Miscellaneous revenue-generating sources have shown to be decreasing the size of their contributions to a hotel’s overall revenue since 2010.
Published by: Robert Mandelbaum/Hotel News Now
Published date: February 2018
In hotel industry jargon, other operated departments are frequently referred to as minor operated departments. Based on recent trends in other operated department revenues and profits, these sources of income have become less consequential to both the top and bottom lines of U.S. hotels.
Other operated departments consist of revenue-generating services provided by the hotel, and the vast majority of the costs, operational responsibility and financial risk for providing these services are assumed by the hotel. Examples of other operated departments include gift shops, golf courses, spas and parking lots.
The recovery of the U.S. hotel industry since the depths of the 2008-2009 recession has been strong. From 2010 to 2016, rooms revenue for the properties that participate in CBRE’s annual “Trends in the Hotel Industry” survey increased by 38.8%, while total hotel revenue grew by 39.8%. However, during this same seven-year period, the revenue generated by the other operated departments increased by just 15.8%.
Other operated departments have always been a relatively minor source of revenue for most hotels. In 2016, other operated department revenue for our Trends sample averaged 4.3% of total revenue. With other operated department revenue growing at a slower pace than total hotel revenue, this ratio is down from 5.2% in 2010.
Other operated departments are more meaningful at resort hotels that have multiple recreational and retail outlets. As these property types, other operated revenues averaged 10.1% of total revenue in 2016. At select-service hotels that simply offer movie rental or guest laundry services, other operated department revenues average just 1.4% of total revenue.
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