Transcript: Episode 170: Very Pricey Photocopy

LISTEN TO THE EPISODE:

APPLE PODCASTS | SPOTIFY | TOPFLOOR.COM

[00:00:00] Susan Barry: This is Top Floor episode 170. You can find the show notes at topfloorpodcast.com/episode/170. 

[00:00:14] Narrator: Welcome to Top Floor with Susan Barry. This weekly podcast right up to the top floor features tangible tips and excellent stories from the experts and characters who elevate hospitality. And now your host and elevator operator, Susan Barry.

[00:00:31] Susan Barry:  Welcome to the show. Pablo Torres started his career in hotel management in Spain and worked across Europe, including Ireland, the UK and Germany. Pablo has held roles in front office management and revenue strategy, eventually joining TSA, where he trained hotel teams globally in driving ancillary revenue strategies. His consulting work and teaching efforts have made him a sought after expert. In revenue optimization in addition to his hospitality career, Pablo hosts a successful podcast and is currently involved in consulting and projects with industry leading software companies like Oaky. He has a new book out called Mastering Hospitality Ancillary Revenue. Today, we are going to talk about that book and thoughts around overcoming the common challenges in revenue strategy. But before we jump in, we need to answer the call button

Call button rings 

[00:01:33] Susan Barry: The emergency call button is our hotline for hospitality professionals who have burning questions. If you would like to submit a question, you can call or text me at 850-404-9630. Today's question was submitted by Gabriella. She says, I'd like to start an upselling contest at my hotel. What is the easiest first item to focus on? Perfect question for you, Pablo. What do you think? 

[00:02:03] Pablo Torres: First of all, thank you for having me on your show. First and the easiest one to start with is breakfast, 100%. 

[00:02:09] Susan Barry: Say more. How, what should they do? 

[00:02:11] Pablo Torres: Okay. Most of customers when they come with, make a reservation directly with the hotel. They book room only in most cases they don't book with breakfast. So if it's a resort is different but for a city hotel the easiest one is breakfast because a high percentage of them, they didn't book in advance. So incentivize your team to try to sell as many breakfasts as possible. And make a competition of it. 

[00:02:34] Susan Barry: Excellent. And if the front office people are anything like what I remember from working in hotels, you can give them the reward of eating breakfast and that'll be plenty. They'll be delighted just to have code B breakfast for free at work for sure. So Pablo, tell me what initially drew you into the hospitality industry. What was your first hotel job? 

[00:02:57] Pablo Torres: It was a night receptionist shift. 

[00:03:00] Susan Barry: Yikes. 

[00:03:01] Pablo Torres: Yeah. I know. I know. But we have to switch somewhere. So I was still studying. And it was a three year degree back then in Spanish universities. And after the second year, I did my internships. And then last year of university I got an opportunity. I knew someone who was leaving the job. And I was recruited to start working night shifts here. 

[00:03:20] Susan Barry: I think there should be a secret club for people who got their start in night audit and stayed in the hotel business because I'm sure there are plenty of people who did nights and were like no, thank you. I'm out of here. There are too many crazy people in this business. So if you actually made it through and stuck it out, you deserve a reward. I believe. 

[00:03:41] Pablo Torres: Thanks so much. It was only three months actually. So after that, I switched to basically elsewhere. 

[00:03:45] Susan Barry: That makes sense. How has working in multiple countries influenced your professional outlook?

[00:03:53] Pablo Torres: I think it helped me have an open mind because when you go somewhere and you deal with professionals who have never been elsewhere. They have that closer mentality because they haven't, they can't really compare much. So they might know the neighboring properties or the competitors are very narrow in terms of geography and type. But when you've traveled, when you visited different clients, professional or even on holidays, when you travel a lot, you still difference the cultural differences and how people behave in different places, how people work. the culture of work as well and it really helps you bring in the best of each destination to your next project.

[00:04:30] Susan Barry: That makes a lot of sense. Could you share maybe a defining moment in your career that Is what led to you landing in revenue landing as a revenue leader and revenue expert like not for nothing, but I don't really think that math problems and Excel spreadsheets are things that people usually get super excited about. So tell me what made it for you.

[00:04:58] Pablo Torres: No. So I was working as an office manager in a five star hotel in Spain, and the company was growing back then. It was like small hotel company, but it was, they have plans to grow fast. And they, but then the review management was clustered. So a centralized in the head office because of the growth they needed to try to get some hotels be self sufficient when it comes to revenue. So they asked me to, if I could run the revenue of the hotel by myself. So I got some guidance from the head of the department and it worked out and I really liked it. So seeing the impact that you have direct impact that you have on the results of the hotel is very fulfilling. So that's how it all started.

[00:05:36] Susan Barry: Did you have to do that in addition to being front office manager or was that a separate job? I can see you're nodding vigorously. That happened to so many people when revenue became a discipline was oftentimes revenue sorry, reservations managers who had that tacked onto their roles. And all of a sudden they were just like, now you're a revenue manager. Have fun. 

[00:05:57] Pablo Torres: That's the usual evolution for most revenue managers coming from, oh, usually it's been reception is then reservations agent, reservations manager, and revenue manager. 

[00:06:06] Susan Barry: Yeah. It's interesting. I don't think it happens that way as much anymore. I think that there are people, I know people who straight out of school knew that they wanted to do revenue and so went straight to that, which is surprising. Okay. Ancillary revenue is the big topic of discussion for us today. For our listeners who may not be as familiar with the concept, how do you define ancillary revenue in the context of hotels? And why do you think it has untapped potential? 

[00:06:40] Pablo Torres: So the revenue you go to a dictionary will be the, all the revenue that is generated from the main source of business. So in a hotel, main source of business, obviously is room sales. To any of the revenue, no kind of groups will be ancillary in some hotels. They still consider F&B or restaurants part of the, all of the business, but in most cases, so besides that you have anything else, it will be ancillary in airlines at the moment is for all style carriers, let's say is around 15, 20%. Locals airlines, like spirits frontier and the sort in the States, it's 45, 50% for ancillary. So in hotels at the moment, we're talking about 5% maybe the extra that they can generate. So if you include the F and B in some branches, it's very heavy. It could be up to 15, 20%. But very far from the masters of ancillary, which are the airlines. 

[00:07:29] Susan Barry: Got it. So right now hotels are making about 5% of their revenues from ancillary sources. And you're saying you think it could go as high as 20%.

[00:07:40] Pablo Torres: You just haven't focused on it. Simple as that. So for many years first of all, there was no revenue in hotels. So it came from the airline industries or moved to hotels a couple of decades ago. Not in every hotel though, I have to say some hotels still have, don't have much Anything doesn't beat up dynamic pricing or be yielding, but it doesn't really revenue, but the only focus on routes. So they haven't really got into trying to do revenue management in any of the department. So as soon as they start, the numbers will boost. 

[00:08:06] Susan Barry: Interesting. And when you say that, do you mean things like dynamically priced restaurant menus where a plate of eggs costs one price one day and another price another day?

[00:08:18] Pablo Torres: That could be an option if also trying to optimize the revenue generated by its guests. But even in discussing a few days ago in a panel on focus only on ancillary revenue and event in Mallorca. The revenue that each, the extra revenue that each customer can leave the property. And even on all inclusive resorts, there's a lot of potential to generate more revenue because there is nothing really as such as all inclusive. There's always something like a mirror, extra charge that you can get on each department. 

[00:08:48] Susan Barry: Interesting. So what role does technology play like Oaky, that upselling platform that we talked about? How do you use that to optimize ancillary revenue streams? 

[00:09:02] Pablo Torres: So main pain points from hotels is like they might have the lack of knowledge on how to drive extra revenue. The struggle currently with talent. retention of talent is very challenging. And so with that kind of tools, that's just okay. For example, you increase the satisfaction because you are really micro segmenting the information that each guest receives. So it's very personalized, the sort of information that they receive. Therefore, they're more eager to click on the button or to go for that option that includes profitability of the hotel. And the good thing about ancillaries is it mostly goes directly to the GOP benefits and that is great. Go to the bottom line. And then usually most hotels incentivize teams. So using the kind of tools also engages more staff, so it helps with the staff retention.

[00:09:46] Susan Barry: So where does that technology platform sit? Is it in the booking process? Is it in the stay? How does something you know, send a personalized email to a guest. When does that happen? Or is it a text or? 

[00:10:03] Pablo Torres: Yeah. It's a bit of everything to be honest. You have every option. So originally it was a pre arrival emails, so you can set it up from the hotel point of view. When you want to send those emails, you want to send one, two, three, the text that is going to be there, the pictures, the information, and to which customers are receiving it. The whole point of this personalization, for example, is that a single business guest who goes there every week. It doesn't receive the, oh, do you want to enjoy our 1 2 package? It's annoying for loyal customers or personalization in that sense. And also when customers arrive there are PMMS’s with two way integration that display on the screen for the receptionist, exactly which ancillary options are available for that particular guest at that particular moment. 

[00:10:45] Susan Barry: I see. So it's prompting them to say, Hey, do you want to add on a, cocktail or something like that. Got it. Talk about a case study or an example where a hotel was able to successfully diversify revenue streams in the way that you've been describing. 

[00:11:05] Pablo Torres: So we locate there are loads of different big companies like such as Radisson and H minor hotels, Accor hotels, Harrock but thinking of one hotel in particular, for example, by rumor, one case, how is that hotel, a large city hotel. And they were performing very poorly when it comes to upselling, much lower than I expected. The main challenge they had, it was incentive. So they were incentivizing their team much lower than the industry average. So it was a matter of trying to get them understand that was a condition to make sure they increase. So, they changed the incentive and this put it exactly the same as the industry standard and the results multiplied by four. So it's a great success. And another example would be a beach resort. Which we started from scratch, so they didn't have any upsell culture. So we implemented it and we did it two ways. So one was in terms of room upsells and then also different sort of F and B packages. So it wasn't non-inclusive, but you could have room and breakfast, have board full board and then full board with say, basic drinks, exclusive drinks, the top of the range drinks, so no different options. And it really went.

[00:12:08] Susan Barry: Interesting. Before Pablo and I continue, I want to share something special with our listeners. If you are a woman looking for a solo trip that supports local communities and women in business, I have to recommend Cherish Tours. I went on their Alaska tour trip in 2023 with my sister and we had such a great time. Life changing memories. You can hear all about that in episode 100. Cherish has upcoming trips to Tanzania, Costa Rica, and Iceland and the Faro Islands among others. And you can get $250 off 2025 trips that are a week or longer using the code TopFloor250. Visit GoCherishTours.com, use the code TopFloor250 and make lifelong memories.

[00:13:07] Susan Barry: Okay, back to Pablo. Pablo, we like to make sure that our listeners come away from every single episode of top floor with a couple of really practical, tangible tips and ideas to try either in their hotel or, in their travels. For hoteliers that are just starting to explore ancillary revenue, like our question answer or question asker, Gabriella, what low cost strategies would you recommend to get the quickest win? 

[00:13:41] Pablo Torres: So early, we mentioned about the breakfast, another easy one, it can be reviewing your inventory. So many hotels, they don't really have Create differentiation in room categories. So you might have standard, junior and suite, maybe three categories in most cases, but not every standard is the same. So you can have rooms that are close to elevator, away from the elevator, higher floor, lower floor, with view, with no view. Even though officially they're all standard. You can get out to maybe six different categories. So internally, even you don't even have to go online and do all the different channel strategy, but at least internally, try to name them differently and try to price them differently. So when a customer at check-in time, for example, ask for a room with a view or room away from the elevator. Then you can charge extra because they are asking for it so that you're just covering their demand. And so try people to test it. It doesn't need to go online, so it's very cheap. 

[00:14:36] Susan Barry: That's interesting that you say, just do it in house versus putting all of those attributes out there. Cause I've definitely seen hotel companies that have tried to price out every single attribute, view, city view, ocean view, high floor, low floor. And I think that becomes a little dilutive. Like it's a little bit confusing to a guest who's scrolling through page after page of room types. But I love this idea of just doing it on property. Sure. We would love to be able to accommodate that request. It's just an extra $10 easy, right?

[00:15:14] Pablo Torres: And if you see it works, then you can go online and create it because you see that the man is asking for that kind of.

[00:15:20] Susan Barry: Yes, if hotels were to try to rethink the way that they use the more communal spaces or public spaces on property like lobbies, meeting rooms, et cetera, do you have any ideas for what you would suggest that they do to make those revenue generating spaces. 

[00:15:40] Pablo Torres: Yep. I would say mixed spaces. So check Hoxton, for example, check edition by Marriott. Just go online and take the pictures they have for the lobbies. And you realize that instead of having a boring lobby, and then a reception, and then a bar, it's all one. So you have a bar where, which is at the entrance of the hotel, so it's open to the local public. And in that bar, there is a desk to check in. There's only one space, so you're saving three spaces. So you have two extra spaces to generate more revenue, maybe for meeting spaces and the lobbies much more lively. 

[00:16:13] Susan Barry: I have a feeling that some people listening to this conversation might feel a little nickel and dimed by what we're talking about, like, why are you charging me for every single little thing? Why can't you just give me a room further away from the elevator versus? Close to the elevator if that's what I want. Do you have any communication tips that you would suggest to make this type of upselling and dynamic pricing more palatable to customers? Otherwise, I'm nervous. It's going to seem a little bit like price gouging, but I have a feeling there's a way to describe it that is more palatable. What do you think? 

[00:16:57] Pablo Torres: Absolutely. The thing is dynamic pricing is everywhere, but some people don't realize. So you think McDonald's, for example, they have dynamic pricing in their menu. So in the app, the price is different now that you see on the counter. That's already happening. 

[00:17:09] Susan Barry: Are you serious? 

[00:17:10] Pablo Torres: Yeah.

[00:17:11] Susan Barry: I didn't know that.

[00:17:12] Pablo Torres: McDonald's dynamic price that you've seen on Google. Yeah. A 100%. Okay. It is. It is different price. Take away food. For example, if you go to a restaurant, the price of the menu is different than the one on Uber Eats. Deliver exactly the same item, a different price. Early bird menu restaurant. So when you go to a theater, for example, in London, the early menu from five to 7:00 PM is cheaper than the other one. So it already exists in all different industries. In this case, focusing on F and B. And customers are fine with that 'cause they, they got used to it. So it's a matter of getting customers used to it little by little.

[00:17:45] Susan Barry: Do you think customers are fine with the fact that the McDonald's price is different on the app than in the restaurant? I think they just don't know. 

[00:17:53] Pablo Torres: They can compare it. If they have the app downloaded on their mobile, they can check on the counter and they can check on the screen on their mobile and they're going to see it's different.

[00:17:59] Susan Barry: And are they usually, is one more like typically more expensive than the other? What would be the more perceived value? You know what I mean? 

[00:18:07] Pablo Torres: The cheaper one is the one on the app because it's meant to be for loyal customers that have downloaded the app, they have some points, et cetera.

[00:18:12] Susan Barry: Oh, okay. That makes sense. So I think what's missing in this is the way that you phrase all of this stuff. It has to be very careful and very precise. So rather than just saying like the price in the app is cheaper, our loyalty price for app users has is 10% less than in store. Do you know what I mean? Something like that, or rather than, Oh, on Friday night, state costs more at our restaurant, it's Friday night is rack rate. That's our price. And we just reduce the price all the rest of the week. It's very simple, but very important. And I feel like sometimes that distinction doesn't get made carefully enough to not sound like we are just taking advantage of people. Do you know what I mean? 

[00:19:03] Pablo Torres: No, a 100%. One point that was made the other day on that event that I mentioned earlier, it was don't give discounts at value. And they were talking about a resort in particular. So resorts usually stay five, seven nights. So it's a longer unusual stays. And they say if you get like a five, 10% discount on the rate, you try to get people booking in time, seven nights, that's going to be maybe $300, $500. Now, if you throw in a free massage, it's going to cost you like. $50. So the value of the customer perceives that, wow, they're giving me a free massage to stay there for a week. That's really cool. And the hotel is saving $450. 

[00:19:38] Susan Barry: Got it. Got it. And so free massage instead of the longer stay discount. That makes sense. We have reached the fortune telling portion of the show. So now you need to predict the future so that we can see if you were correct. What is a prediction you have about the future of revenue management in general and hotels? 

[00:20:00] Pablo Torres: So it's going to be about automation. So now we talk about revenue management, but still the percentage of hotels actually actively doing revenue management is lower than the ones who don't do it yet. So technology, AI, machine learning is coming in very rapidly and more and more hotels will go into automation. And then revenue managers, we mentioned earlier, used to be reservationists and then became revenue managers. That thing, that role is going to turn thanks to the automation. It's going to turn into more of a chief profitability officer. If you want to call it like that. CPO.

[00:20:31] Susan Barry: CPO. I like that. 

[00:20:33] Pablo Torres: Because it's not only about the money you generate, it's the net profit. So revenue is going to be, of course, in charge of how much money the hotel generates, but also how much is spent. 

[00:20:44] Susan Barry: That makes sense. Yeah. I think that we've been moving in as an industry in the direction of centering profit both for a long time, but slowly. And so it's time to get that move. I know owner hotel owners would be really happy to hear that. If you could wave a magic wand and change one thing about the way that hotels sell extra products, extra services, ancillary revenue, what would it be? 

[00:21:11] Pablo Torres: Personalization. 100%. So think of Netflix. What I see on my screen is different than yours because it shows things that are similar to what I've watched in the last few weeks. And my screen is unique. So we have to do the same with hotels. Hotels have millions of data. So each customer, when they make a booking, they'll enter their address, credit card number, phone number. They have, you have lots of information. So it could be what 20 data points. per customer, 300 rooms hotel. That means around a million data points a year, which are stored in your PMS doing nothing. So most hotels don't use their data. Netflix does do it. Try to use the right software to filter the data, to have clean data so that you can personalize your communication pre arrival because you need to stay your loyalty program, wherever it is. So what I see on my screen when I get your offer, I get Netflix sort of screen, but moving to the hotel, it's really personalized based on my relation with you as a business. 

[00:22:08] Susan Barry: The challenge with Netflix is that you have to have a recommendation engine because there are too many choices. There are an almost infinite number of entertainment choices, whereas the purpose of a hotel stay is finite. You may go to a hotel one time for one night because you're attending a funeral and never go back there again. So I'm, I just can't think of exactly how to phrase this. Like, how do you extrapolate? Is it that you're looking for the needle in a haystack to find out of those million, million data points, just enough to keep filling the hotel over and over again? Does that, I don't know if I'm clear about it. It makes sense. 

[00:22:54] Pablo Torres: So I saw a pilot. I don't think it's really released yet. So this guy is making that AI powered up that instead of just saying, I want to make a book and say, okay, I want to go to New York for the 1st through the 5th of November with my wife and my five year old kid. And that will tell me, we recommend you these and these hotels and in that hotel, this particular room and then next to it is this toy store. And then the museum is going to cost you $10 so you can book the whole package based on your profile. So what we need is, it's information. So ask those questions. The signals you do to personalize and upsell at check in, what are your plans? Because if I tell you I want to sell you dinner and you tell me I'm meeting someone, sorry, if I will have asked you before, do you have any plans for the evening? Yeah. I'm meeting my friend outside. Okay, fine. Enjoy it. 

[00:23:41] Susan Barry: That makes sense. I think there's probably another side to it, which is hotels, especially in the United States, I don't think it's quite the same in Europe, have to get better at having a personality and be differentiated. Because all of the brands that we have right now from a consumer perspective are the same. There is no better hotel for a family traveling with a five year old because they're all the same. Maybe if it's close to a toy store, sure. But otherwise they're literally all the same. So there's personalization on the guest side, but there's also get a personality on the hotel side. Does that make sense?

[00:24:21] Pablo Torres: Yeah. But that's why the sort of these Hyatt and bundle and the luxury connection from Marriott. So they take independent hotels and put a bit of a brand sort of brand in there, but it still has the personality. 

[00:24:34] Susan Barry: Yeah, I think soft brands are really the only one, but then they only have the personality of their individual building. How great would it be to have more brands like Graduate Hotels, which is a brand in the United States that are only located near college campuses. So they're for alumni, parents, students, et cetera. They're decorated like the college, imagine having a chain of those for kids, a chain of those for grandparents. I don't know. I could talk about that for branding for a million hours instead, let's focus. And let me ask you, what is next for you? 

[00:25:15] Pablo Torres: I've been keep supporting hotels to increase their customer satisfaction, generating more revenue, which is the whole point. So I always, when I do my training sessions, I tell the guys at the desk, it's the whole point of this is to make sure that the customer leaves the hotel more satisfied that they ever imagined, having spent more money. And the good thing about ancillary is that there is a dissociation between value and price. So when you're really enjoying something, that experience in this case, you don't really mind that much about the cost of it. We were discussing with a guy the other day about the family saving for a year to go to Orlando. It's a magic weekend for them and they don't really mind spending around $600 per person for a whole day experience because it really means a lot for them. So that's if you manage to create an experience for customers, they happily pay more and live happier. 

[00:26:02] Susan Barry: Okay. Folks, before we tell Pablo goodbye, we are going to head down to the loading dock where all of the best stories get told.

Elevator voice announces, “Going down.”

[00:26:15] Susan Barry: Pablo, what is a story you would only tell on the loading dock? 

[00:26:18] Pablo Torres: So when I have to go to Nigeria once for training to the capital, administrative capital, which is called Abuja. And so I landed there, I've done all the paperwork in advance. Really challenging to get all the papers and the visa to go there to train. And when I reached out the desk customs, so they told me you were missing a paper. It's here, I have it online, otherwise I couldn't have given the visa. They say, I have to print it. So I show the laptop, open the laptop, show the document that was there. And they go, no I need the paper itself. I'm like is there a printer facility here? It's no. So what do we do? It's like you held here. So a soldier came in with his machine gun. No pointed at me, but it's like still big bloke, and with the weapon there, it's like, Oh, then you have to, can you step aside, please? I'm like, geez. Yeah, so this whole discussion, you entered the country without, so we're still going to send you back to the UK. What can we do? And then more soldiers came in, five people surrounding me. I was the last one, everybody went through. So I was left alone in the queue, until 15 minutes during the conversation, the discussion, the guy said, my guy is here. You want to have dinner tonight? You know what I mean? I was like, okay, I'm like, okay, I'm flying from London and it's okay. So Blondo in pounds, give me 50 pounds. Then I was sorted.  

[00:27:42] Susan Barry: Are you serious? 

[00:27:44] Pablo Torres: I don't have 50 bucks with me, but I had 20 quid. It's okay. Fine. Give me whatever you have. So yeah, I went to customs, gave her the 20 pound note. I told her this is the most expensive photocopy.  

[00:27:55] Susan Barry: Oh my gosh. So I have to tell you that I I've never had a bribery situation like that happen. And Pablo, I think I would miss it. I'm a little bit like clueless and naive. I don't think unless they, it like straight up said, give me some money or you're going home. Would I know what to do? Do you know what I mean? 

[00:28:19] Pablo Torres: Yeah. It took me like 15 minutes. And then it was like, because it went nowhere, the conversation, there's no printer, you need a paper, better go anywhere. I'm stuck here. You're coming into it. And then when he said, my guys and I want to have dinner tonight, I said, 

[00:28:29] Susan Barry: Oh my goodness, Pablo Torres. Thank you so much for being here. I will not ask for 50 pounds for this recording, but I know our listeners learned a lot about ancillary revenue and I really appreciate you riding up to the top floor.

[00:28:46] Pablo Torres: Thanks, Susan.

[00:28:48] Susan Barry: Thank you for listening. You can find the show notes at topfloorpodcast.com/episode/170. Jonathan Albano is our editor, producer and all around genius. He even wrote and performed our theme song with vocals by Cameron Albano. You can subscribe to Top Floor on Apple Podcasts, Spotify, or wherever you like to listen, and your rating or review will go a long way in helping us give you more of what you like. 

[00:29:23] Narrator: Thanks for listening to the Top Floor Podcast at www.topfloorpodcast.com. Have a hospitality marketing question? Reach us at 850-404-9630 to be featured in a future episode.