Ancillary Revenue for Hostels
Ancillary revenue, or cash from things other than renting beds, plays an essential role in running a successful hostel, no matter what kind of strategy a hostel is employing. Almost all hostels obtain this revenue in one form or another. Ancillary revenue can increase your overall revenue, motivate and reward good staff, or even add additional value to your product. The trick is to determine where your customers are spending money outside your establishment and either bring that revenue inside or at least form partnerships around it. Here’s a way to consider what could be right for you, regardless of the size of your hostel.
Food and Beverage
Food and beverage can be a game-changer. Large and mega hostels can pull over 50% of their revenue from this aspect, often having entire teams dedicated to serving hundreds of pints and meals a day (The Generator, St Christopher's Inns, and Freehand have built reputations doing so). Hostels like these have an advantage over hotels because there are more heads per key (room) to come down and enjoy what is offered. To drive people to their bar, these hostels usually implement a "No Outside Food or Drink" policy, which can contradict some customers' expectations of a hostel.
Small hostels, on the other hand, can sell snacks and beverages at their reception desk, maintaining a fridge full of drinks for in-person sales. This personal level keeps interactions high with guests and leads to higher satisfaction. Small hostels can also organize meal nights where guests pitch in and share a meal. Medium-sized hostels are where the creativity comes in. They need to assess whether it is worth the licensing and regulation to have an official bar or kitchen, or perhaps even ignore those regulations altogether. What seems to work best is vending machines for snacks, toothpaste, toiletries, etc. You can choose to provide meals like small hostels or let guests handle their own.
Do you notice your guests all ordering the same pizza? You might consider forming partnerships with local food establishments to streamline the ordering process, especially if your guests don't speak the local language. You can request a commission, or even ask them to offer your guests a discount if they use a specific code. If guests are allowed to bring their own alcohol, they might be more inclined to order food through you. Regardless of your size, food and beverage offerings are essential because they tap into our primal instinct to gather around the campfire and share a meal. People want to share, even more so in a hostel where sharing is part of our community. So, offering food and beverages, as hotels call it, is only half the value; creating the experience or atmosphere that encourages guests to enjoy each other’s company should be the ultimate goal. Organize events and make sure every guest knows about them and shares the information with others they meet down the line.
Additional Services
Look at all the services a hotel offers: do you find your guests asking for similar services? You’ll notice that customers at all hostels often request the same services; however, each has its way of handling them. Here are some examples:
Laundry Service: Large hostels may have laundry rooms and even coin-operated or pay-per-use machines, while small hostels can have staff do the laundry for the guests. All should have an iron and board available, although a large hostel might partner with a dry cleaner and send garments for laundering frequently.
Lockers and Luggage Storage: Large hostels can charge for rented lockers, while smaller hostels can offer free storage in a locked room. Perhaps there are lockers nearby. Lockers with latches are the most popular, but some guests forget or lose locks, so selling locks also helps.
Shuttle and Taxi Services: If you frequently find guests traveling to and from the airport, reach out and make deals with drivers or shuttle companies to sell their services. If their rates are competitive, consider offering free transportation for longer stays.
Extras: Some hostels have hot tubs, saunas, arcade games, billiard tables, table soccer, etc.
Internet Connection: While Wi-Fi is free just about everywhere, some establishments charge for internet use. Companies like TrueCafe and GlobalGossip used to excel in this area, but the practice is diminishing as customers increasingly demand free access. However, they still accept that printing services may require payment.
Travel and Activities
Yes, this is a service as well, but it is so crucial that it deserves its own section. You can decide to host activities and charge guests for participation, or simply connect them with companies that already provide these experiences. Pub crawls are a big hit almost everywhere, as are various types of tours, museum admissions, city passes, scavenger hunts, theater tickets, etc. The sky is the limit. You can build your own local travel desk and assist your guests in planning their itineraries. Think bigger. Is local enough? Do your guests usually travel on to another city? Why not help them plan for that as well? This expands your commission opportunities, and they will appreciate the personalized service. Hostels in Australia and New Zealand have perfected this role; using a local database, they can book nearly every activity a guest will undertake within their first day of arrival in the land down under. It’s amazing, and some hostels like XBase and Nomads are rumored to generate 30% of their revenue from selling travel and activities.