment and weekend events into stay packages so travellers book once and spend across multiple revenue lines.
Turn guest-favourite touchpoints into products and services: retail your linens and toiletries, publish a restaurant cookbook, and hire out meeting rooms to extend your brand while attracting corporate stays.

FAQs about Ancillary Revenue

How to price your ancillary offerings effectively?

Survey guest willingness to pay and benchmark against nearby competitors, then test small price steps until your attachment rate and margin reach a healthy balance.

When to promote ancillary services during the guest journey?

Surface premium add-ons at booking and in pre-arrival emails when guests are planning their stay. During the stay, use mobile or in-room prompts to spark impulse buys such as spa slots, bar credits or late checkout.

How to measure the performance of your ancillary revenue strategy?

Track incremental revenue per occupied room, attachment rate and gross profit for each add-on. Review these figures monthly against targets and room revenue growth to highlight winners and close gaps.