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  Revenue Management: Enhancing the Overall Consumer Proposition
with Ancillary Products

What Really Drives “Value” for our Customers, and What has an Impact at the Bottom Line for the Business  

By Ritesh Gupta
October 2010

Ancillary revenue products vary by complexity, cost and their impact on consumers.
 
Ancillary performance is about identifying what added services and products your customers place value on and how much that value is worth to them.
 
Hotels have been implementing ancillary revenue boosting strategies.
 
Assessing the maturity level of such initiatives in the hotel industry, Jennifer Keen, director, Total Revenue Solutions, says a lot more needs to be done.
 
“In comparison to other sectors within the hospitality industry, we have a long way to go in hotels to really maximise the ancillary opportunities.  As an industry, we need to get closer to two areas; what really drives “value” for our customers, and what has an impact at the bottom line for the business,” said Keen.
 
She added, “Too often, I see packages that are deemed as “popular” by the hotel, so they spend money to market them, commit money to the package inclusions and use valuable resources to deliver the package.  These packages are popular as they provide such great value the customers want them....however, they make little or no additional revenue for the hotel and thus have no commercial viability.”
 
“Moving away from the idea of packaging to consider add on sales, this is also an area where hoteliers traditionally struggle.  Quite simple, we don’t commit enough time and resources to dialogue with our customers about what they want, and then train our teams to deliver a tailored proposition,” added Keen, who is scheduled to speak at the forthcoming Revenue Management and Pricing in Travel 2010 conference, scheduled to take place in Amsterdam (23-24 November).
 
What makes sense to the customer, what fit seamlessly in the customer’s purchase life cycle and how the overall consumer proposition can be enhanced with ancillary products. If simplicity and customer service is an objective for the partner then limiting the number of ancillary partners to core product makes sense.  
 
Standalone or joint effort
 
Travel suppliers and intermediaries acknowledge that any single travel player cannot truly be a “one stop shop” for everything linked to travel. In this context, what should hotels offer other than their core offering?
 
Keen pointed out, “If you go to an airline website, a car rental site (or of course any of the major third party intermediaries), you can book multiple travel components.  Typically, if you visit a hotels website you can only book a bedroom. Most companies have yet to figure out how to sell their own add-ons and upsells, yet alone offering other components of the travel process.”
 
She further explained: the first step for hotels needs to be to ascertain what additional items they can sell online, that customers will be willing to pre-purchase and commit to in advance.  Recognising that the emotional impact of spending money is far easier when all that is required is a “tick in a box”, we need to be able to tailor the options that appear before each customer at the close of the sale. 
 
“For instance, if a guest has booked a corporate room only rate, then offer them wi-fi packages, pre purchased breakfast or advance purchase parking.  If they have booked a Romance Package, offer them a late checkout package, flowers or upgraded bathroom amenities,”  she said.
 
“So, the primary considerations need to be – what adds value to both the customer and the organisation, and how is the message tailored by booking segment.”
 
Partnering with one or limited specialists that can provide multiple products also helps reduce the complexity and management costs for the travel supplier whilst maximising profitability. If site performance is critical to revenues, and it typically always is, multiple partners can sometimes slow down integration efforts and ultimately site performance.    
 
For their part, partners must ensure that the ancillary product is integrated throughout their retailing strategy from marketing communications, to all customer touch points including offline channels. Getting this aspect of the partnership right is just the beginning though, as the integration also needs a high level of relevancy from a perspective of supply and demand matching but also from a customer purchase lifecycle relevance.  
 
Overall, it is clear that ancillary revenue has become increasingly important for most travel suppliers as they strive to maximise share of wallet of their customers, however just bolting on an ancillary product to their existing offering is no longer sufficient.
 
Today successful suppliers need to fully integrate their ancillary partner seamlessly into their website offering customer the ability to add ancillary products either as individual components or fully integrated as a dynamic package.
 
For certain products, one may have the right assets within the company to launch a new ancillary stream, or the complexity and cost of running the product is too high. It’s important to remain focused on operations and resources of your core products. The benefits of partnering with specialist in the market place can allow you to offer more to your customers than maybe you could on your own and take advantage of the latest innovations and developments they are using.
 
 
Revenue Management and Pricing in Travel 2010 conference
 
Jennifer Keen, director, Total Revenue Solutions is scheduled to speak at the forthcoming Revenue Management and Pricing in Travel 2010 conference, scheduled to take place in Amsterdam (23-24 November).
 
For more information, click here:


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