With the usual performance metrics taking a bit of a hit at the moment, hoteliers are prioritizing other income, notably food and beverage, but the landscape is far more complicated than just opening a burger bar and providing grab-and-go options.
NASHVILLE, Tennessee—In a second quarter in which many hotel companies have outlined muted performance metrics, there is renewed focus on other revenue streams, notably food and beverage.
To secure much-needed top-line revenue, F&B departments are under the microscope. Speaking at a panel titled “How F&B can be your meal ticket to profitability” at the 2019 Hotel Data Conference, panelists said there is a new focus on F&B revenue management.
“We’re looking at seats per available hour and overall per seat,” said Gregory Griffie, SVP of F&B at Davidson Hotels & Resorts. “And we know we have labor in the restaurant between 3:30 and 5 p.m., but that they are not generating revenue. We offer drinks and oysters priced ridiculously low at 4 p.m., and then they might go up in price every 15 minutes. It can bring huge dividends.”
Lana Trevisan, VP of restaurants, bars and nightlife at Hyatt Hotels Corporation, said her company has a beverage leader at every one of its top-line hotels.
“No one wants to add expenses, but to have someone who is passionate about cocktails, well, bars will be more creative and enticing,” she said.
Vince Barrett, VP of food and beverage and rooms at New Castle Hotels & Resorts, warned that still not everyone is looking at the full F&B picture.
“Usually there is never a dedicated person looking at F&B revenue—rather someone who had 1,000 other things to do. (At New Castle) we put together a committee of people from across the F&B team, with a percentage of F&B revenue budgeted for sales and marketing,” he said.
Barrett said F&B pushes must go hand in hand with driving rooms revenue.
“When you start giving a room away, it flows through the entire thing,” he added.
Numbers speak loudest
Panel moderator Veronica Andrews, director of digital data solutions at STR, the parent company of Hotel News Now, said the U.S. hotel industry is currently worth $218 billion per year, with rooms providing $96 billion of the pie and F&B contributing $38 billion.
Andrews said year to date, catering and banquet revenue per available seat increased 2.5%, and total F&B revenue per available room has increased 2.6% to $115.
“Hotel F&B is enjoying an increasing growth trend, from 2.2% in 2017 to 2.6% in 2019,” Andrews said.
Panelists said they’ve seen similar F&B growth.
“We’ve seen a 5% increase in total revenue coming out of restaurants and bars in 2018 and 2019,” Griffie said, adding that five of his properties have a 50-50 F&B and rooms split, and in some cases more.
In some cases, the hotel restaurant is defining the entire property, Andrews said.
“Restaurants and bars are fast becoming the real character of any hotel, with sales up 8.3% in food and 8.7% up in beverage,” she said. “This all started about three or four years ago when we started treating F&B for what it is, not the ugly stepchild.”
Trevisan said she aims to create buzz around F&B and partner with whatever chefs are making a noise.
“The ratio we like to work with is to have 30% of F&B guests be in-house, 70% from outside,” she said.
Trevisan warned not to be too starry-eyed at the metrics.
“A group buyout can kill a rooftop bar, for example, for the community, so every rooftop space now has to be compartmentalized,” she said. “It will not be shut down for the local population.”
Barrett agreed that large groups can hurt a hotel’s potential F&B revenue gain.
“It is a dangerous balance that we have helped create,” he said. Where we have been more successful is when a group has bought the entire hotel.”
Another potential hole is increasing bottom-line revenue in part by cutting costs.
“Have solid conversations with revenue managers,” Trevisan said. “The easiest thing is to say cut, cut, cut, but this is a downward spiral to ‘Loserville.’ Driving top-line sales solves everything, by being creative, not via sterile cuts.”
“We call this the accounting department,” Barrett said. “One of the mistakes from the 2009 recession is that we cut right to the bone, even broke it. We need a fully balanced scorecard. Generate revenue, and then manage the middle.”
“Ask yourself if you want 10% of 100 covers, or 15% of 10,” Griffie added.
Labor and efficiencies
One of the highest expenses in F&B and across other hotel departments is labor, which is particularly acute in F&B and is on the rise, panelists said.
“We all struggle with this, but one of our major shifts is to hire on behavioral lines,” Griffie said. “And we’re signing bonuses for dishwashers on hiring, and with another after 45 days. Yes it’s a couple of hundred dollars out of our pocket, but a lot less to spend than on the recruitment process.”
Trevisan said it is a concern, especially in growing markets.
“Two percent unemployment in Denver is a huge problem, so it is about (hotel) culture as turnover cost can be brutal,” she said. “It us about having an awesome working environment.”
One of Barrett’s new employee initiatives is to roll out tuition help for credits on further education.
“Everyone needs the tools for their job to be a success,” he said. “(New employees) are only as good as we allow them to be. At established hotels, our retention rate is good, but at acquisitions and new builds that is when the churn can be bad.”
Initiatives in efficiencies go hand in hand with clever thinking on labor, although panelists said front-end robotics are not likely to take over soon.
“Inventory stocktaking, tracking and reporting saved us 100 man hours in a quarter, and the accuracy is better,” Barrett said. “Also, we are not looking at individual food-item costs but rather how much did all the food cost and what revenue did we bring in.
“I went to the dark side and talked to the accountants,” he quipped.
Griffie said he has been more creative with breakfast in terms of nutrition and gluten-free items.
“When was the last time anyone ate a Danish? They just end up in the staff canteen or in the trash can,” he said.
Barrett said he had seen an increase in profit derive from portion management.
Some expensive offerings remain prudent, though, Griffie said.
“We partner with local coffee roasters,” he said. “It is not cheap, but it has created in one market the go-to coffee shop for students as well as corporate groups.”