Saturday Brain Storming Thought (256) 04/01/2025
ANCILLARY REVENUE
Ancillary Revenue is the revenue generated from goods and services that differ from or enhance the main services or product line of a company
Ancillary Income
Ancillary Income is defined as the revenue generated that’s not from a company’s core products or services
Key Takeaways of Ancillary Revenue
1) Ancillary Revenue
2) Ancillary Income
3) Ancillary Revenue is important because it can help companies diversify the sources of total revenue
Example of Ancillary Revenue
1) Ice cream company – Main business is to sell Ice cream
2) Ancillary Income – Selling Ice cream scoopers
3) Printer Company – Main business is to sell printers
4) Ancillary Income – Selling printers ink
Ancillary Revenue in a Hotel
1) Revenue from high speed WiFi
2) In room drinking
3) Parking
4) Business services
5) Meals
6) Fees for extra loyalty points
7) Late check-out or early check-in fees
8) In room entertainment
9) Trip cancellation insurance
10) Car wash services
11) Many other services
Ancillary Revenue from Airline Industry
1) Baggage fees
2) Seat selection
3) Priority boarding
4) In-flight meals
5) WiFi
Types of Airline Ancillary
1) Fare or product bundles
2) A la carte products
3) Commission based products
4) Frequent Flyer/Loyalty programs
5) Advertising sold by the airline
Key Strategies to Improve Ancillary Sales
1) Personalized offers
a) Data-driven Insights – Utilize customer data to understand preferences and purchasing behaviour
b) Dynamic pricing – Implement dynamic pricing models that adjust prices based on demand, booking time and customer segments
2) Enhanced Digital Experience
a) User-friendly interfaces – Ensure that websites and mobile apps are intuitive and easy to navigate, making it simple for customers to add ancillaries during the booking process
b) Post-booking Opportunities – Offer ancillaries at multiple touch points, including Post-booking emails, check-in reminders, and In-flight prompts
3) Bundling and Packaging
a) Value bundles – Create attractive bundles that combine multiple ancillary services at a discount rate
This encourages passengers to purchase more services at once
b) Subscription Models – Introduce subscription based services for frequent travellers, offering benefits like unlimited Wifi, priority boarding and more
4) Innovative Ancillary Products
a) New offerings – Continuously innovate and expand the range of ancillary products
Consider services like In-flight entertainment subscriptions, lounge access and including sustainable aviation fuels
b) Customer Feedback – Regularly gather and analyse customer feedback to refine and introduce new ancillary services that meet evolving passengers needs
5) Partnerships
a) Commission based – Collaborate with third-party providers to expand the range of ancillary services offered
These partnerships can include car rentals, other modes of transport, hotels etc, where airlines will only earn commission on revenue earned by partners
b) Tour packages – Combined flight and other means of travel to sell tour packages
This has higher risk, but also higher gains
6) Frontline Employee Engagement
a) Training and Incentives – Equip frontline staff with the skills and incentives to upsell ancillary services effectively
Their direct interaction with passengers provides a valuable opportunity to boost sales
b) Consistent Execution – Ensure consistent application of policies and procedures related to ancillary sales across all touchpoints
Common ancillary Revenue examples for small hotels
1) Food and beverage
2) Spa and wellness
3) Meetings and events spaces
4) Local tours and activities
5) Retail shops
6) In-room activities
7) Laundry and dry cleaning services
8) Transportation services
9) Gift certificates
10) Display local artwork and sell it to guests
11) Attract global guests – communication in 20+ languages and 20+ currencies
Importance of Ancillary Revenue
1) Diversification
2) Competitive advantages
3) Enhanced guest Experience
4) Increased profitability
Utilization of Ancillary Revenue
1) Identify potential opportunities
2) Price approximately
3) Market effectively
4) Train staff
Ancillary Tourism Service
1) Travel insurance
2) Medical expenses while a trip
3) Airport parking
4) Tickets for any kind of park/museums
5) Chauffeur service
6) Specialized services
7) Foreign exchange
8) International SIM card and services
Ancillary Financial Services
1) Medical care and hospitalization
2) Personal accident
3) Cancellation or curtailment of holidays
4) Delayed departures
5) Luggage loss or delay
6) Money loss
7) Loss of personal belongings
8) Personal liability
Low cost Philosophy and Ancillary Revenue
1) Pursuit of lowest cost base
2) Conversion of cost centres to revenue sources
3) Customers left with a selection of paid-for add-ons
4) Mutual benefits reassured
5) Historically only if an alternative exists
COMPILED BY:-
Er. Avinash Kulkarni
9822011051
Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer
