There are several ways to generate ancillary income in hospitality. An example of ancillary income is if your hotel has vending machines and you make a cut of the vending machine sales. That 5-15% or so of sale profits that you make is considered ancillary income in the commercial real estate (CRE) business.
Micro Real Estate is a broad category of ancillary income generating machines and spaces – also refereed to as micro commercial real estate (micro CRE). As stated previously, vending machines are a classic example of ancillary income producing machines and the most well known form of Micro CRE. The next big wave of ancillary income producing machines in hospitality are Electric Vehicle Chargers, since like vending machines, EV chargers allow you to invest in real estate with a relatively small amount of money (on the order of a few hundred to a few thousand dollars).
Other Ancillary Income Producing Assets
There are several other burgeoning markets for ancillary income in hospitality. Shipping container farms need spaces to operate and there are likely going to be more and more of them cropping up in cities as climate change make our food supply more variable. Shipping container farms can also help reduce the amount of gasoline required to transport crops (plants, yes, but also things like mushrooms), since the crops will be grown right next to where people live or stay in cities.
A farm won’t generate passive income unless a very high degree of automation is achieved, but for the building owner who allows a farm to operate on their property, the rental income is certainly passive. Imagine a mobile home park or RV park with one spot that is a farm and can supply food to residents. The combination of a shipping container farm with a ghost kitchen would be beneficial for ultra fresh ingredients, and a ghost kitchen could even be operated out of shipping container that is right next to the farm shipping container.
Growth Over Time
Ancillary income is typically far less than the primary income that a commercial property make from rent of it tenants. The nice thing about optimizing ancillary income with Micro Real Estate machines is that more machines can be added over time to increase the ancillary income, and the capital investment is not nearly as high as adding more rooms to rent.
For example, a hotel that is 300 rooms might have 10 to 15 EV chargers now, but as EV adoption rates increase, more EV chargers can (and should be) added to the hotel parking lot to increase ancillary income and provide guests with a necessary amenity. Luckily, proptech companies (like Leptonic) are coming to save the day.
Ancillary Income Manager
Since, ancillary income is typically only a small portion of revenue from a commercial property, it will require some effort to increase revenue from all of these small pieces of machinery. It would be wise to hire someone to manage all of these streams of income and try to grow and optimize the Other Income. Micro real estate agents are also another source for help, especially because there is some confusion of micro real estate with micro flipping.
