How to Turn Experiences into a Hotel Revenue Driver - with Pablo Torres

Fran (00:00): Hello everyone and welcome to another episode of Conversations on Experiential Hospitality.

With me today is Pablo Torres, hospitality entrepreneur, university lecturer, consultant, podcast host, and author of the bestselling book, Mastering Hospitality Ancillary Revenue. Pablo, welcome and thank you for joining us.

Pablo (00:22): Thank you, thank you for having me, it's a pleasure. Thanks man.

Fran (00:24): Where are you joining us from?

Pablo (00:25): Alicante, Spain.

Fran (00:27): Alicante, Spain. Is warm there now or?

Pablo (00:30): It is indeed, it's 18 degrees, very sunny.

Fran (00:33): Beautiful, nice. Well, thanks again for joining us. I can't wait to dive more into your knowledge, into your experience. Can you maybe start by telling us about your work and your background?

Pablo (00:44): Yeah, absolutely. So I've been working in the industry, hospitality industry for 25 years. I did hotel management in university, and then I went abroad working in hotels, operations and revenue in Ireland, England, Germany, back to Spain. And then chronologically, then I did my MBA. And then in 2011 is when I switched from operations to training and consulting. So I was working 12 years in an international company going on site to over 300 hotels. in 30 different countries, training them and helping them optimize their ancillary revenue. And then in 2022, I came back to Spain after almost 10 years in London again, and I started my own business.

Fran (01:23): Brilliant. So ancillary revenue is your kind of core. Maybe if

You want to tell us a little bit about how hotels at the moment measure ancillary revenue, what are the key things that they're asking you for? And then perhaps what are some of the big buckets of ancillary revenue that you then advise on?

Pablo (01:41): So the question is if they measure it and that's the big challenge to start with. Many hotels, still focus only on ADR, so average daily rate for the rooms and RevPAR, revenue per available room. They focus only on rooms. And sometimes, you know, I start the some sessions asking them, okay, why do you only do revenue management in this space where there is a bed? Because if you ask them, what about the rest of the building? From the asset management point of view, the owners want to optimize every square meter of the building, of the complex, the resort, but usually hoteliers only focus on rooms and they don't pay that much attention into all the revenue streams. So ancillary dictionary says that it's any revenue coming from the business that is not core business. So if we take a hotel and the core is selling rooms, then the rest include F&B could be ancillary. Other people will say, actually F&B is also core, so it be any other smaller revenue stream. But...

Even though you have other outlets in a hotel, you might be like breakfast, lunch, dinner, you have a spa. It's not only about tracking properly that revenue, trying to make those outlets profitable because in most hotels, they actually make a loss on those departments. And then if you manage to make money out of them, to optimize them and to apply dynamic pricing and making the most out of them. They usually are forgotten. And even some hotels, say, well, it's a As long as I don't lose much money with F&B or my spa, I'm happy. And that shouldn't be the case. And people are looking more into experiences. And that's why you have to switch more, to pay more attention to ancillary. Answering to your question back to the, to reply, the metrics should be, what is the impact of ancillary revenue on your overall results? So TRevPAR total revenue per available room. How much can that number be increased? thanks to your upselling cross-selling actions.

Fran (03:30): Yeah, so right about asset management perspective there because when I stay at a really nice hotel and I see their spa and wellness center and I can see that millions and millions were invested into it and yet there's a paper menu next to it, you know, and I have to book by going up to the reception. It's almost like preventing me from booking in this day and age when I want everything to be digital. I'm used to ordering my food, my pizza, my taxi, everything online.

Pablo (03:57): Yeah, It's probably gonna happen is you go in the evening to reception and they tell you, oh, I'm sorry, know, the spas are already close. You have to come back tomorrow morning when they're here. And you go like, yeah,

Fran (04:04): Exactly.

Pablo (04:05): It's like, why can't I book on mobile? Why don't you have a spreadsheet online where you can book yourself? Why can't only be a spa? Yeah, it's a lot of technology is still missing in those departments because everything is focused purely on roots.

Fran (04:17): Yeah, exactly. And what I think happens there is guests lose trust in the overall brand because guests today know and have experienced booking things online. So, you pre-COVID, you had a big generation of people, a chunk of people who never booked something online. After COVID, everyone's booked at least a table at a restaurant or something online. And now you come to a hotel and they tell you exactly as you said, like, you have to come back tomorrow. Well, no, I shouldn't have to because I know that there is technology that... can do this. Now, spa and wellness is a huge and growing area. Another one

You mentioned, there is experiences. So how important do you think our destination experiences as a potential ancillary revenue stream for hotels?

Pablo (05:00): Very important. And that's another thing on the to-do list for many hoteliers. They focus on creating a very nice building, resort, gardens, pool, et cetera, and the rooms, nice view, whatever it is. But then they tend to neglect the relation with the environment. And we talk about sustainability, for example. What we hear always, it's environmental, planting trees in somewhere.

Africa, Asia, Latin America. Okay, fine. That's cool. Yeah, it's very helpful. We're missing two other ones. Financial, which is the number one, the most important. We have to make money to have a business. And second, linking to what you're saying, social responsibility. So sustainability, sorry. So, and that leads to having a relationship with your community. Who is around you? Who delivers and can create experiences for your customers? Because I'm sure there is a local craftsman, a local company. creating nice excursions, experiences, things to do in the location, that you create a good relation, then it can be real partners. And your clients coming from very far away will stay in your hotel and then will enjoy a day out with that experience that you curated for them and have a real connection with the local.

Fran (06:12): And I think that's almost the reason why people travel in the first place. It's to do something locally. It's very rare that someone's going to fly halfway around the world just to see a beautiful building. I mean, I'm sure there are people and there will be, and it's a beautiful building. So you want to experience it. But I would say eight out of ten more times, it's also to explore a local area, to learn something, to experience something new. And that's where those experiences come. into play. And what I've seen hotels struggle with is connecting to those local partners. I see that locally, the GM and the concierge team, they have those connections, right? They know the transfer providers, they know who to go to for a private yacht tour. They have all of these connections, but none of that is technologically enabled. So do you see at the moment hotels going in the direction of technology adopting in this space? And if so, how do they usually do it?

Pablo (07:07): Not many, to be honest. They tend to rely a lot on either guests doing it themselves through some sort of broker online, separately from their online booking, or once they are on site, talking with the concierge. And the concierge hopefully will have those kind of connections. Although nowadays more and more hotels don't have concierge and they just rely on customers doing it themselves. Or if they have it, they are not the old school concierge and all they do is just check on Google what they can find. So it's not really ideal.

Some hotels and resorts, you're thinking about resorts coming to mind in Spain, for example, in the Canary Islands or the Balearics, southern coast of Spain, they might have contact with local companies, but it's very manual. So you go to reception, I want to rent a car, I want to have this discussion. So they call the people, give them a ring. Okay, do you have still availability for tomorrow? Yeah, no, I have two more guests for you. But yeah, I mean, as we mentioned earlier, there's a lot of technology missing, a layer of technology and experiences. And knowing that... especially post pandemic, more and more people want to really enjoy local experiences, well-being, it's growing very, very fast. So that layer of technology should be already there helping customers.

Fran (08:17): Yeah, and I think what it also helps sometimes to do is the shoulder season in most of the seasonal destinations is actually the time where people travel more for experiences and less for the sun, weather, beach, warmth. And therefore it can actually have an impact both as an ancillary revenue stream, right, from commissions or own experiences, but it can also fill up the hotel because you're going to be coming to parts of Spain because of the wine tasting or because of certain gastronomic or festival experiences that are currently happening in the region.

Pablo (08:50): Yeah, all the things to do, you say, you sometimes you might be traveling for the sake of enjoying the beach, for example, but other times you might like to find other experiences. And also it might trigger you to go somewhere else. So if I'm, say, in the UK, for example, and I want to go to a warm destination, I might not mind somewhere in Northern Africa or somewhere in Southern Spain or maybe the Canary Islands. It depends on what kind of offer I find, not only about the cheapest, but what's on offer on the destination. If it's only a hammock or a sunbed by the pool, it's not really adding much value. Now, if I see on the website or I can see that there's other cultural activities that catch my attention or gastronomic activities, then might lean my decision towards other destinations.

Fran (09:34): Yeah. You know, I've worked and implemented Turneo in many hotel chains and it is a bit of a technology shift where you're moving from human only, the way that you're used to prescribe or recommend experiences to guests before into a hybrid mode of using people still and having concierges and having advice on what experiences to do, but also having a tech enabled where the guest can self serve or potentially through the concierge, how do you approach when you advise hotels on ancillary revenue optimization and when it involves implementing a new piece of technology? What advice do you give if it includes a lot of changing of hearts and minds, let's say? How best can hotels prepare for that for implementing a new technology into an area where before there was none?

So you're not replacing a technology, you're actually just implementing a new piece of tech.

Pablo (10:32): So it should be very straightforward, streamlined, ideally two-way integration, because usually what causes most rejection when it comes to hotels and operating technology, it's how difficult it is to use or get used to use it. And that's gonna be the excuse used by a lot of staff not to use it. Or it was easier before, we've always done it this way, why should we change? It's more difficult now, the system is faulty, there's glitches, bugs, whatever it is. They'll come back to whoever decided to sign is like, well, listen, you know, this is not good. We'll go back to our previous handwriting model because they feel comfortable. No, no one, mean, none of us likes usually likes change. We're fine in our comfort zone. So that software, whichever it is, needs to be very easy to use, very straightforward and thinking of the management, generating very easy to read reports. Because sometimes what happens with software, it's that the reports are either non-existent or too difficult to read this. too many numbers, too many KPIs, it should be very easy. Okay, what are we measuring here? Are we measuring just pure revenue? Are we measuring the impact on TRevPAR we mentioned earlier? And then so that it's very easy to read both for agents, if they have commission on it, and then for the management to see what is the impact on the total results.

Fran (11:49): Yeah, absolutely. I would add, I mean, your first point is spot on, you know, how easy it is to use something. If you walk into any hotel in the Mediterranean on a Saturday in July, there's a massive queue. And if something's not working, and if you just added one extra step for the check-in staff or the front office, it can cause huge frustrations for both the staff and for the guests, of course. But another thing that I'd add there is, I see a lot of hotels struggling with staff retention and hiring, and therefore training staff perhaps in a new technology needs to be as easy. Have you had any experience with that? I think that's one of the hottest topics in hospitality right now, right? Acquiring acquisition and retention of staff. Any thoughts on that?

Pablo (12:35): Yes, massive issue in all destinations to find people who want to work in hospitality, especially against this pandemic. Lot of people have left the industry and there's very few refilling those roles. So some of them will be replaced by technology. But the ones who remain, they should be much more customer focused and that's going to be key. So what I'm foreseeing, it's a split in hospitality between the ultra luxury. full of human connection, interaction and experience and then the cheaper fully automated. So the humans, the talent still working in hospitality will work on those luxury destinations or more luxurious hotels and what people will pay to go there to have that personal treatment, that personal connection. And obviously if I'm going to a fancy destination or resort, I expect the staff to be fully knowledgeable. on destination and also using their resources. You can have someone thrown into reception with no previous training, they don't know how to use a PMS. But it is a massive challenge at the moment to find staff. So the easier it is, the software to use, easier it is then for hotel to train new people and put them on the spot.

Fran (13:49): Absolutely. What I've heard one revenue director in a very posh and beautiful hotel in Singapore once tell me is she was struggling to hire staff, you know, who speaks languages, who is educated, who knows the destination, who worked in premium hotels, when she has bad software that she puts those staff in front of. Because even in the, as you said, ultra-lux segment where a personal connection is everything. the tools and the software that you give to the staff needs to work. Because if I am sitting in front of a computer that doesn't work, if I'm trying to do something on a software that doesn't work, it looks very bad in front of the guest, of course. And therefore she was struggling to hire those people because they'll ask, what kind of equipment do we use? What kind of technology do we have as support? And if that tech's not up there, it causes friction. So yeah, that's definitely something I've heard as well.

Pablo (14:46): I remember back in the days in London, there was this reception academy, which basically they were teach people with no hotel background whatsoever to use the main, the biggest global PMS and they will get a job straight away because that was the main requirement. Not about languages or skills. Just if you know how to use a PMS, you're hired because you can work tomorrow morning. And I say three weeks of training.

Fran (15:07): Yeah, yeah, but that's probably because that PMS - not to trash anyone here on the podcast, but was so difficult to use that you had to have like an advanced degree to figure out. Yes.

Pablo (15:16): Yeah, it was like a full model training.

Fran (15:19): Yeah. Okay. Brilliant. In terms of the future, as we're as we're moving on, where do you see the future of experiential hospitality?

Pablo (15:28): Growing super fast. Mean, you check any trends, any reports in the last few years, and it's growing so, fast. Eco-friendly resorts and anything to do with biodiversity, it's growing very fast. Wellness, we mentioned extended life. I'm not sure if that's the correct term, but people are looking to stay healthier longer. And there are already resorts purely focused on that. And they're more opening.

And then you have the different concepts of branded residences, co-living, flex-living, and anything in between, senior living. And that also includes, people go there instead of going to a hotel or apartment because they want to have the community and I get links to the experiences. So I want to find people like-minded who do things to have similar interests so that we can do things together. And on those flex-livings, usually they have a community manager who is creating these experiences for them. activities and things to do together. It could be that role, it could be through technology, but more and more people are looking for that kind of trip or stay abroad.

Fran (16:32): Yeah, that makes perfect sense. The community aspect you mentioned is so interesting. When I was younger, I'd stay in hostels when I was backpacking. And I always loved booking tours through the hostel because I knew that on that tour, other like-minded solo travelers are going to be present. Whereas today, if I'm going to an event and I know there's going to be some tech entrepreneurs there, I'd love to meet them and hear their stories. So we are humans as such that we like to... congregate in similar like-minded groups. And I think that from an experiential hospitality perspective is huge as well. Brilliant. Any closing thoughts in terms of what would be your advice, let's say, to hotel managers thinking about experiences and how to manage that, whether to get into new tech or not? What would you advise as a closing thought?

Pablo (17:27): Well... To move.

Because if you don't move, you stay behind because everyone's moving. So if you say, okay, I want to stay as I am because I'm fine, I'm profitable, I'm doing okay. Maybe your neighbor, your competitor, the guy on the next door or the city next to you, they are doing something different. They are creating experiences. Are creating something different for customers. So when the customer is looking for a destination on the browser or on their chat GPT, whatever it is, they're to find, this hotel is offering me these extra activities. already included in the package, which is another thing you're bundling different activities with your state, which are much more appealing to the hotel number one. So knowing that the hotel is doing it already, and that it's a very fast growing trend, the advice will be just get on board or you'll be left behind.

Fran (18:20): Thank you so much, Pablo, for that. Thanks for sharing your thoughts. I really appreciate you coming and joining and I hope we stay in touch for the future. I'll keep following your work as well. You are one of my favorite people to read on the topics of ancillary revenue, so I'll keep doing that. And once again, thanks for joining us today.

Pablo (18:44): Thank you, it's been a pleasure. Thanks a lot.

Fran (18:46): That was another episode of Conversations on Experiential Hospitality. My name is Fran and I'll see you next time.