6 $ make the difference between survival and bankruptcy

Hospitality industry insights Hospitality TV

How to use ancillary revenue and end the struggle for survival and significantly increase your income – in hospitality, airline, maritime, healthcare and other industries.

A few days ago, IATA presented an interesting report showing that airlines average of just over $6 of profit per passenger. One of the most surprising facts being that revenue from fare and cargo don’t compensate even the operating costs, labor and fuel. It is only ancillary activities like priority boarding, selecting seats, renting cars, hotel reservations and other upsell/cross sale offers, that make the difference between the profit and loss.

Graph 1: Worldwide airline net post-tax profit per departing passenger, 2019

Of course upsell/cross sale ancillary revenue is more important for low cost carriers where percentage ranges from 25% to almost 50% of total revenue, but other carriers are not immune either. Total upsell revenue for United was almost $6 billion, while for Lufthansa it was $2 billion respectively.

Airlines learned from top class companies in digital merchandising (like Amazon, Booking) and adopted their practices over a decade ago. The result of this effort being an upsell market of over $82 billion, which is expected to produce $28 billion net post-tax profit.

Why is this opportunity still largely underused?

With at least 5 medium size EU airlines expected to go bankrupt this year, it is obviously essential for each airline to find a way to increase its revenue even by a seemingly insignificant amount of dollars. While some airlines make up to $50 per person in ancillary alone, let us not forget that as little as $6 per person can be the difference between survival and bankruptcy.

To put this perspective into hospitality market, we see that ancillaries are still largely unexplored, even though market clearly exists. For example, as much as 70% of business travelers indicated they are interested in purchasing more than core hotel products! They are interested in trip cancellation insurance, high-speed wi-fi, transportation options, early check-in/late check out, fitness/wellness to name just a few.

Hotels’ could benefit also by offering car rentals, restaurant reservations, hairdressing services and trips through strategic partnerships or offer upsell or cross sell options during booking or any other purchase process. So why do hotels, for the most part, fail to exploit this potential?

There are many reasons for that, of which most are connected with the management and staff. Namely, many hotels struggle to attract and retain quality staff and thus have been forced to simplify their service delivery as much as possible. Both management and staff are all also doing multiple jobs, so they are reluctant to accept any new tasks, no matter how important they might be.

Therefore the main focus for any hospitality service providers is to bring in digital ancillary which is extremely easy to integrate with existing systems and which is almost self managed.

BE THE HOST!

Nevron is known for providing not only excellent guest experience solutions, but also staff onboarding and extra mile support so implementation goes as smooth as Tennessee whiskey until the system is in its functional phase.

What can exceptional guest experience solution brings to your hotel?

For more info contact us NOW! Don’t forget that in the airline market, even though it represents a very small percentage of total revenue, ancillary revenue alone determines who will survive and who will go bankrupt. Don’t close your eyes to the fact that very soon it will be the same in the hospitality market. ACT NOW, before it’s too late. Howgh (that’s all I wanted to say, your turn).

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[1] IATA https://www.iata.org/publications/economics/Reports/chart-of-the-week/Chart-of-the-week-7-June-19.pdf

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