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Ancillary Revenue : Significant chunk of the pie

Tuesday, February 22, 2022, 16:39 Hrs  [IST]
Asmita Mukherjee | Hyderabad

The global pandemic has forced the Indian hotel industry to look outside the box, for generating revenues and increasing profitability. We are witnessing a drastic shift in the way in which hotels used to look at ancillary revenue. With the use of latest technologies, hoteliers are now easily able to cross-sell and up-sell to make the most of ancillary revenue streams. During the last two years of the pandemic, we have seen hotels adapting themselves to the market demands by transforming into hospitals and workstations, while also maintaining relevancy by offering various services, such as laundry services, food delivery services and many more. Asmita Mukherjee spoke with industry experts to know what the industry is thinking around ancillary revenue streams.

Profit-making path 

COVID has taught the Indian hospitality industry to strive through the adverse and think beyond the unimaginable. Hence hoteliers have spent time Rethinking, Reimagining and Restarting. Hotels have been ‘innovators’ in creating ancillary revenue streams to maintain the cash flow during the lockdown period.  

With an understanding the new lifestyle patterns and demand trends, Shuvendu Banerjee, General Manager, Crowne Plaza New Delhi Okhla informed that they forayed into multiple avenues such as Takeaway, Home Delivery and Dial-A-Chef from a food and beverage perspective. “From comfort ‘Meal Bowls’ for the work-from-home crowd to ‘Party Boxes’ for the adventurous palate, from packed thalis & lunch boxes for nearby corporates to Institutional Catering services- we ensured that the guests enjoyed their favourite dishes in the comforts of their premises,” he added. 

Reiterating with Banerjee, Param Kannampilly, Chairman and Managing Director, Concept Hospitality & The Fern Hotels & Resorts opined that in these difficult times any rupee earned contributes to the overall bottom line. With so many restrictions like a cap on the number of people in the restaurants, limited numbers of people attending conferences/marriages, closure of spas, swimming pools and clubs etc, there is very little room for city hotels to make ancillary revenue.

“The only silver lining has been the leisure destinations, resorts etc, which have done brisk business. We were able to sell everything there to add up to the revenue coming from the rooms,” he added.

Manish Goel, Founder, Stotrak Hospitality also agreed to the point that ancillary revenues have helped hotels to achieve profitability during these trying times. Elaborating on the importance of ancillary revenue streams, he said, “For our chain whose mission is to provide unique experiences, the revenues generated through such activities, and experiences have been very critical commercially. We are putting a lot of effort into creating experiences enabling us to cater to our guests of all age groups.”
Utilisation of ancillary revenues

According to Goel, hotels are still not exploring it to its potential. He expressed that hotels are still on the conventional path which is focused on room and Food and Beverage sales, and tend to ignore the importance of these ancillary sales opportunities which have a dual impact on profitability, on both top and bottom line.

Kannampilly opined that there is always room for improvement, as a hotelier only looks at ancillary streams in difficult times. He added that most of the normal revenue comes from basically three departments viz. rooms, banqueting and FnB. But he emphasised on the fact that given the pandemic situation it is imperative for hoteliers to reimagine the ancillary revenue segment.  

Explaining the scenario Rohit Arora, Area General Manager, The Park New Delhi said, “Hotels and hoteliers have been very rooted to the structure of the business we are in, but every now and then there is a disruption that changes the structure a bit. COVID was a much bigger disruption than anyone of us have seen in our lifetimes, hopefully, the first and the last. This time changed our regular route of business and survival shifted us towards ancillary revenue streams, though we were new in these streams, we had experience at handling almost anything and we gave our 100% into deriving profits from these streams. However I personally still feel that we can do much more and reach our full potential. Currently, I do not think we are there yet.”

Planning and selecting projects

Arora opined that one should always keep in mind their own strengths, as to not jump into something because everyone is getting into it. Sometimes it is better to miss the bus than to join the bandwagon. He suggested that hoteliers should think about whether the project will bring profit, or if the project is resonating with the company goals and vision.

He pointed out that the involvement of departments and the core teams are indeed very important. Also the major point which is required for the success of the project is good marketing for those projects. Lastly, he suggested that deep drilling to find the best ways and processes to pursue the project is necessary and each process should be detailed and drafted.
According to Goel, the main factor will be the purpose it solves, and the experiential impact that it gives to the guest’s overall experience during the stay at the hotel/resort. 

“Getting a clean & hygienic room is no more a luxury, it is a very basic necessity for any hotel. The key to success now is being authentic and local. We have been able to offer our guest's such experiences, and by these value additions provide a scope of introducing facilities and products which can add on to the revenue as well. These do not necessarily have to be of exorbitantly high price, and they can be as local and traditional as possible. After all our industry has already started to act more sustainable in the way we conduct our businesses,” he added.

Banerjee said, “It is extremely important to understand the gaps and needs in order to curate solutions. Hotels should also identify the target groups that they are trying to tap. Evaluate and observe your hotel spaces, underutilized venues, resources and local partnership avenues with a fresh approach to creating innovative concepts. A short term strategy must also fit into your long term agenda. The umbrella approach should be on ‘Selling An Experience’ rather than just selling a product. It is important to expand your horizons and generate ideas outside the property as well. In a nutshell, an idea shouldn’t be cancelled just because your premises or infrastructure doesn’t permit it.”

Trends in hospitality ancillaries

The hospitality industry is competitive, and hotel businesses need to keep up with the latest hospitality trends to avoid being left behind.

Arora said, “FnB will surely be one of the biggest revenue streams, as this is one service that is mobile and does not have to be restrained within the hotels. Offering services and ODC to small events, openings, events and weddings will surely be one big focus stream for us and we do anticipate results from that. Secondly, small add ons in our rooms, like a meal, upgrades, special in-room dining packages at attractive rates will remain a winning idea. Workations, staycations and work from restaurant spaces at nominal rates, MICE and Wedding packages at competitive yet lucrative rates will be another big thing.”

Giving an example of how technology is helping hoteliers to understand the market trends, Banerjee said, “While OTAs and Meta searches will help the hotels sell a room at the desired price point, the focus has to be on selling the experience! ‘Themed Packages’ focusing on specific demographics such as family vacations, romantic getaways and adventure junkies will help hotels to cater to the niche markets. For example, for family vacations, a guest might be looking for an attached room, customized meal offerings, baby sitters or even early check-in or late check-out matching the kid’s schedule. Hotels will look out to utilize the surroundings as well as local partnerships to create immersive and more thoughtful experiences for the guests. For example, a romantic getaway may call for a beautiful champagne dinner at an exotic location while an adventure trip could be camping, glamping, hiking at a nearby pristine location. Wellness, Spa and entertainment segments would also be key drivers as not just the leisure guests but even corporate guests would look for ways to unwind during their downtime. Even if a guest is low key, mood enhancers such as organic coffees and herbal teas, rejuvenation kits and more can just be the right add on.”


Since the ancillary revenue stream has proven to be revenue-generating, hoteliers will now give more focus on innovative approaches to leverage this. Most hoteliers have seen results and have plans to think more on these lines to survive and revive.  

While speaking on the contribution of ancillary streams to the total revenue, Goel mentioned that the ancillary revenues contributed to, “around 6 to 8% of our total revenues in the past year.”
Arora added, “Well, they have been a saving grace so far. These different businesses have given us revenues in times when the pandemic had hit us the most.”

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