The Recipe for Profitable Hotel Food and Beverage

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Finding the perfect chemistry for restaurant service in a hotel is difficult, but necessary for the success of the hotel.

If it was easy, customers would flock to hotels just for their food service. With a few exceptions, it isn’t – not even close. Traditionally, hotel catering has been a dismal competitor to restaurants, perhaps outside of five-star hotels and some unique boutique hotels.

In all fairness, it just doesn’t make financial sense for hoteliers to focus heavily on food and drink, which has traditionally not been lucrative. The food service was the unwanted son-in-law of the room keys. As a convenience for guests and a requirement for hotel meetings, the quality of the hotel’s food has declined, with exceptions in the boutique accommodation space, such as Kimpton, Morgans, and others.

Around 2010, modern boutiques arrived, following in the footsteps of their predecessors; by emphasizing an individual approach to the customer experience and placing more emphasis on the quality of the catering service. Many hoteliers have learned that excellent food service can attract hotel and non-hotel guests to certain types of hotels.

Even today, despite the many advancements in the provision of catering services, the profitability of hotel catering remains a challenge. The centuries-old debates and questions continue: Should food and drink be viewed as a separate profit center that can stand on its own? Or is it just to be factored into the overall performance of the hotel? Also, does the owner or operator manage the food and drink, or is it better to leave the risks and rewards to a competent restaurateur under lease?

There are a number of barriers to successful hotel catering: changing consumer tastes and demand, changing design strategies, increasing regulation, managing food waste, and increasing labor costs, among others. others. An important step in getting proper food service is getting it right the first time; it is too expensive to attempt a recovery. To do this, hoteliers need to fully understand their market, their guest’s tastes, demand drivers, competition, and the impact of food and drink on hotel room revenues. They must have a food and beverage plan in place and execute that plan.

It takes time and research, but the investment is well worth it. Food service is increasingly an important part of building a hotel. In the United States, hotel revenues represent an industry of approximately $ 200 billion, with food and beverage services accounting for approximately 25% of that revenues.

The role food and drink play in a hotel depends a lot on the style and type of hotel and the clientele. Essentially, hotel owners are looking at multiple sources of income for food and drink: in-room meals and minibars; restaurants / food service areas, bars, cafes / bakeries and snack bars; and banquets / conferences / catering.

These sources of income are associated with costs and expenses that hotel owners and investors should be aware of, namely: food and drink costs, labor costs (wages, salaries, bonuses, benefits, distribution of service charges and taxes), service expenses, such as such as cleaning products, glassware and cutlery, utensils, china, cooking fuel, uniforms, etc.

Owners and investors need to understand the main sources of revenue within the hotel and how and where to focus their resources. To achieve this understanding, owners and investors must have answers to questions such as: how much, on average, are hotel guests willing to spend on food and drink, and from what location? the hotel will these expenses be incurred? Can the hotel fill a significant market niche for banquet space with sufficient meeting rooms? Is the restaurant famous enough to compete with the outside restaurants and keep hotel guests inside the hotel and attract customers from outside the hotel? Do hotel guests really only use the hotel kitchen for in-room dining? Room meals have rarely been cost effective. Would it make more sense to eliminate food and beverages due to the high costs and operational constraints? Hotel owners and investors need to understand their market and their guest profiles before budgeting for expensive food and beverage facilities and upgrades.

Owners and investors also need to understand the changing market to structure the food and beverage within the hotel. Most hoteliers will privately concede that they do not handle food and drink very well. This leaves an excellent opportunity for owners and investors to separate food and drink from hotel management and operate this space as a separate business with the goal of profitability or, at a minimum, to better manage the hotel. expenses. This can give the hotel owner more flexibility on how the catering service will be delivered.

A separate food service team can be engaged – or better, the food court can be leased to a third party operator who will have a separate risk profile from that of the hotel owner and operator. There are, of course, legal and business issues that need to be addressed when hotel rooms and food and beverage are handled separately. Care should be taken to weave the terms of the agreement between hotel management and catering management, so that economics, conditions, risks and operations are managed transparently.

For example, hotel and restaurant service documents should address specific areas that the hotel manager will control in relation to the catering operator. How will operating expenses be allocated and paid? How will insurance, security and liability be structured? How will the two entities coordinate marketing, guest lists and bundled sales? Will the hotel manager receive a waiver of income from food and drink? Which party will control the banquets and meeting space? Which party offers room service? There are many other legal and business issues that need to be taken into account.

As the United States and hotels emerge from the pandemic, getting food services to work will add even more challenges, both business and legal. Of all hotel revenue sources, food and beverages lagged the most. Almost 90% of the hotel’s food and drink has been closed.

The group’s hotel industry was the most affected.

Hoteliers will need careful planning to successfully reintroduce food and drink. For example, will room service make sense immediately after the pandemic? Probably not. Will unions present greater challenges to hoteliers? Rather likely. Will unions insist that room service be provided or that their employees be paid as if room service was on duty? How will seniority be approached? Will hoteliers be able to adjust the work rules to provide only breakfast and dinner, and leave out lunch – which could be the last meal to return to hotels? Will hotel managers be able to adjust shifts? Although leisure travel has increased significantly, customers mainly eat breakfast only. How will hotels recover profitable group business, business meetings, weddings, etc. Reopening food and drink after the pandemic is itself a new cottage industry with its own experts.

Today, mainly due to the growing influence of boutique hotels, hotels in general are making strides in catering. For food and beverage to be financially profitable, hotel stakeholders will need to do the appropriate research, plan, and engage in the financial and legal structuring necessary to create a food and beverage paradigm that both attracts customers and is financially savvy and allocates risk fairly. This research and planning will be especially important as hotels emerge from the pandemic and hotel owners and managers find ways to reintroduce food and drink as part of the guest’s hotel experience.

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