The travel life cycle is now undergoing a phase of rapid evolution. The rise of OTAs and alternative lodging sites like Airbnb means a much more competitive landscape for booking accommodation with either a hotel operator or a short-term accommodation provider host. In today’s market, both hosts and hotel operators need to be able to offer more than just great accommodation. They need to be able to fulfil the ever-growing demands of today’s travellers with extra services, but delivered in a more personalised way.
Ancillaries, often known to travellers and travel businesses as the extra items — like checked baggage, rental cars, hotel room upgrades, room service, and local experiences — that are bundled along with their plane tickets or hotel rooms play an essential role in travel industry merchandising, marketing, and revenue considerations. Although ancillaries have always been an effective strategy to boost sales, they are no longer seen by today’s travellers as a mere supplement to other travel products. Today, they are increasingly the main event.
Forces such as evolving personalization technology, smarter approaches to e-commerce merchandising and bundling, the expanding categories of products and services that fall into the bucket of “travel,”, today’s travel businesses need to fundamentally rethinking the role of ancillary products and services in their overall business strategy.
But the biggest ancillary opportunity of all may be in the short-term accommodation industry, which includes hotels plus short-term accommodation hosts, such as those on Airbnb, Vrbo and Booking.com. Due to larger shifts in consumer habits, hosts and hotel operators need to begin to realize that they are no longer simply selling access to rooms and beds. Instead, they are gatekeepers and taste makers connecting travellers to a universe of related experiences in dining, entertainment, spas, tours and activities, retail, local services, and more.
This new way of thinking about ancillaries is no accident. It’s part of a growing trend, one that Skift summarized in its 2018 Megatrend, “Travel Brands Want to be Experience Platforms.” As noted by Skift hospitality editor Deanna Ting, “While it’s still very true that, fundamentally, hotel companies run hotels and airline companies run airlines, it’s also become increasingly clear that more travel brands want to expand beyond what they’re known for doing in travel and into new segments of travellers’ experiences.”
Taking this more expansive view of hospitality offers hosts and hotel businesses a variety of benefits. This includes an opportunity for increased revenue, a more detailed understanding of the wants and needs of their guests and customers, and an ability to drive more repeat business and create loyal customers. In order to make sense of the emerging opportunity, it’s important to start by understanding the consumer trends that justify this new approach.
The first lesson related to ancillaries is that travellers tend to value convenience and personalized knowledge when making purchases. It’s probably no surprise to hear that 86 percent of consumers in a recent study by Think with Google said that personalization plays an important role in their purchase decisions. Even better, the same study found that 62 percent of consumers have either chosen, recommended, or paid more for brands that provided a personalized shopping and buying experience.
The second change impacting hotel ancillaries is an evolving traveller mindset related to industry loyalty programs. While this insight may seem like a problem, it is also an opportunity as hotel loyalty takes on more of a lifestyle dimension. Instead of seeking out programs built only on points, travellers are increasingly looking to associate with brands that can help them facilitate access to the lifestyles they want to lead. Ancillary products have an important role in the creation of this lifestyle element for hotels: they can be easily integrated into loyalty programs, helping them to deliver access to a broader range of travel experiences not typically associated with hospitality.
The third change impacting hotel ancillary strategy is linked to when, why, and from whom consumers purchase these supplementary items during their trip planning process. Today’s traveller isn’t necessarily visiting the concierge desk as often as in the past. Instead, many consumers increasingly rely on digital resources and mobile devices to find local food and itinerary recommendations. According to Skift’s 2018 “U.S. Traveler In-Destination Mobile Usage Survey,” 76 percent of leisure travellers used their mobile phones for hotel-related purposes. In addition, 42 percent of respondents said they used their device to “find things to do in the area.” This suggests that today’s hosts and hotels have an opportunity to claim much bigger ownership over this process, aligning their expertise and trusted customer relationship with today’s evolving digital research and purchase process.