The revenue potential of 'Ancillary' services
The importance of ancillary services is always understated. At times it is seen as a distraction that dilutes a firm's focus on its core products and services. But then, when incidental services have the potential to generate substantial revenues (can they, then be termed 'ancillary?), without diluting core services, or maybe even supporting core functions, they turn 'critical'.
Take hospitality services in India. Lately, room revenues have been taking a hit due to drop in occupancies, partly prompted by increased competition. In such a scenario hotels have taken to promoting ancillary services. This makes good sense considering the rise in disposable incomes and the young Indian's taste for premium Food & Beverage, health clubs, spas and other services.
Traditionally, room revenues contributed 70%, F&B 20-25% and the balance was contributed by ancillary services. Non-room revenues have started moving up over the last one year, with F&B itself contributing one-third of the total, besides other ancillary services constituting another 15-20% of the total.