The average Hotel has increased its ancillary revenue stream by 10%/year post pandemic. Have you?

Ancillary revenue is any revenue generated from a hotel or resort’s additional products and services, such as food and beverage, spa treatments, parking, and early check-in/late check-out fees. In recent years, the hospitality industry has seen a significant increase in ancillary revenue sales, as hotels and resorts have become more focused on providing guests with a variety of amenities and experiences.

According to a recent report by STR, ancillary revenue sales generated $18.9 billion for the U.S. hotel industry in 2022, up from $13.3 billion in 2019. This represents a compound annual growth rate (CAGR) of 10.2%.

The increase in ancillary revenue sales can be attributed to a number of factors, including:

The growing popularity of experiential travel. Guests are increasingly looking for more than just a place to stay when they travel. They want to have unique and memorable experiences. Hotels and resorts are responding to this demand by offering a variety of ancillary activities and amenities, such as cooking classes, wine tastings, and spa treatments.
The rise of the sharing economy. The sharing economy has disrupted a number of industries, including hospitality. Airbnb and other home-sharing platforms have given travelers more affordable alternatives to hotels and resorts. However, hotels and resorts are still able to compete by offering guests a variety of amenities and experiences that are not available in the sharing economy.
The growing importance of technology. Technology is playing an increasingly important role in the hospitality industry. Hotels and resorts are using technology to improve their guest experience and to generate new revenue streams. For example, many hotels and resorts now offer mobile check-in/check-out and keyless entry. They are also using technology to promote their ancillary products and services to guests.

The increase in ancillary revenue sales is a positive development for the hospitality industry. It is helping hotels and resorts to increase their profits and to improve their guest experience.

Here are some specific examples of how hotels and resorts are increasing their ancillary revenue sales:

Partnering with a local restaurant delivery service to offer guests the option to have food delivered directly to their room. The hotel chain charges a commission on each order.
Offering guests the option to purchase a «spa package» that includes a variety of spa treatments at a discounted price. The hotel chain generates revenue from the sale of spa packages and from the treatments that are included in the packages.
Offering the option to purchase a «VIP package» that includes early check-in, late check-out, and access to the resort’s executive lounge. The resort charges a premium for the VIP package.

Here is some additional data and sample numbers about the importance of ancillary revenue in the hospitality industry:

A study by the American Hotel & Lodging Association found that ancillary revenue now accounts for nearly one-third of total revenue for the U.S. hotel industry.
Another study by PWC found that ancillary revenue is expected to grow at a faster rate than room revenue in the coming years.
A sample of hotel chains shows that ancillary revenue per room night has increased by an average of 10% per year over the past five years.

Overall, ancillary revenue is an important part of the hospitality industry. It is helping hotels and resorts to increase their profits and to improve their guest experience. Such a win-win that is surprising to know many properties are still not appliying total revenue policies.