GONE ARE THE days when hotel guests checked in, rented a movie, made a few calls on the room phone and did their laundry, and gone, too, is the extra revenue from those activities, according to CBRE Hotels’ Americas Research. However, internal hotel retail services, which have evolved from “newsstands” to front-desk kiosks, are on the rise, and parking lots are bringing in growing profits.
Other operated departments are revenue generating services provided by hotels at their own cost and risk, including gift shops, golf courses and guest laundries, said CBRE Director of Research Information Services Robert Mandelbaum in an article. In recent years, other operated departments overall have contributed less to hotels’ profit margin.
For example, Mandelbaum said rooms revenue for properties in CBRE’s annual Trends in the Hotel Industry survey increased 38.8 percent between 2010 and 2016, and total revenue grew 39.8 percent. Revenue from other operated departments increased only 15.8 percent. The departments’ share of total hotel revenue shrank from 5.2 percent in 2010 to 4.3 percent in 2016.
“Other operated departments are more meaningful at resort hotels that have multiple recreational and retail outlets. At these property types, other operated revenues averaged 10.1 percent of total revenue in 2016,” Mandelbaum said. “At limited-service hotels that simply offer movie rental or guest laundry services, other operated department revenues average just 1.4 percent of total revenue.”
Movie rentals and telecommunications services have shrunk rapidly in recent years due to the rise of smart phones and tablets, Mandelbaum said. Revenues from telecommunications declined 52.7 percent between 2010 and 2016, while movie rental sales dropped by 52.9 percent. Profits from telecommunications fell 64 percent during the same time period and movie rental profits plummeted 69.3 percent, despite expense cuts by providers.
Guest laundry services have suffered from the growing acceptance of casual business attire, Mandelbaum said. Laundry revenues dropped 14.1 percent from 2010 to 2016, and their profits dropped 44.1 percent.
On the other hand, front desk kiosks selling various goods from toiletries to microwave foods, as well as other hotel retail outlets saw a 17 percent increase in revenue and a 48.6 rise in profits during the same time period. “These kiosks are now appearing in limited and select-service properties that historically did not offer any retail services to their guests,” Mandelbaum said.
Parking lots have also evolved like the retail services, he said. “The incidence of suburban hotels charging for parking is on the rise, as well as airport properties expanding their overnight parking services. Accordingly, parking revenue has increased by 28.7 percent from 2010 to 2016.”
Parking revenues made up 2.5 percent of total revenue for hotels that charge for the service, and profits have risen 39.6 percent over the past seven years. Mandelbaum said these additional sources of revenue are likely to become increasingly important to hotels.
“With RevPAR forecast to grow less than three percent on an annual basis through 2021, hotel owners and operators are looking for other sources of revenue to bolster the top line,” he said. “Owners and operators need to eliminate, downsize or adjust those other operated departments that no longer meet guest needs.”