Introduction: Hotel revenue sources include food and beverage, room rent, and ancillary revenue sources.
Three main revenue sources in a hotel are room, food & beverage, and other income and the selling of the three main revenue sources in a hotel will dictate its success. It is the room sales effort that fills the sleeping rooms on a nightly basis. The catering sales effort endeavours to fill the meeting space. The combination of the two translates into sales in the outlets and ancillary revenue sources.
Every hotel is different and has its own unique challenges and strengths. In hospitality, the financial health of a hotel is measured by the strength of the three components of the success triangle. The base of any triangle needs to be able to support the other two sides. Room sales, by definition, endeavour to fill the sleeping rooms in a hotel. A fully occupied hotel dictates the total hotel’s financial health.
1) Food and beverage / Events: A source of hotel revenue that is often overlooked.
Many small and large hotels overlook the food and beverage revenue aspect of their business and, in turn, miss out on an opportunity to build a valuable part of their revenue. Food service is often seen as a necessary evil that costs more than it brings in, but guests’ hunger can be used to the hotel’s advantage.
2) Rooms: Provide the most direct means of generating income for the hotel.
The rooms should be well-appointed and comfortable, with a view to attract guests who are looking for comfort rather than luxury. The room rates must also reflect this fact.
The major focus on the hotel’s rooms, room revenues, and each room’s individual profit margin is due to the facility’s profitability, which occurs primarily in the sleeping room.
3) Other income: This includes items such as events, parking fees, laundry services, spa, recreational activities, saloon, travel and concierge services etc.,
The items which may not directly generate money for the hotel, but do help them make some extra cash. An ancillary or Other revenue source can be a hotel’s business center, golf course, events, parking fees, laundry services, spa, recreational activities, saloon, travel and concierge services, tennis center, audio/visual services, or gift shop. Other ancillary revenue sources include products/services available inside the guest room that are sold at a profit. These include in-room movies, minibars, and telephone service.
Conclusion: A successful hotel needs to have a diversified revenue model. The preceding profit margin analysis highlighted the profit potential of hotel rooms. Subsequent to bed sales, that profit is only credible if rooms are sold. The key is to find ways of generating additional income streams that are not dependent on the success or failure of your core business, and which can be easily adapted as circumstances change.