Trending in Hospitality: Unbundling Services to Create Alternative Revenue Streams

It’s been a bad couple of years for the hospitality industry. What alternative revenue sources are some hotels trying out? We examine the trends and possibilities in this article.

2020 was a bad year to run a hotel; 2021 hasn’t been a lot better. With large and expensive buildings to maintain and staff wages to pay, independent hoteliers and hotel chains have to find ways to supplement their traditional income sources of rooms, event hosting, and food/beverage sales.

You’ve probably heard that MCR Hotels has adopted a new pricing paradigm at 12 of its properties. In exchange for lower room rates, they’re charging guests additional fees for early check-in, late check-out, and weekend swimming pool usage.

The idea is that many customers don’t use (or care about) these perks and will be happy to see a price reduction. And the concept of paid hotel extras (like in-room Wi-Fi) isn’t exactly new; it’s just being expanded.

The concept of alternative revenue streams is very important when hotels are still struggling to survive. What other revenue sources do hotels have? And how can they leverage them?

Alternative Revenue Sources for Hotels: Think Beyond the Box

Supporting traditional hospitality revenue streams with other sources predates the pandemic, but the pandemic’s effects have made it a pressing matter for hotel operators.

It’s time to look beyond the rooms and the restaurant and examine what you can do with the hotel space and existing services. How can you use customer experience and expectations to create what are essentially new products?

How Hotels Are Creating Nontraditional Revenue

One example of this expanded service offering is ResortPass, which offers day-only rates to hotel spas, pools, and amenities; starting at just $25 per person, it allows guests to have a “daycation” in their home city. This opens up an entirely new group of customers and adds some flexibility to the hotel’s cash flow. It also puts underutilized amenities to good use.

Additional ideas for ancillary revenue mentioned in a 2ndKitchen article include offering empty rooms as remote working areas and expanding the hotel gift shop to include home décor items and other products associated with the hotel. We’ve already seen hotels using their food-prep areas as ghost kitchens and competing with local spas and salons, to name just two alternatives.

The overall message here is maximizing and repurposing the space and services hotels already have. By focusing more on their ‘home’ market and supporting locals’ needs for space to work, a day out, or a place to meet a few friends in relative isolation (i.e., by renting a room or meeting space), hotels are less dependent on tourism.

The Future of Alternative Revenue Streams for Hotels

When we come out of the pandemic, will hotels continue these expanded offerings?

For those offerings that make use of hotels’ existing-but-underused spaces and services, it seems like alternative revenue streams will continue post-COVID. But however the post-pandemic situation resolves, now is the time to adopt a flexible, data-driven approach to hotel revenue management.

This will require an AI-based holistic solution that captures consumer behavior and trends and enables hotels to stay current with customer demands. Here, AI acts like the backbone of the system, letting the hotel operator see where and how to expand their business and launch offerings that match the insights coming from their customer data. Such a system – like Infogain’s Value Delivery Framework – can also optimize the customer-facing website UX and help hotels meet guest expectations around things like remote check-in, biometric identification, Hyperpersonalization, and customized experiences.

In conclusion, there needs to be a shift in mindset for hotels to successfully adapt to the current crisis. Operators that use technology to facilitate a flexible, customer-oriented approach to revenue streams will be in the best position for success.

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