Finding new sources of revenue at hotels can mean charging for various things that were once free. Revenue managers share their perspectives on how this is best accomplished.
TORONTO—Hotel companies—like most businesses—are always looking for new ways to make money.
In addition to driving rate and capturing more room demand, many hoteliers, revenue managers in particular, are considering charging for different amenities and features at a hotel, some of which have long been viewed as free.
Revenue-management executives who sat down and spoke with Hotel News Now at HSMAI’s recent Revenue Optimization Conference said this is a process that holds potential but hoteliers need to be thoughtful about their approach.
“I had this conversation with a brand just two weeks ago,” said Sloan Dean, SVP of revenue optimization and underwriting at Ashford Inc. “It comes down to how you evolve in merchandising and making money off something that is free now and is an offer without being seen as nickel-and-diming. It’s a delicate dance, and if something’s changing, there has to be a way to market and merchandise it so that it comes across to the customer’s benefit.”
Chris Cheney, VP of revenue management for Stonebridge Companies, said he feels like the shift to a more airline-like model is inevitable, but the hotel industry isn’t inclined to be at the forefront.
“I think it’s something the industry will get to, but I think it’s going to be a much easier conversation with guests if it’s done in scale first,” he said. “The airlines are leading the way, and it’s sort of an expectation in the travel industry that this is a thing.”
He said it’s likely hotels would go the route of stripping out amenities and then providing guests a lower basic rate. Ultimately, though, it will come down to the brands, not owners or operators, to roll this out.
“We’ll let them take the lead and follow where this goes,” Cheney said.
A matter of consumer choice
Dean noted that could be a matter of presenting guests with a greater array of options, treating the hotel experience as more of an a la carte than an all-you-can-eat buffet.
“A lot of owners want a more restrictive cancellation policy, so maybe you offer a cheaper rate to somebody with a heavy cancellation policy,” he said. “I know there’s already advance purchase, but you can provide more optionality, and you can let the customer drive the price differential.”
Dev Koushik, VP of global revenue optimization for InterContinental Hotels Group, said he views the transition as a matter of responding to consumers’ needs.
“Customization is happening as we speak,” he said.
He noted that means measuring how much money is made per guest beyond just revenue per available room.
“That’s what I’m seeing in the future, and in this scenario that includes pricing merchandising and rate for a specific customer,” Koushik said.
He said that practice can’t be identical at every hotel and type of hotel, and the transition will require a significant amount of work not just from revenue managers but from sales and marketing teams to strike the right balance.
“It will be different in each segment, but we haven’t been through the implications (of that),” he said. “It’s going to take some time to understand it all, but it’s definitely happening now.”
Jamie Pena, VP of revenue strategy and global distribution at Omni Hotels & Resorts, said she is skeptical about how it would come together for luxury hotels, but there are always opportunities for new revenue streams.
“The key when you say unbundling is, to me, that doesn’t feel like luxury or full service,” she said. “But we’ve had success selling late check-out.”
She said that’s an example of a somewhat niche offering that is still useful because it’s highly profitable even with a small portion of guests taking up the offer.
“The opportunity to me is finding other things that provide piece of mind or guest value (even if) only select people will find (them) purchase-worthy,” she said.
Pena said hotel companies could reserve them for guests who book direct or through loyalty programs.
“Now you have a reason to book direct because there are extra things you can buy like late check-out or you can request things like food-and-beverage amenities for when you arrive,” she said.