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Ancillary Revenue for Hostels

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Dennis Pitcock
Written by Dennis Pitcock

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Ancillary revenue, or cash from things other then renting beds, plays an essential role in running a successful hostel no matter what kind of strategy a hostel is running, and almost all hostels obtain this revenue in one form or another. Ancillary revenue  can either increase your overall revenue, motivate and reward good staff, or even just grow additional value to your product.  The trick to it is to determine where your customers are spending money outside your establishment, and bring it inside or at least make a partnership out of it.

Here is a way to consider what could be right for you, no matter what size hostel you run.

<h2>Food and Beverage</h2>

Food and beverage can be a breadwinner. Large and Mega hostels can pull over 50% of their revenue from doing this right and have entire teams dedicated to this, serving hundreds of pints and meals a day (The Generaotr’s, St Christopher’s Inns, and Freehand have built a reputations doing so). Hostels like these have an advantage to hotels, because there are more heads per key (room) to come down and enjoy what is offered. In order to drive people to their bar, these hostels usually have a “No Outside Food or Drink” policy that can go against some customers expectations of a hostel. Small hostels on the other hand can sell snacks and beverages at their desk. They can have a fridge full of beverages, and sell in person. This personal level keep interaction high with the guest and lead to higher satisfaction.  Small hostels can also organize meal nights having the guests pitch in and share a meal.

Medium hostels, on the other hand, is where the creativity comes in. They need to determine if it is worth the licencing and regulation to have an official bar or kitchen in their space, or perhaps ignore those regulations all together. What seems to work best is vending machines, for snacks, toothpaste, toiletries, etc. You can choose to do meals like the small hostels, or let people have their own. Do you see your guests all ordering the same pizza? Perhaps you can form partnerships with local food establishments to make the ordering process easy (especially your guests don’t speak your local language). You can ask for a commission, or even for them to just give your guests a discount if they use the code. If guests are able to bring their own alcohol then they might be more willing to order food through you.

No matter what size you are, food and beverage is essential because it taps one of our primal instincts to gather around the campfire and share a meal. People want to share, and even more so in a hostel where sharing part our community. So having the F&B, as hotels call it, is only half the value as creating the experience or atmosphere to get guests to enjoy each other’s company. That should be the ultimate goal. So organize and hold events and make sure every guest knows about them, and tells everyone else they meet down the line.

<h2>Additional Services</h2>

Look at all the services a hotel offers, do you find your guest asking for the same? You can find that customers at all hostels are asking for the same services, however, each has their own way of handling it. Here are some examples:

  • Laundry Service: Large hostels have laundry rooms and even coin operated / pay-per-use machines where as small hostels, the staff coudl do the laundry for the guests. All should have an iron and board for the guest, however a large hostel might have a partnership with a dry cleaner and send the garments frequently.
  • Lockers and Luggage Storage: Large hostels can rent lockers and guests can pay per use. Smaller hostels can store for free in a locked room. Or perhaps there are lockers nearby. Lockers with a latch are most popular, but some guests forget or lose locks so selling locks also helps
  • Shuttle and Taxi Services: Do you find many of your guests coming to and from the airport. Reach out and make a deal with drivers or shuttle companies to sell their products. If the product is cheap enough, perhaps offer free service for longer stays.
  • Extras: Some hostels have hottubs, saunas, arcade games, billiard tables, table soccer, etc.
  • Internet Connection: Wifi is free just about everywhere, however some places charge for internet use. Companies like TrueCafe and GlobalGossip excel here, however the practice is dwindling as customers are demanding free access. They still accept they have to pay for printing.

<h3>Travel and Activities</h3>

Yes, this is a service as well, but this is so important it deserves it own sector. You can decided hold activities and charge for activities, or just connect your guests to companies that do the activities already. Pub Crawls are a big hit just about everywhere, but so are all kinds of tours, museum entrances, citypasses, scavenger hunts, theater tickets, etc. The sky is the limit. You can build your own local travel desk and help your guests plan away.

Think bigger. Is local enough? Do your guests usually travel onto another city? Why not help them plan for that city as well? This expands your commission possibility and they love the personalize service. Hostels in Australia and New Zealand perfected this role, using a local database, they are able to book just about every activity a guest will do within their first day of arrival into the land down under. Its amazing, and some hostels like XBase and Nomads rumor to make 30% of their revenue selling travel and activities.

About the author

Dennis Pitcock

Dennis Pitcock

Dennis jumped into the hostel industry after a summer backpacking Europe in 2008. He went from being a guest to a manager within weeks, and currently does consulting for large and small hostels alike in 3 continents. Prior, he worked in eCommerce, so he has passion for the tech side of the industry and is now deeply entrenched in the hostel and activities industry.

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