Hotels embrace creativity to generate extra revenues
Hotels embrace creativity to generate extra revenues
11 MARCH 2016 7:40 AM

Hotel operators are finding new ways to generate additional revenues. Some sell fitness club memberships; others provide short-term meeting room, guestroom and parking rentals.

GLOBAL REPORT—Hotels typically generate revenues from a limited pool of sources: guestrooms, food and beverage, banquets and catering and gift shops are the most common. Today, some hotel operators have uncovered new avenues of revenue generation, including fitness club memberships, short-term guestroom and meeting room rentals and parking space rentals to non-guests.

Some resorts with golf courses and tennis courts sell memberships to local residents to increase usage of the facilities, but now a few transient hotels with large and well-equipped fitness facilities are able to market their services to local residents.

Fitness partnerships
California-based Leisure Sports takes the concept a step further. The company operates a chain of seven fitness clubs, including two connected to Renaissance ClubSport hotels in California.

“We don’t even consider the fitness club and the hotel to be separate entities, as each contributes about half of the total property’s revenues,” said Brian Amador, VP of hotel operations at Leisure Sports. “In fact, we market ourselves as who we are—not a hotel with a health club or a health club with a hotel. We are the combination of the two and are actually a fitness resort.”

The two hotels—in Walnut Creek and Aliso Viejo—each have 175 rooms, while the attached health clubs each have about 85,000 square feet of fitness, spa and swimming facilities. Amador said about 2,000 people typically visit each club each day.

“Many of our guests choose our hotels because of the access they get to health clubs that are in many cases very similar to the high-end clubs they experience at home, which enables them to participate in their workouts much as they do at home,” Amador said, adding that guests can participate in group fitness activities—everything from exercise classes to pickup basketball games—that aren’t typically available in most hotels with fitness facilities.

“Also, our guests and club members can continue to enjoy their healthy lifestyles, from a workout in the club to food and beverage choices in the hotel that are specifically geared toward living healthy,” Amador said.

He said each hotel/club combination operates with one set of operating executives: a single general manager and directors of sales, engineering, accounting and more. Staff members at times work both sides of the operation.

“This synergy allows for a tremendous amount of operational efficiencies that cascade throughout the facility,” he said. “While housekeeping in the evening is typically focused on the health club, those housekeepers are also available to work at the hotel should we, for example, need to turn over a guestroom very quickly.”

Because of the cross-training and dual-purpose management, Amador said the major operational challenge is finding managers and staff members who can work in both environments.

“In order to be successful, we need to tap into a very specific talent pool since it’s not common to find a person who is equally a hotel leader, a health club leader and a lifestyle leader,” he said. “As a result, we focus heavily on succession planning so we can bring future managers up through the ranks.”

An urban example
The Fairmont Pittsburgh has a similar but more modest combined hotel/fitness club operation. The six-year-old, 185-room hotel has a 6,000-square-foot health club and spa that’s open to both hotel guests and local residents on a membership basis.

“There are some other fitness facilities downtown, but our health club has been a real differentiator for the hotel,” said GM Matthew Sterne. “When the hotel was built, the vision was that the club would be an important amenity for our guests and it has proven to be the reason why many people stay with us.” 

Sterne said initial success of the club spurred a renovation in 2013 that included the addition of three spa treatment rooms and expanded manicure/pedicure stations. The result has been a tripling of health club revenues in the past three years, he said.

Short-term space
Some hotel operators have figured out they have empty spaces in their properties that can be rented on a short-term basis as a way to generate ancillary revenues. Several operators leverage third-party website systems to sell unused meeting space, guestrooms and parking spaces.

The Hotel 48LEX New York has 166 rooms and four boardroom meeting spaces that each have a capacity of 16 people. The property’s marketing staff works with several websites to rent those spaces for periods as short as one hour.

“In this economy, there are a lot of home-based workers who at times need to meet with clients and/or other colleagues who may be home-based as well,” said Carol Ajikata, director of sales and marketing at the property. “The options are a coffee shop or a restaurant, which really isn’t ideal, so having a boardroom they can book even at last minute is enticing to them.”

Ajikata said she is able to access the website to change availability of the rooms and pricing. She said the additional revenues are modest, with the hotel typically getting one or two bookings a week.

At a Residence Inn in the Midtown East neighborhood of New York City, GM Greg Dietl said he uses a web-based service to sell the property’s limited meeting space, including a boardroom that seats 12 people, a flexible space for up to 40 people, a small library lobby and three small pods near the lobby that can be used by two or three people for meetings.

He said once the hotel receives a booking through the website, a sales associate at the property contacts the customer for possible additional sales, such as audio-visual systems or food and beverage service.

Another web-based service enables hotels to sell use of guestrooms during the day. Edward Wilcock, cluster revenue manager for London Town Group, an operator of seven hotels in the United Kingdom, said he sells vacant rooms between 10 a.m. to 6 p.m. for £69 ($98.13) to £79 ($112.35), or about half the hotels’ nightly rates.

“It gives us a way to fill a room that would be sitting empty waiting for a guest to come for the night, and it provides us with a bit of extra income,” he said, adding that the logistics of day-use of rooms generally isn’t an issue.

“We sell perhaps five or six of the day-use rooms each day, and there are always arrivals coming after 6 p.m. so it gives us plenty of time to prepare the room for the overnight guests,” Wilcock said.

Guests use the rooms to freshen up or rest between flights or rail departures. Wilcock said the concept is not unlike charging traditional guests for extra time spent at the beginning or end of their nightly stays.

Paid parking
Some hotels have more parking spaces than needed for guest use, so they offer them for rent through web-based services. According to Tony Edwards, GM of the Glasgow Marriott in Glasgow, Scotland, the property has generated more than £20,000 ($28,441.53) in additional parking revenues in the 11 months it has used the service.

Edwards said most of the renters are business people who work in central Glasgow and use the spaces during the week. He said his staff continually monitors the number of spaces it offers for rent to make sure enough are available for overnight guests and meeting attendees.

In December, the hotel processed 160 parking rentals, which increased to 288 in January, Edwards said.

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