Unlike vacation rentals, hotels have many ways to bring in additional money. Revenue from their retail shops, food & beverage outlets, spa or premium internet charges, for example, can more than double their revenue beyond room rentals. This is what hoteliers call ancillary revenue.
Revenue managers focus intensely on their ancillary revenue channels, in addition to controlling expenses (like you would your household expenses) and increasing RevPar (Revenue per Available Room). RevPar is literally a basic health measure that looks at room rates (or ‘home nightly rate’, if you will, for VR’s) combined with occupancy.
Through buying featured ad placements on vacation rental listing sites, increasing the subscription package or taking cues from blogs posts on building a vacation rental brand, many vacation rental owners are convinced occupancy and rates are the only ways to increase profitability.
Increasing Your Revenue
These are all very important aspects, no doubt, especially increasing occupancy through repeat guests. But I encourage you to think more like hoteliers today, beyond just ‘RevPar’, even if you don’t have immediate access to revenue enhancement centers (the physical places ‘ancillary revenue’ is generated at a hotel).
You can increase profits, aside from occupancy and rates, albeit through less traditional means.
I’m not insinuating that vacation rental owners nickel and dime guests as airlines do by charging for the basics (i.e. checking your luggage). We are in the competitive hospitality business as independents, have a standard guest experience and understand that some items are a minimum expectation!
Every single guest needs to receive a quality experience for their payment. Luxury sheets are required if you are offering a high-end rental home, for example.
I’m not fond of guest check-out chores under any circumstance; however, it works for some experiences (when the expectation is presented clearly prior to booking). I cringe when owners or managers drop a list of check-out chores, on top of cleaning fee, in their house manual just to save a buck.
I’m referring to increasing revenue through differentiating your product offerings and providing customized options.
A Great Example
A Volo client had a great little Inn in Mexico near a community of soap makers. The owners offered amazing complimentary soaps in each room, but also introduced a soap concierge program encouraging guests to order personalized soap scents; lavender, melon, vanilla or any mixture thereof. Guests used them during their stay, brought them home and purchased as gifts. The ancillary venture not only increased their revenue by 5% (in addition to other implemented strategies), but gave back to the community.
Other examples could be snack/lunch boxes (preordered for planned outings, not to be confused with a gift basket left for new guests… although, pre-arrival grocery shopping is also a great add-on), upgraded bathroom amenities or linens, gift cards and other easy-to-deliver items. Know who your guest is and you will be able to define ancillary revenue sources they will engage with.
One client saw nearly a 10% increase in revenue by sending her guests to local businesses she loved. According to FlipKey, the average homeowner in its network earns $26,000 a year, that equates to $2600 in additional revenue.
We achieved this by developing referral partnerships that complemented her vacation rental experience; ski and outdoor equipment rental companies, restaurants, spas, movies theaters and art galleries. The commission per referral was between 5-15%, depending on the business partner.
Each ‘revenue center’ may not independently skyrocket your profit, but collectively, it can add up quickly!
This guest post was written by Kris Getzie, Founder & Principal Consultant at Volo. She is a vacation rental expert and author of the recently published Vacation Rentals For Newbies.