Asmita Mukherjee 
Asmita Mukherjee | Hyderabad
In recent years, the Indian hospitality industry has witnessed a revolution in ancillary revenue generation. Ancillary revenue, which refers to the additional income generated from non-room sources, has become an essential component of the financial success and sustainability of hotels. To explore this revolution and its impact on the industry, Asmita Mukherjee spoke with key industry leaders who have implemented successful strategies to maximize ancillary revenue in their hotels.
Diversifying Revenue Streams
Sarbendra Sarkar, Founder & Managing Director of Cygnett Hotels & Resorts, emphasizes the significance of ancillary revenue in the hospitality industry. He highlights that ancillary revenue allows hotels to diversify their income streams beyond room rates, mitigating risks associated with fluctuations in occupancy rates or seasonal demand. By offering additional products and services, hotels tap into new revenue sources, ultimately increasing profitability and financial performance. Sarkar also stresses the higher profit margins associated with ancillary services compared to room rates, making them a lucrative revenue stream.
Rahul Joshi, General Manager of Taj Hotel & Convention Centre in Agra, said “Our ancillary revenue serves as a means to enhance the overall guest experience and embodying our unwavering commitment to delivering a world-class stay that exceeds expectations.” He added that ancillary revenue plays a vital role in enhancing the overall guest experience, offering services and amenities that create a personalized and memorable stay. The hotel focuses on various strategies to maximise ancillary revenue, including special F&B offerings, curated stay packages, tailor-made celebrations, unique dining experiences, and guided tours and city excursions. These initiatives contribute significantly to the hotel’s financial growth.
Kush Kapoor, CEO of & Resorts, Roseate Hotels echoes similar thoughts stating that, “Ancillary revenues are growing and an important part of our business mix.” Roseate Hotels & Resorts have implemented various initiatives to generate ancillary revenue, such as hampers for festive gifting, mithai (sweets) for celebrations and gifting, outdoor catering, in-flight catering to private jets, coworking spaces, short-term courses, tea, coffee, and fragrance appreciation sessions, summer camps, and lifestyle products. These initiatives have significantly contributed to the hotel’s financial growth.
Mainak Ray, Director of Sales, Sheraton Grand Bengaluru at Brigade Gateway recognizes the importance of ancillary revenue in maintaining top-line performance, especially during lean months and off-seasons.” It helps offset the impact of factors like reduced international travel and periods with low demand, ensuring financial stability and diversification beyond traditional revenue sources,” he said. The hotel implements strategies such as target-driven incentive plans to promote accountability and motivate staff to actively identify and capitalize on upselling, cross-selling, and additional service opportunities. Ancillary revenue streams that significantly contribute to the hotel’s financial growth include laundry services, room upgrades, F&B package upsells, and transportation packages.
Mandar Abhyankar, CRME Portfolio Revenue Manager – Southwest Asia, Holiday Inn Hotels, highlights the critical role of ancillary revenue in a hotel’s overall revenue mix. “The revenue generated will depend on nature of ancillary revenue making opportunities the hotel has, especially in terms of facilities and services that the hotel can provide,” he informed.
He also emphasised on the importance of considering both minor operating departments (e.g., laundry, spa, transportation) and major revenue-generating areas like meeting rooms and banquets when assessing ancillary revenue opportunities.
Strategies for Maximizing Ancillary Revenue
At Cygnett Hotels & Resorts, the focus is on creating attractive package deals that bundle room rates with specific ancillary services or amenities. Sarkar mentions the importance of training front desk and reservation staff to upsell and cross-sell ancillary services during the booking process and check-in. By simplifying the booking process and allowing guests to add ancillary services directly to their reservations, the hotel aims to provide a convenient and seamless experience. Successful ancillary revenue streams at Cygnett Hotels & Resorts include spa treatments, room upgrades, and local sightseeing options.
To assess the effectiveness of ancillary revenue initiatives, Taj Hotel & Convention Centre tracks key performance indicators such as revenue per available room (RevPAR) for ancillary services, average spend per guest on ancillary offerings, conversion rates for upselling or cross-selling opportunities, customer satisfaction scores related to ancillary services, and repeat business and guest loyalty metrics. Balancing the need to generate ancillary revenue with providing a positive guest experience is essential for the hotel. By offering a range of add-on amenities and services, Taj Hotel & Convention Centre caters to guests’ diverse preferences and needs, ultimately driving higher guest loyalty and positive recommendations.
To maximize ancillary revenue, Holiday Inn Hotels focuses on various strategies such as attaching non-room revenue services with room rates, offering value-add packages, and identifying upselling opportunities throughout the guest journey. Laundry services and transportation have been successful ancillary revenue streams for the hotel.
Tracking Success
To assess the effectiveness of ancillary revenue initiatives, Sarkar mentions the use of key performance indicators (KPIs) such as Ancillary Revenue per Available Room (ARPAR) and conversion rates. ARPAR measures the average revenue generated from ancillary services per available room, providing insights into the overall effectiveness of ancillary revenue initiatives. Conversion rates, on the other hand, help assess the effectiveness of marketing efforts, sales techniques, and promotional strategies in driving guest engagement with ancillary offerings. Sarkar also emphasizes the importance of guest feedback in evaluating the effectiveness of ancillary revenue initiatives.
Abhyankar explains, “Tracking metrics like room upsell revenue as a percentage of overall room revenue helps gauge performance. Other KPIs include laundry revenue per available room, transport revenue per available room, and total other operating departments revenue per available room.”
While on the other hand to assess the effectiveness of ancillary revenue initiatives, Roseate Hotels & Resorts focuses on guest feedback, repeat business, and referrals. Kapoor highlights the importance of providing a positive guest experience while generating ancillary revenue. The hotel strives to ensure that guests have a superlative experience, whether they are staying at the hotel or using its products and services.
Leveraging Technology
Technological advancements play a crucial role in enhancing ancillary revenue generation efforts. Sarkar mentions the use of apps to monitor guest preferences and deliver customized services at their doorstep. Data capture throughout the guest cycle allows the hotel to monitor and record guest preferences, enabling the delivery of tailor-made services. Email marketing, personalized offers, and guest loyalty programs are also utilized to tailor promotions based on guest profiles and previous stays.
Looking to the future, Sarkar anticipates that technology-driven solutions, such as apps enabling doorstep delivery and customized services, will shape the evolution of ancillary revenue. By continuously evaluating guest data and closely following industry trends, Cygnett Hotels & Resorts aims to define a robust ancillary revenue strategy.
Ray highlighted the importance of technology, “Implementing a dedicated software platform that leverages data from frontline systems and focusing on key performance indicators (KPIs) drive revenue and deliver superior service.”
Future Trends
The future of ancillary revenue in the Indian hospitality industry is expected to be driven by technology and changing consumer preferences. Mobile apps for convenient service delivery, customization based on guest preferences, and capturing guest data to tailor offerings are anticipated to be significant trends.
Ray anticipates that “ancillary revenue will undergo changes with a focus on budgeting, in-house services, and being end-to-end service providers. Hotels will invest in expanding their own ancillary services to meet evolving guest needs.”
Abhyankar expects that ancillary revenue will continue to be an integral part of total revenue optimization. The focus is on strategic approaches, involving stakeholders, and leveraging technology to drive ancillary revenue growth.
Ancillary revenue is no longer an afterthought but a strategic priority for hotels in India and beyond. As the industry evolves, embracing innovation and adapting to changing trends will be essential for sustained growth and financial success.
asmita.mukherjee@saffronsynergies.in
