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Where are the significant non-room revenue opportunities?

19 August 2021
The non-room opportunities all depend on the target group, the reason for travel, type of hotel, destination, and many other variables. It all starts with analyzing the needs of the target group to be able to create attractive products and services that can generate additional revenue.

Hotels try to find new revenue sources replacing lost room revenue. As a result, more hotels offer longer stays, packages, and upsell offers, but consumers are not as enthusiastic. In a recent report from Skift and Oracle surveyed more than 500 hotel executives and nearly 5,000 consumers, 41 % of European consumers responded that they would like to receive options to improve their stay. In contrast, 49 % said it would depend on the trip and the context.

Hotels are reactive followers

Hoteliers tend to be followers and wait to act until something hurts. One example is when the OTA:s continued to steal business from hoteliers successfully during the recovery after the financial crises. After some time, the action was developing websites, booking engines, and launching campaigns to convince consumers to "book direct." Unfortunately, the impact of the lack of forward-thinking and fast action was billions of dollars in lost profits for the hotel industry.

Compete with short-term rentals

The report also lists reasons why people would like to stay in short-term rentals. Over 50 % respond that more privacy and having a kitchen are the two top reasons for staying in a short-term rental. Over 40 % say that more space, better location, and the possibility of controlling social distancing and hygiene are why they stay in short-term rentals. Only 36 % say that price is a factor. Short-term stays have a much better offering than hotels for some consumers and some travel reasons.

So now, hoteliers have discovered that short-term rentals steal a share of the business and want to recover some lost guests. As a result, hotel operators strongly believe that they need to develop products and services to better compete with short-term rentals. They are right, but the solution is not to add privacy, kitchens, or more space. Instead, hotels need to develop unique products and services that differentiate them from short-term rentals. It all starts with servicing the guests traveling for a specific reason that fits the hotel.

Hotels have a hard time understanding consumers and their reason for travel. If hotels would spend more time researching the real needs when guests are traveling for a specific reason, they would quickly find many wishes that the hotel could satisfy. In business language, satisfy means charging for and make more money. Families with small children have different needs than families with teenagers. DINKS requires another product and service than baby boomers.

Therefore, interviewing guests about their needs is the only way to find new sources of revenue and, at the same time, make guests happier once you understand their real needs. Therefore, talking to real guests is better than just making guesses based on gut feelings.

Traveler purchase intent

The survey also asked what consumers would be open to purchasing from the hotel at their next stay. Food from a restaurant, drinks at a hotel bar, tour or activity, and package deals came out at the top. Of course, people need to eat while away from home, but they also need something to do more than just the main reason for travel. There are more suggestions in the report. The link is under useful resources in the right column of the blog post.

The non-room opportunities all depend on the target group, the reason for travel, type of hotel, destination, and many other variables. Therefore, each hotel needs to analyze the local market and create products and services that fit the guests they want to attract. If hotels with significant non-room revenue manage this well, they will see a notable profit impact. For some other hotels, non-room revenue will only be marginal and will not need much attention.