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Make diversifying revenue in your hotel easy with these 8 strategies

Finding new sources of revenue goes a long way toward ensuring your security, but how do you do it? Discover ideas and methods to make sure you don't go wrong!

8 strategies for diversifying revenue in your hotel | Smartpricing

In recent years, hotel operators have clearly felt the need to diversify their revenues, by finding new resources beyond traditional revenue sources (such as room and breakfast sales or meeting and event space).

This drive to diversify is due to several intertwining factors, such as:

  • growing competition from the non-hotel sector, which has made a flagship of the "bed & breakfast" formula
  • the spread of new and more modern locations dedicated to conventions and events
  • the uncertainty created by the pandemic, which has challenged the financial stability of many hotels, especially those with less access to alternative sources of revenue.

In this article, we will take stock of what the benefits (and challenges) are for hotels that want to diversify their revenues and provide an overview of the best strategies to achieve this important goal.

Diversifying revenues in hotels: benefits and challenges

Before implementing a revenue diversification strategy, it is essential to know the benefits, but also the possible obstacles of the path you want to take. Only a proper assessment will allow you to avoid hasty choices and focus exclusively on the activities best suited to the characteristics of your hotel.

The benefits of revenue diversification

Reducing risk

By reducing dependence on a single source of revenue, you can mitigate financial risk. It's clear that if your hotel relies solely on overnight stays, the moment tourist demand declines (for whatever reason), revenue will also shrink significantly, which you cannot always recover in the short term.

That's why, just as is the case with investments, diversifying revenues is the best way to shelter yourself from market fluctuations.

Increased competitiveness

At a time in history when the experiential tourism trend is more alive than ever, offering a diverse range of quality services and experiences is the top strategy if you want to succeed in attracting a broader and more diverse clientele than competitors who limit themselves to primary services.

This gives you not only greater competitiveness but also a shield against fluctuations in demand.

The challenges of revenue diversification

Additional resources

Developing new revenue sources often requires a significant initial investment in terms of time, money, and staff training. For example, if you decide to offer spa and wellness services, you will need to not only create or renovate suitable space, but also equip yourself with qualified staff.

Before embarking on such an investment, it would therefore be advisable to conduct a marketanalysis to assess the demand in your area and then proceed in stages, such as more limited bids or partnerships with outside professionals, so as to test the market before committing to more substantial investments.


It is true that adding services increases your competitiveness against those who do not offer them, but it also means competing with other businesses already active in that field.

For example, if you are planning to introduce a gourmet restaurant to attract both guests and local clientele, you already know that you will have to compete with established restaurants in your area.

Again, you will need to assess the feasibility thoroughly, such as identifying an added value or unique concept that can set you apart from the competition, and only then proceed with the investment.

In summary, then, it is necessary not to discard any services out of hand, but to evaluate very carefully all those that require substantial investment to be started and maintained. Because while it is true that proposing new services by exploiting "old resources" may be more cost-effective and low-risk, it is difficult for this solution to translate into a real source of alternative income in the medium and long term.

8 strategies for generating alternative revenue

The opportunities available to diversify revenue are numerous and depend on the type of hotel, your target clientele and the location you are in. However, there are some tried-and-true options that are worth exploring at the beginning of your feasibility assessment.

1 - Offer personalized experiences

One of the most affordable and effective strategies for diversifying revenue at your hotel is to offer personalized experiences. For example, create thematic packages combined with local specialties (food and wine tours, tastings, etc.), but also excursions, cooking classes, fitness sessions or cultural tours.

For example, a hotel located in a historic city might offer a package deal that includes a guided tour of major local sights, saving its guests the task of finding a reliable provider for that service, and well in advance. The memory of the positive experience will remain associated with the hotel's name, fostering loyalty, reviews, and word of mouth.

2 - Collaborations and partnerships

Collaborations and partnerships with other outstanding businesses in your area represent an opportunity to diversify your revenues while minimizing investment and related risks.

You can partner with top restaurants, spas, specialty tour operators, and other providers of site-specific services. For example, a hotel in a beach resort might collaborate with partners that offer surfing lessons or allow you to get your scuba certification.

3 - Selling hotel-branded products

If your hotel has a recognizable brand identity or if you notice that your guests particularly appreciate the quality of your bath linens or toiletries, you can capitalize on these assets by offering bathrobes, body care products, or gift items

For example, a boutique hotel with a distinctive style or particularly tied to the local area could not only sell its products to guests, but try to reach out to local clientele by setting up a small shop with a storefront on the street. This could fuel word of mouth, bring in new guests, or incentivize the use of the restaurant or spa.

4 - Monetizing all spaces through RevPAM

Since the pandemic, more and more people have become remote workers, being able to choose between different locations, and travelers referred to as "bleisure" travelers, i.e., those who combine business travel with a few days devoted to leisure.

Taking advantage of all available space in light of these new needs has therefore become increasingly common for hotels, so much so that a parameter specifically designed to assess the profitability of a facility in an all-inclusive manner is increasingly in vogue: the RevPAM.

If RevPAR is revenue per available room, RevPAM is used to measure revenue per available square meter.  

Activities that lend themselves to maximizing all space include:

  • renting representative spaces for events (weddings, corporate meetings, workshops or conferences)
  • renting out any unused premises as storage or warehouse space
  • arranging common areas to turn into coworking space when needed
  • offer parking, luggage storage, shuttle service and the like against a fee to offices, companies or other accommodations that lack such facilities

5 - Meeting the needs of clients with extended stays

To attract customers interested in longer stays, you can adopt an extended-stay model, offering competitive rates dedicated to these guests. This option is attractive to potential clients because it offers a worry-free alternative to traditional apartments with all amenities included.

To meet the specific needs of these guests, compared to traditional travelers, it is essential to provide additional services such as laundry and cleaning, as well as on-site facilities such as common areas, kitchens, gyms, and outdoor spaces. The food and beverage (F&B) proposition may need to be modified slightly, such as offering easy to take away breakfasts and lunches.

6 - Invest in Food & Beverage

Offering high-quality restaurant and/or catering services can make all the difference, which is why Food & Beverage is already an important source of additional income for many hotels.

If your lodging establishment does not already offer food and beverage services and you have no experience in the field it may seem like a difficult undertaking, however, if the local market is poor in alternatives and your establishment is of decent size, it may be the best possible investment.

If you already offer basic food services (such as half board or a café with a guest kitchen), it might be a good idea to open up to outside patrons by adapting your offerings to the local public. In case you feel you don't have enough seating, don't give up: choose a delivery platform or organize a catering service for large companies or events.

If you want to learn more about this topic, read our article on easy techniques and ideas for upselling F&B in hotels.

7 - Focus on upselling

Upselling allows your hotel to earn more money while satisfying the guest by offering valuable extra options, such as rooms with panoramic views or special amenities. These offers can increase the average value of the stay.

For upselling to be considered within a revenue diversification strategy, it cannot be reduced to an "occasional" sale, but must be understood as a structured marketing model.

In this case, upselling is accomplished by organizing the service offering in a modular manner and following the "attribute-based sales" (ABS) model. This means that services are broken down by feature to create a wide range of specific, targeted products. The strategy starts with a lower initial price to attract a broader customer base, and then separately emphasizes and enhances the specific features that most interest each individual customer.

Successfully implementing this model requires precise planning and effective digital support tools.

8 - Offering a subscription service

By offering complementary products and services in the form of a subscription, you gain the benefits of generating a recurring and predictable revenue stream and promoting loyalty not only among your guests, but also among your local clientele.

Thus, when designing your subscription service, it is important to consider both the most attractive services to offer and the right price range in which to place yourself. Especially at the beginning, it is important to avoid overly complex or articulated proposals that could discourage potential subscribers and to focus on simplicity (weekly massages, access to the fitness room or swimming pool).

How to implement diversification strategies

Once you have identified the best revenue diversification strategy for your hotel, you need to know exactly what steps to take to plan and implement it effectively and without error.

The key moments are:

Strategic planning and development

As a first step, clearly define your hotel's revenue diversification goals (remember the acronym S.M.A.R.T and choose specific, achievable, measurable, relevant, and time-based goals), and then develop a detailed action plan to achieve them. Before proceeding, a thorough analysis of the local market and competitors must be conducted.

This study should include a survey of prices and offerings of complementary products and services by your competitors, as well as an analysis of customer needs and preferences and market trends in your locality. If you perform this assessment correctly you will be better able to identify unexplored market niches and opportunities for differentiation.

Performance measurement and analysis

To evaluate the effectiveness of your revenue diversification strategy, it is critical to implement performance monitoring systems. These systems should measure not only sales volume, but also your customer satisfaction, guest return rate, and other key performance indicators.

At this stage you will find your customer relationship management (CRM) system most useful for collecting and analyzing imported data on their preferences, spending habits, and feedback on the products and services you offer.

In conclusion, revenue diversification in hotels is a vital strategy to reduce financial risk while providing unique and memorable experiences for guests, thus maintaining a competitive position in the hotel industry.

However, this strategy requires the utmost caution and careful planning − that's why we have created a quick and easy checklist where you can find all the steps to follow to avoid mistakes in your diversification strategy.