F&B: What’s making money now?
07 JULY 2015 7:20 AM
In this first story in a two-part series on hotel F&B trends, hoteliers share tips on how to capitalize on dining trends while keeping profit margins high.
Editor’s note: This is the first in a two-part series examining food-and-beverage trends.
REPORT FROM THE U.S.—Gone are the days when full-service restaurants were cash drains on a hotel’s operations. Today’s hotel food and beverage must strike the balance between profit generation and meeting guests’ more discerning demands.
To boost F&B profitability in a period when culinary trends can seem daunting and expensive (custom ice, farm-to-table sourcing and top-shelf bourbon programs come to mind), hoteliers are putting in the work to make F&B margins better. Here are four trends to watch:
1. Know your market
Not every hotel needs all the stops pulled out when it comes to F&B innovation.
“We want to be best in class in our markets, and every one of our properties has a different market niche—we can understand and implement things in each market that speak to the people there,” said Bill Kohl, principal at Greenwood Hospitality Group.
Kohl’s point illustrates Greenwood Hospitality’s goal for its restaurants to be best in class in their specific locations. That second part is the key, Kohl said, because not every hotel warrants the latest in bleeding-edge F&B trends and technology. But by knowing the market and clientele, F&B can surprise and delight while still turning a profit.
“For example, we have a Crowne Plaza outside of Cleveland, which is very nice and renovated, but it’s an interstate highway exit hotel,” Kohl said. “We’re not going to attract a huge amount of the local dining community, but what we did was create a very well-done bar and grill that caters to product, price and clientele. We’re buying the best, local when we can, and we’re presenting it in a unique and different way.”
It’s a different approach than what the company took at the Hilton Harrisburg in Pennsylvania, which just completed a $2-million renovation on two restaurants at the end of 2014. To cater to the hotel’s large business clientele (due in part to its proximity to the State Capitol Complex), Greenwood created a steakhouse and a modern American tavern that markets to locals as well as guests.
“We built a display kitchen, built a cocktail stage for our bartenders and created a lot of visuals,” Kohl said. “Since reopening in January our business has more than doubled what it was previously, which is stunning.”
It’s critical to be able to realize profits in any F&B endeavor, Kohl said.
“If your market isn’t willing to bear the prices, you have no business offering them,” he said.
Still, a hotel restaurant can see revenue on different levels simply by understanding what the market can take, Kohl said.
“Maybe we don’t do a bourbon program but instead we do something interesting with craft beers,” he said.
2. Banquet’s back
Group business is a big driver boosting catering and banquet profitability, sources said. With this line item often leading the pack when it comes to F&B revenue contribution, hoteliers are focusing on continuing to grow this segment of their F&B business.
Hyatt Hotels Corporation executives shared in-depth figures surrounding the company’s F&B operations during its first-quarter earnings call with analysts, saying that F&B was approximately 35% of total global chain revenue in 2014, driven in large part by group business.
“Banquet revenues grew at a faster pace than group roomnights over the past seven years, which means groups are increasing their spending on F&B even when adjusting for inflation,” Hyatt president and CEO Mark Hoplamazian said during the call.
Susan Terry, VP of culinary operations for the Americas for Hyatt, said one of the reasons Hyatt’s overall corporate banqueting revenue has been strong is because one of the company’s goals is “to stay diversified and value our business relationships.”
“In the U.S., we’re seeing larger-than-previously-experienced bursts of smaller, short-term business,” as well as increased corporate group business from technology companies in particular, she said.
Hoplamazian during the earnings call said that as the company sees group business trends shifting this way, hotel-level staff is responding in kind:
“The terms on which business is being booked include higher F&B components, and our hotel teams have become more selective in the types of groups that they book … being mindful of the services we’re providing outside of the room, including F&B,” he said.
How do you deal with today’s group resurgence? Tom Martini, GM of the Westin Convention Center in Pittsburgh, said a big part of making banquet F&B profitable lies in planning.
“We do a lot to try to give planners and attendees an experience that’s atypical for a hotel,” Martini said. The Westin is the only hotel directly connected to the Pittsburgh Convention Center, so group business is integral to the hotel’s mix. “We’ll call these ‘on-site specialty events,’ and we plan them a lot, which gives the feeling that we’re doing something beyond a typical ballroom experience.”
Kohl agreed that hoteliers must be cognizant of the fact that “meeting planners are trying to get smarter with their expenses and there’s still reticence to fully open the pocketbooks to go all-out on a hosted bar or full-fledged dinner.”
He said the approach that works for many of Greenwood’s properties is to adopt a mantra of “customize, don’t discount.”
“Once you discount, you can never justify the full price,” he said. “Instead, tell us your budget and let us customize the menu. Now all of a sudden we’re off-menu, we’re creating something where we can still meet our cost structure and profit margin, and the guest feels special.”
He said quick ways to accomplish this include proposing a three-course meal instead of a four-course meal, getting creative with interactive stations instead of a traditional buffet and providing more interest and entertainment in the room—all tactics that lower the price tag and increase margins.
3. Casual doesn’t have to cost less
The move away from tablecloths and toward casual dining is one trend hoteliers are embracing because it speaks to guests’ desires and cuts down on costly service elements.
“As people travel they want to experience a comfortable setting that’s fun and still has some excitement to the atmosphere,” Martini said. “They want comfortable more than they want fine dining.”
Kohl echoed that sentiment, calling it “the ongoing casualization of fine dining.” He said guests do care about great service and great food, but not necessarily about fancy settings and having to dress up.
A casual, comfortable style doesn’t have to mean menu prices drop—instead, the trend often means hoteliers see better margins by focusing on the quality of the food and the service, while ditching the costs of setting an elaborate table and laundering all those white tablecloths.
4. Delivery goes casual, too
That casualization extends to F&B delivery as well as atmosphere, particularly when it comes to grab-and-go outlets and roomservice.
Terry said the future of meal delivery depends on the hotel’s location, and that the evolution of grab-and-go and roomservice go hand in hand.
“It’s important to remember that roomservice revenue contribution differs based on location, brand, country and purpose of visit,” she said, saying that what a business guest in New York City wants can be very different from what a vacationer in Costa Rica wants. “What we do know is that each type of guest has a specific need that we need to meet.”
She said the availability of quick grab-and-go options definitely factors in to the success of roomservice at any given hotel. “That offering wasn’t as prevalent seven years ago,” she said. “Now we are focused on designing the brand experiences so guests can access what they want, when they want it and how they want it.”
Kohl calls this trend “food on demand” and said that it can be profitable for hotels because it incorporates elements of traditional roomservice and a more casual approach.
“This will be the new roomservice,” he said. “Each brand will have its own take on it, but it’ll look like this: You call down to roomservice and place your order and you can come pick it up or have it delivered. It’ll be in very nice disposable, recyclable packaging—sort of like grab-and-go for your room, or takeout delivered to your room.”
The cost savings come in labor and delivery. “Sure, you may see a cost increase in your paper supplies, but it’ll be offset by savings in linens and labor,” Kohl said. “You won’t need people to go back up and get the tray or sweep the floor for carts at all hours.”
HNN’s Alicia Hoisington contributed to this report.