Das ungenutzte Potenzial von Nebenumsätzen in Hotels

the Future of HospitalityI've been doing training and consulting globally for for hotels focusing mainly on on revenue strategies. Mhmm. How did you get your focus to ancillary revenue? Like, how did you get exactly to that focus?

Pablo TorresWell, certainly came working for so when I switched to from operations to to consultants, I was saying that it was a Singaporean company, but then TSA, which was, back then, the major player when it comes to when it came to front desk upselling. So improving ancillary revenues in hotels. So I had a contract with large corporations globally, and I was with them for almost twelve years until two years ago working in supporting different hotel chains internationally to drive our ancillary revenue, and that's what that's been my focus ever since. So now as an independent consultant, I also do trainings and consulting for for hotels and companies on on how to drive up those ancillary revenues.

the Future of HospitalityIt's nice. And in a way, is it becoming more and more relevant for hotels to focus on ancillary revenue?

Pablo Torres100%. The thing is many, many hotels do not put have any focus whatsoever on ancillary revenue. So backtracking is what is ancillary revenues or any revenue that is not coming from the main business for a company. So if it's airlines, anything that is not selling seats will be ancillary revenue and they are the masters of ancillary. So the airlines and the cruise liners are doing a great job as well. Depending on the company, we're talking about up to 50% in some locals airlines is coming from ancillary revenue. Top revenues are ancillary. In the cruise liner, like 35%. If we think about hotels, we're talking about, like, 8% of revenues coming from ancillary, so it's a massive growth potential in there. That is already explored because, historically, hotels are purely focused on doing revenue on the space where there is a bed. So only bedroom revenue, but nothing else. So you might have a restaurant. You sell your menus. You have your customers.

Pablo TorresYou might have meeting rooms or spa, but hasn't been dynamic pricing is not there yet in most cases. And so trying to optimize that revenue is is not part of their business. So that's why we're trying to build up and there's lots of potential. Yeah. Mhmm. And why is that so bad? Why why isn't the focus on ancillary revenue? Why why are they so focused on the bets? The best? I mean, obviously, it's their main business. So when you have a business, you start to focus on your core, which in this case is rooms, and they haven't had the need probably. I would say that's the word. They haven't had the need to to try to optimize the rest. So if we think, for example, going back to airlines, low cost airlines, in some cases, they have they need to have an 85% occupancy on their on their flights to breakeven.

Pablo TorresSo that's why for them, it's very, very important to drive ancillary revenue because in most cases, all their profit comes purely for ancillary. Hotel business traditionally have had a healthier profitability. Let's put it like that. So they didn't have to have that focus on other sources of revenue that is not rooms. Now come the pandemic, you know, some business struggled for for a few months. Now it's true that it's the opposite, so they're booming. But in some destinations, the the average rate is already pretty stretched. So customers are starting to be concerned about how high the rates are. And if you cannot push rates any harder, and we've seen a slight decline on the increase of rates, then what you can do to improve your results is drive ancillary revenue.

the Future of HospitalityYeah. That's true. And from my opinion, just I'm not an expert like you in ancillary revenue, but in my opinion, if a guest spends more money in the hotel, that's also a better guest experience for the guest because he's more involved with other things. So it's not only about revenue. It's also about getting your guests more attached to your hotel, and that makes it for him get a better guest experience. Right? Absolutely.

Pablo TorresAnd it's all about personalization nowadays. So, more custom customers want to really feel that they're living a nice experience, again, post pandemic. There there's been a lot of big mindset switch for many customers. They wanna enjoy life more and they wanna go out for restaurants, enjoy the holiday holidays, so you'd wanna make sure that whatever you suggest to them or propose to them, it makes them feel special. Hence, you know, all these different items that come from ancillary revenue are great to personalize that experience for customers. Mhmm. Nice. Nice. And and what are let's say, the most

the Future of Hospitalitychallenges have when dealing with

Pablo Torresgetting a high ancillary revenue. Like, what are the challenges? Why is it so difficult for them? Except the ones that didn't think of it. So one will be I mean, there are two main ones. It will be trading and technology. So trading, when it comes to upselling, it's cross selling, which is where the absolute revenue usually comes from. It's about having an upsell culture in there. So even if you provide a company, a hotel in this case, the the right technology, if the team at every level from GM to the to the receptionist, if they don't embrace a culture of trying to offer, trying to personalize experiences for customers and suggest the right upsell to rent the right guest every time, then it's gonna be challenging to increase the numbers at the level that you might expect. That's on one hand in terms of trading. And then technology, you can do everything manually, but why would you when you have technology at a very affordable price when that can do it for you? So and it comes from why would you do calculations with your hands so you have a calculator, right, or Excel spreadsheet? So that's that's common sense now because it's been in the market for I don't know how many decades. But go moving now into the present and then the future, if you had tools and technology that can personalize experience for the customer, can do the invoicing for you, the suggestions, the inter the connection with the customer. Just rely on technology, put it together with the training, and then it will be much easier to to achieve the And

the Future of Hospitalityis it true that, like, from what I see, like, most hospitality professionals, they don't really like to to sell stuff, sell it, say it like this. They feel like they they force the guests to buy something, and I think that that mindset is like, has to be shifted because they're not, like,

Pablo Torresyou know, forcing them to do something they don't want, but it's like giving them another opportunity. So how do you look at this? It's true. I I've I've encountered that situation many, many times in hotels saying, well, if the suite is available, why don't we give it for free? You know? We wanna look nice in front of the customer. We want them to give us a good review. So if you give we give them a a better room, they're gonna give us a nice review. So my answer to that is that, well, then you're buying the review. They're not leaving your review because you're giving them a good service. You're leaving your giving you a good review because you gave them a a present. So it's just that they feel obliged to give you a good review because of that. They should give you a good they they should leave a good review because you gave them great service, and they love your your facilities, not because they they feel like they they owe it to you. So the thing is every business is there to make money. Simple as that. Right? So once we pass that, then thing is, in any scenario, when you're trying to suggest something to a customer, you have to focus on their needs. And if those whatever service or or product you're offering your customer, if it's fulfilling their needs, they won't mind that much about the price tag. And we and you can see that I'm I'm using a lot of airlines examples because they are the masters of ancillary.

Pablo TorresSo economy flight from London to Dubai might cost you $300, $400, you know, the cheapest you can find. Same flight, seven hours on first can cost you, like, 10 times more. Same same same seven hours. Why? I mean, it's like, okay. Better seat, fine. But people don't don't don't buy that don't pee 10 times more because of the champagne or the extra lounge. They pee because of the comfort, relaxation. They can enjoy. They have the status. So it's all about the personal feeling of the customer, not about the item on itself. So if you if you manage to cover those needs that the the customers is looking for in that situation, then it will be much easier both for you as a company to try to sell it to the customer and then for the for the customer to to buy it. And if those needs are fulfilled, then the price tag is not really an issue for customers.

the Future of HospitalityYeah. That's a good one. I like it one. Because it's a it doesn't need to be like a transaction. It needs to be like a connect emotionally and also resonate with what it needs and wants. And that's how it's I I come from a sales background. If you, as a professional, try to sell something with the mindset that you want to take something, for example, raise money, then it always feels better to sell. But if you try to sell the mindset that you want to give something, then it's a whole different mindset. So I think that, you know, giving instead of taking, if you think that there's a mindset that can help hospitality professionals.

the Future of HospitalityMhmm. Yep. 100% of you. What is, like, the most underestimated ancillary revenue stream in hospitality today?

Pablo TorresI would say probably food and beverage to restaurants and bars is you see it many, many times that customers might have the glass empty, for example, and no one is offering them a refill quick enough. Waiters not making eye contact with customers. So customers are waiting looking for a waiter, and the waiter is not making eye contact. So all those missed opportunities to improve the customer experience, and therefore, the revenue optimization of the of the outlet are being missed a lot. And and it's surprising because, I mean, some sort of dynamic pricing have been there in the market for many for many years. So you think of London, for example, the theater menu, the early bird menu, so you have cheaper dinner options if you go, like, five until 7PM, something like that. So I think that's a way of dynamic pricing. So what we have to do is to try to take it to the next level, apply technology in there. So why will your menu items will need to cost the same every day of the week or every time of day? And what about optimization of your of your chairs, for example? Do you know how much each chair, each table of your restaurant is making per hour, for example? Most restaurants don't do those numbers. So you start applying KPIs to restaurants and bars, you will see that the result would boost without putting any extra effort. It's just going down to the detail and and optimizing it. Nice. Nice. That's a good one. Yeah.

the Future of HospitalityAnd is it like like you said, if I just take your example, like, the wine glass is empty and you can refill it, does it make such a big impact on the revenue? Like like, can you give an example? Like, because it does, like, such a small thing like that. It does. It does. So, I mean, all these extra so if we're looking for hotels, so we're talking about RevPAR, revenue per available room.

Pablo TorresSo we move from that to RevPAR. So total revenue per available room or guest. So how much each person is staying in your premises spending. So we're talking about increasing probably, like, up to 10 the revenue that each person lives in a bar, restaurant, or hotel during their stay, even if it's a dinner, for example, or if it's gonna be a weekend in a hotel. In most cases, that extra, it's mostly profit because the cost was already there. So if you book a room, the cost for the hotel for you staying in a room versus staying in a suite, the change of cost is minimal for the hotel. But the profit the profit of that extra is much higher. So, yeah, you were planning to stay for there for dinner anyway, and you're gonna spend maybe $40 for your dinner. If you had that entree or appetizer that I suggested to you, that extra drink, maybe a cocktail, the average ticket is gonna increase by that maybe 10, even 15% some cases, and profitability is gonna be much higher.

the Future of HospitalityNice. Nice. And it's also, from what I see, like, kind of a snowball effect. Right? So, like, if you spend more in a hotel, then you have a better experience, and then it's kind of snowballing that you are willing to spend more in the hotel because that's how our brain works. And if you say, ah, they didn't look at me when I was looking for icon with the waiter. This restaurant isn't for me. Maybe the spa is also not nice, and then they go out of the hotel, and then snowball and the other the other effect. It's yes.

Pablo TorresIt's for me. The the mantra I always share with the with the trainees I mean, that when I would do the trainings, wanna make sure that the customers leave the premises more satisfied than they expected, having spent more money than they had in mind. And Yeah. But that's when you enjoy a nice dinner with your partner, with a with a a group of friends, if you had a good time, those two, three hours in a restaurant, you don't really mind that much the final ticket. Exactly. Because what you went there to to have a nice time. You wanna spend a weekend with your family, with your partner.

Pablo TorresYou wanna have quality time with your family. Maybe Christmas, Thanksgiving, whatever it is. And if you enjoy those nice couple of days, price tag. Of course, it's important. We we we all wanna, you know, make sure that we're not overspend.

the Future of HospitalityBut when you balance the what you spend and the quality of the service that you and the quality time that you have with your family, then that's why it counts. Mhmm. Really emotional when you when you pay for the. It's not like when you're selling to a software company and have, like, a c level management taking the rational decision. It's not what happens when you are in a hotel. It's just like a feeling. Let's do this. Let's add a glass of wine. That feels good. And can you share maybe a success story of when ancillary revenue, like, really transformed hotels' profitability?

Pablo TorresYeah. So I can give you two quick ones. So one was resort that didn't have any upsell culture. So we started from scratch, so we did a full implementation focusing on on reception. So being a resort, they had, like, half board, full board, all inclusive sort of options. And in those kind of cases, the sky's the limit because you have endless possibilities from the front desk. So we get a restructure in terms of all the different rooms that were available, all different F and B for the beverage package that were available for customers as well, and then mixed that with a with the right training for the team, culture for the management, and then an incentive program.

Pablo TorresAnd it really great. Went from zero to, in this case, a million euro in the first year, which was was great results. And another one, they already were doing upsell very good with a a large chain hotel belonging to a to a large company, global corporation. But in that particular property, they were giving away very low incentives. And thing is you cannot expect your team to sell and not get anything back. So from a hotel point of view, you have your sales team, sales, marketing, commercial, and part of their salary is a bonus. And that's widespread that sales teams, they're gonna have a percentage of the salary coming from a bonus if they reach certain targets. That's normally in in most companies. So if you if you expect your receptionist, your waiters, your spa therapist that to become also sellers, so part of their duties is selling products and services, why wouldn't you incentivize them? It doesn't make any sense. You know what I'm saying? So that hotel, what wasn't incentivizing the team, so their results are very poor. We created with them or for them, in this case, a a clear structure of our incentives according to the industry standard, and they multiply by four the the results.

Pablo TorresBecause they they the team realized that now they're I mean, they they felt important and say, hey. I'm doing an extra effort selling, but I have a compensation.

the Future of HospitalityNice. Nice. And what did they get back? Was the money incentive, or was it, like,

Pablo Torrespoints? Or I don't know. No. In this case, was money. Yeah. It's like money is the it is a international language. It works in most cases. There might be some territories where, you know, money incentive might not be allowed for whichever reason, but in 99% of hotels, they incentivize with with monetary incentive, and there could be also some extra freebies on top of that. But the basis is it's money help. Mhmm. It's yeah. It sounds

the Future of Hospitalitylogical. And what, like, let's say, okay, I'm a hotel general manager. I want to of course, you can do always better and better and better at ancillary revenue. But let's say I want to take my first steps into making it better. You talked a little bit about incentivizing training technology. What are, like, the easiest steps to take? Like, the first easiest step to take into becoming more profitable with ancillary revenue.

Pablo TorresSo first will be one room related, one nonroom related. So room related, check out your inventory. So you might have on your website, let's say, super simple, standard room, junior suite and suite. Many hotels have a very simple sort of inventory structure. But you have to review your inventory and say, okay. All my are all my junior suites the same? Or do I have one that's in a corner, maybe a higher floor, maybe a better view? So even though on your distribution channels, it's just called junior suite, you know internally which ones are the best ones, which one do I have. So those ones, you can have a different price tag, which is something you can sell at the desk. If you have a resort with 20 different room categories, obviously, your life is much easier. You know, I'm going to the difficult example with just three room categories.

Pablo TorresAnd and then non non room related with breakfast. So loads of guests come to check-in without breakfast booked. And if you don't know the city, you don't know what's around the hotel. You're not gonna as a customer, you're not gonna go to the street and start wandering around to see where you can have breakfast. So you probably will end up having breakfast at the hotel. So if the reception manages to make sure that they take the breakfast at check-in time so they commit themselves to have breakfast during the stay. It's it makes life for F and B and and the kitchen easier because they know how many people they're gonna be expecting during the stay. So it's a win win for for every department. So for a GM, easiest way to start, check out your inventory, start up selling breakfast at the desk, give a nice incentive to your team, and see a move from there. But that'll be the the the very basic to start. Mhmm. When you see some improvements into your revenue and selling revenue, then also, I guess, gives you that feeling like, let's do more with this, then we can do better and better. Exactly. And then depends on the size of the hotel. Obviously, you have a bigger hotel. Probably, you'll rather have some tech tool to to help you. So software that can help you, for example, in pre arrival, sending messages to customers. So they they already upsell themselves before arrival. You can have some software embedded in your PMS that can offer the reception is the right upsell to offer to the customer at at that point during the stay. So, obviously, you can go step by step covering the entire customer journey so you make sure that every customer has at least knows that that's available because that's a that's a terrible point happens sometimes. Customer living in hotels and say, oh, if I would have known that you had a spa, I didn't know there was a restaurant. It's like, oh, that's gonna happen. Customer should know, and then it's a decision. They wanna use it or not. Fair enough. But no customer should leave the premises without the right information, and technology helps you push that information to to them. True. True. And and what trends if you talk about technology,

the Future of Hospitalitywhat trends do you see in regards to ancillary revenue, less of technology?

Pablo TorresMhmm. So, obviously, mobile first. So most people won't check everything on their mobile nowadays when they're traveling, when they're at home. So you have to make sure that all your technology is it's adapted to to the mobile environment. And then in terms of data personalization, so every hotel has millions of data points from every customer checking in. You have you give your passport ID depending on the country, you have to to give it to the to the hotel so they're gonna collect a lot of information points and then from your reservation, when you booked, rate, etcetera. So all that information that is stored in the PMS, it should be used by hotels to personalize the offers if we focus in our revenue.

Pablo TorresSo that if you're going on business by yourself from Monday to Thursday, you will only receive a message saying, hey. You wanna enjoy the romantic package? Like, that doesn't really it still happens. You know? The it shouldn't. So use the right technology, which is available at the moment I mean, nowadays now for for very low prices to make sure that you utilize your data to personalize the offer that you you suggest to every customer.

the Future of HospitalityNice. And and do you then if we also look at the future hospitality in regards to ancillary revenue? Do you think that technology will make a bigger difference, or do people still make a bigger difference in selling and offsetting cross selling? So it's gonna be a mix. And thing is, I think for the future,

Pablo Torreshuman talent is gonna be the luxury. So I see, like, a split between lower tier hotels with mostly installed by technology. So you check-in on your mobile, check out on your mobile. There's maybe one person on the desk just in case, but there's no real real human interaction. And the opposite, the luxury will be having the old fashioned five star hotel with a doorman, a bellboy, reception, concierge because talent is becoming more and more expensive for obvious reasons. You know, salaries are going up, and it's be it's becoming more challenging to find staff to work in hospitality. So only top luxury hotels will have that the full man teams in that sense, also with the right technology, of course. But the ones with on the lower categories will rely a 100% on technology. So that's where I see the the split in there. Yeah. Interesting. Nice.

the Future of HospitalityNice. And I started to get on with the new book in Amazon. Yeah. So I'll be here. Where is it?

Pablo TorresThere it is. Master in hospitality and sales revenue. So it's, what, well, all those 35 of experience and mainly the last fourteen working, doing consulting and training for hotels. So I've been on-site in some 300 hotels in 30 countries, trained around 4,000 people. So all that all that experience is it's here. So, hopefully, it can help add value to to hoteliers and share with ideas and and examples from that it are being applied at the moment in in worldwide to drive up on share revenue. Yeah. Mhmm. And it's only for, like, GMs and revenue management people or also for, like, front desk and Also front desk. Yeah. I mean, even for hostels and small businesses, students, anyone who wants to open up their mind when it comes to ancillary revenue.

Pablo TorresThere's a chapter for FMB. There's another chapter for airline and cruise liner. So to it's a global view, like, three sixty view of what ancillary revenue means and how it can be applied at every level from reception all the way to to corporate level.

the Future of HospitalityOmen, do you have anything else to add? Because we're basically almost almost out of time.

Pablo TorresI mean, the no. I I think we we shared it with a really great question, so to to try to evangelize, if I can use this word, in terms of ancillary revenue. Because what when you are in this small world, this niche, you feel like everybody talks about it, but it's not true. You know, still many hotels have to discover how ancillary revenue can improve the results. And it can be hotels, bar, restaurants, event venues. So it's about inviting them to to join and and improve the results. Thanks, Juan. See that revenue. Mhmm. So everybody wants.

the Future of HospitalitySo I would say, yeah, Pablo, thank you very much for for being our guest.