These days, add-on fees are providing a way for businesses to generate extra revenue.
In today’s world, when we hear “fees” we immediately think of airlines. Carriers are flying high with billions from fees for: checked bags, changing flights, picnic packs, meals, a seat assignment, extra legroom, unaccompanied kids, even the family pooch. Thank goodness Ryanair hasn’t gone with its plan for pay toilets . . . yet!
Airlines aren’t the only “fee-spirits” these days. Checked your latest hotel bill? If, for example, you just stayed at Nassau’s Atlantis Hotel, your bill likely included a “housekeeping gratuity and utility service fee” of $22.50 per guest per day. Lots of others, for example hotels along Miami Beach, have “activity fees” or “resort fees” on their bills now.
In a different move, some hotels allow the guest to opt out of having their room serviced. That reduces the hotel’s labor costs. Some even offer guests a discount if they opt out of daily cleaning. But, knowledgeable observers believe this is really the precursor to making room cleaning fees a hotel industry standard. After all, right now, guests just opting out of housekeeping may cut some labor costs, but it doesn’t bring the hotel a new revenue stream like airline bag fees or extra legroom surcharges.
As the airlines have modeled so well, the key to successfully generating a revenue stream from fees is quite simple. Take something that is now included in the price of a product or service, unbundle it, and make it a mandatory fee. The truth is, as consumers we’ve become quite accustomed to surcharges and fees. We’ve paid fuel surcharges to FedEX, UPS and cruise ship lines. Gas stations charge us a higher price per gallon if we don’t use that oil company’s credit card. Ticketmaster has made a business model of “convenience” fees.
Even in our dealerships, for some time now, our customers have become accustomed to paying add-ons for environmental disposal charges and/or a fee for shop supplies. In a personal experience, I cruise my boat to a nearby dealership for scheduled outboard service. Until recently, the basic package price for 100-hour service included lifting the boat from the water with their forklift, etc. Recently, the dealer unbundled the lift-out and a mandatory fee of $30 now appears on my bill.
It’s a fact that fee-for-service has become an accepted standard business model in which services are unbundled and paid for separately. Moreover, I suspect in virtually every dealership’s operations there are new income stream opportunities. These days, it’s worth taking time to examine all parts of a dealership to determine if and where unbundling might generate new revenues.