With demand for hotel rooms still suffering from the pandemic, hotels around the world are desperately looking for new ways to make money.
By Kasper Gjedsted | Co-founder of PERE.com
Let’s start by admitting that this isn’t the first time an industry has had to look for new ways to generate revenue. Remember when airlines used to offer free luggage, in-flight drinks or a slew of other amenities that made flying a unique, if not exclusive, experience? It’s been a while — we know. In fact, you have to go all the way back to pre 1980’s (remember Pan Am?)
Today, however, airlines wouldn’t survive without the more than $100bn generated from ancillary sales. Things like priority boarding, extra leg room, in-flight food and beverages, and those movies that keep you preoccupied are indeed keeping the industry afloat.
“The airline industry is more and more contingent on ancillary revenue as airlines are trying to improve their operating margins with new sources of revenue; in 2019 this value amounted to $109.5 bn.’’ Source: statista.com
The same goes for the car rental industry. As the former CEO of Avis and SIXT, trust me when I say that it too is totally dependent on the billions of dollars in ancillary sales. If you’ve ever rented a car, there’s a good chance the car rental agent tried to sell you insurances, upgrades, GPS or a host of other things — all considered ancillary revenue that can increase the value per customer and lift profit margins
Hotels aren’t even in the ancillary revenue game
But think about when you visit hotels. How many times has the front desk tried to sell you anything other than a room upgrade (or try to convince you to join yet another loyalty program)?
If you’re drawing blanks then that’s because hotels don’t do this. And it’s not a part of their playbook because they’re not even in the ancillary game. Instead, they’re sitting on the bench — watching other hospitality industries play and win.
But getting into the game — and flourishing — doesn’t require a sea change for hotels. Actually, hotel guests are already being sold ancillary options when flying and driving to hotels. So in many ways they’re already conditioned for this type of user experience.
The reason hotels have been slow to respond, it seems, comes down to one thing — motivation.
Unlike the airline and car rental industries, things have been on the uptick and profits have been soaring for decades. And like most of the time, when things are going well, innovating becomes less of a priority (if it ain’t’ broke, don’t fix it they say).
So hotels have ignored much of the digital transformation that’s been going on around them and have been slow to update or develop technologies that cater to the modern hotel guest. They also didn’t expect what was about to happen in early 2020.
Covid-19 was a game changer for hotels
The wake up call came in 2020, when the global hotel industry saw their profits plunge to $198.6 bn, a massive 46% drop year-over-year (Source: Statista). With both domestic and international travel coming to a grinding halt in just a matter of months, hotels found themselves with unprecedented occupancy rates. At just over 40% occupancy in November, 2020 and down a whopping 305% year-over-year, the incentive hotels needed to rethink their business models — including ancillary revenue — had arrived (Source: Statista).
PERE.com is an ancillary sales enabler
Covid-19 virus has only fueled the interest and adoption for PERE.com. We’re giving hotels a new way to drive ancillary sales when they refer guests to local restaurants. And as a new ancillary revenue stream, hotels are now able to profit from something they’ve already been doing. This means no significant changes to how staff perform their jobs. If anything, the guest experience is enhanced when hotels make it easier to dine like a local — which is what hotel guests are really looking for.
Recently, we’ve seen an unrivaled interest in PERE.com and have some of the world’s largest and most recognizable hotel chains flocking to our platform to unlock their ancillary revenue streams. We’re happy to see hotels finally enter the ancillary sales game and realize that it might very well be the new revenue king that will help get the industry back on track and drive long-term growth.