Leveraging technology to maximize ancillary revenue in hospitality

The rapid development of technology has revolutionized the hospitality industry, offering new ways to enhance guest experiences and boost ancillary revenue. From data analytics to AI-driven personalization, hotels are increasingly utilizing innovative technologies to generate additional income from services beyond room bookings. In this article, based on Chapter 3 of my book, we will explore the key technologies that hospitality businesses can leverage to optimize ancillary revenue, along with practical applications and real-world examples to inspire implementation.

Technology in hospitality: An overview

Today, technology plays a central role in modern hotel operations. It enables properties to offer personalized services, streamline operations, and create new revenue streams that cater to the evolving needs and preferences of guests. Whether it's through smart rooms, AI-driven virtual concierges, or mobile apps, these advancements provide hoteliers with powerful tools to enhance the guest experience and generate additional revenue.

Let’s break down some of the key technologies shaping the future of ancillary revenue in hospitality.

Key Technologies Transforming Hospitality

1. Data analytics and Artificial Intelligence (AI)

Data analytics and AI have emerged as transformative technologies in the hospitality industry. By analyzing guest data, hotels can gain insights into preferences, behaviors, and spending patterns, allowing them to personalize services and optimize pricing strategies. AI, on the other hand, can enhance operational efficiency and provide targeted recommendations based on real-time data.

Practical applications:

• Guest personalization: AI-driven systems can deliver personalized offers and experiences based on guest history. For example, a frequent guest could receive a customized welcome message, room temperature preferences, or spa treatment suggestions based on previous stays.
• Predictive maintenance: AI can predict when hotel equipment requires maintenance, reducing downtime and improving guest satisfaction by ensuring facilities are always in top condition.
• Dynamic pricing: AI can optimize pricing for ancillary services such as spa treatments or in-room dining based on real-time factors like demand, competitor pricing, or seasonality, helping maximize revenue.

These technologies allow hoteliers to not only enhance guest experiences but also increase the likelihood of guests spending more during their stay, driving ancillary revenue.

2. Mobile applications

Mobile apps have become an essential tool in hospitality, enabling hotels to offer seamless, convenient services directly to guests' smartphones. These apps improve guest convenience, provide personalized offers, and integrate with loyalty programs, further incentivizing guests to engage with ancillary services.

Practical applications:

• Mobile Check-In/Check-Out: Guests can bypass traditional front-desk queues, enhancing convenience and freeing up staff for more personalized service interactions.
• Room service and reservations: Guests can order room service or make restaurant reservations directly through the app, making it easier for them to explore hotel services.
• Push notifications: Personalized push notifications can promote special offers, spa treatments, or exclusive dining experiences based on guest behavior and preferences.
• Paperless invoices: Digital invoices streamline billing and improve sustainability by reducing paper use.

Apps like Marriott Bonvoy and Hilton Honors already demonstrate how mobile technology can be leveraged to increase ancillary revenue through ease of access to services and personalized marketing.

Implementing technology-driven services

1. Smart room controls

Smart room technology allows guests to control various aspects of their room environment, from lighting to temperature, through voice commands or mobile apps. This not only enhances the guest experience but also opens up opportunities for upselling ancillary services through a more integrated system.

Practical applications:

• Voice-activated controls: Guests can adjust room settings such as lighting or temperature through voice assistants like Alexa.
• Service integration: Guests can book services like spa appointments or room service through smart room systems, streamlining the process and increasing the likelihood of engagement.
• Energy efficiency: Smart rooms can optimize energy usage, reducing operational costs while enhancing sustainability—a key selling point for eco-conscious travelers.

By integrating technology into rooms, hotels not only improve guest comfort but also create new opportunities to drive revenue by promoting ancillary services in a seamless, tech-savvy way.

2. Virtual concierge services

Virtual concierges, powered by AI and chatbots, are becoming increasingly popular as a cost-effective alternative to human staff for handling guest inquiries, booking services, and offering recommendations. These services can operate 24/7 and provide personalized, instant responses, significantly enhancing guest satisfaction.

Practical Applications:

• Instant service booking: Virtual concierges can assist guests with booking services such as spa treatments, dining reservations, or transportation, increasing engagement with ancillary services.
• Personalized suggestions: AI-driven systems can analyze guest preferences to recommend activities, excursions, or dining options tailored to individual tastes.
• Staff efficiency: By automating routine inquiries, virtual concierges free up staff to focus on more complex or high-value guest interactions.

Companies like Duve provide comprehensive virtual concierge solutions, helping hotels address staffing challenges while maintaining high service levels. With labor shortages becoming a growing concern, virtual concierges are set to play a critical role in maintaining service quality while minimizing costs.

Measuring the impact of technology on Ancillary Revenue

Implementing technology is only the first step; to ensure its success, hotels must continually monitor the performance of technology-driven services. By tracking specific Key Performance Indicators (KPIs), properties can measure the impact of these technologies on guest satisfaction and revenue growth.

Key KPIs to track:

• User engagement metrics: How often are guests using the hotel’s tech-driven services? This can include app usage rates, frequency of smart room controls, or engagement with virtual concierge services.
• Conversion rates: What percentage of guests are booking ancillary services through digital channels? Higher conversion rates indicate successful implementation of technology in promoting additional services.
• Revenue Per User (RPU): Calculate the average revenue generated per guest from technology-driven ancillary services. This metric provides a clear picture of how effective your technology investments are in driving revenue.
• Guest satisfaction scores: Use guest feedback to assess how well technology is enhancing the overall experience. Satisfaction scores can offer insight into areas where improvements are needed.
• Continuous improvement: Regularly update and refine tech-driven services based on guest feedback and emerging technological advancements to maintain their effectiveness and relevance.

Case Study: Attribute-Based Selling (ABS)

A cutting-edge example of how technology can boost ancillary revenue is attribute-based selling (ABS). ABS allows guests to select specific room attributes (e.g., a balcony, a view, or proximity to elevators) during the booking process. By providing highly personalized choices, hotels can increase guest satisfaction and justify premium pricing for certain rooms or services.

While ABS has been challenging to implement from a technical standpoint, it offers significant potential for increasing ancillary revenue by tailoring room offerings to individual preferences, much like online retailers do with product customization.

The future of Ancillary Revenue in Hospitality

As technology continues to evolve, its role in generating ancillary revenue will only grow. To stay competitive, hotels must embrace advancements like AI, smart room technology, and mobile applications. Equally important is the ability to continuously measure and optimize these innovations to ensure they meet guest expectations and deliver meaningful financial returns.

Technology is not just a tool for efficiency; it's an enabler of personalized, memorable guest experiences that drive loyalty and increase spending on ancillary services. By staying ahead of technological trends and integrating them effectively, hotels can unlock new revenue opportunities while providing superior guest service.

Recapping

Leveraging technology is key to maximizing ancillary revenue in today’s hospitality landscape. By embracing AI, mobile apps, virtual concierges, and smart rooms, hotels can provide enhanced, personalized experiences that drive guest satisfaction and increase spending. With the right metrics in place to monitor the success of these innovations, hospitality businesses can ensure they are continuously improving and capitalizing on every opportunity to boost ancillary revenue.

The future of hospitality is tech-driven, and those who adapt early will stand to benefit the most.