5 trends in hotel F&B profitability
25 AUGUST 2014 6:20 AM
Higher occupancy does not mean higher F&B revenues, according to STR’s Chris Crenshaw.
NASHVILLE, Tennessee—STR’s VP of Strategic Development Chris Crenshaw examined STR’s newest data set of top-line food-and-beverage metrics, along with data from the annual P&L HOST Study, during a presentation at the 6th annual Hotel Data Conference at the Loews Vanderbilt in Nashville.
During the presentation titled “F&B from top to bottom,” Crenshaw crunched the numbers to help attendees understand the state of F&B and its profitability, in addition to insights on future trends. For the purpose of this presentation, he focused on full-service hotels that had full participation in 2012 and 2013’s HOST Study, rooms segmentation and the F&B STAR.
Crenshaw looked at 364 hotels, 86% of which fell under the luxury and upper-upscale chain-scale segments.
Following are five key takeaways about F&B’s profitability in full-service hotels.
1. Higher occupancy does not mean higher F&B revenues
“There seems to be no correlation between growth in F&B revenue per available room and growth in hotel occupancy,” Crenshaw said.
When comparing 2012 and 2013 data from the 364 hotels, Crenshaw found that while occupancy increased 2.1%, F&B RevPAR was up 0.3%.
Breaking it down further, luxury occupancy was up 1%, while F&B RevPAR was down 0.4%. Upper-upscale occupancy was up 2.1% and F&B RevPAR was up 0.7%, according to the data.
2. F&B accounts for roughly 30% of full-service hotel revenue
F&B at full-service hotels accounts for 30.2% of total revenue, according to 2013 data from all HOST study participants.
In some top 10 markets, F&B revenue made up a smaller portion of full-service hotel revenue. For example, in New York City, F&B accounts for 21.7% of total revenue. In San Francisco, that percentage creeps up slightly to 24.3% of total revenue.
In some secondary markets, F&B revenue made up a larger percentage of a full-service hotel’s revenue. For example, in Anaheim/Santa Ana, California, F&B revenue made up 33.4% of full-service hotels’ revenue.
3. Luxury wins when it comes to meetings space revenue
When it comes to revenue per available square foot, luxury full-service hotels generated twice as much revenue when compared to the upper-upscale full-service hotels, Crenshaw said.
“The service fee is higher in luxury,” he said. “The price point with the menu will also be higher.”
This includes F&B revenue and other revenue generated in meeting space, which STR defines as space confined by four walls, Crenshaw said. The data excludes pre-function space and outdoor space.
In total, luxury RevPAS was $1.04 in 2012 and 2013. Upper-upscale RevPAS was $0.51 in 2012 and $0.52 in 2013, according to data collected from the 364-hotel sample.
4. Venue revenue per available seat can be tricky
When tracking this data, Crenshaw said individual restaurants within the hotel were not included, in addition to anything that is outsourced.
“That revenue comes into the hotel as rents and other income,” Crenshaw said. “The seat count is the constant number of seats that are always available where someone can be served.”
Calculating such metrics can be difficult, Crenshaw said, when it comes to spaces like Marriott International’s great room. In order to collect accurate data, STR asked Marriott to define the lobby and count the seats if servers attend to guests there, he said.
Not accounting for meal periods, luxury full-service hotels generated more than $45 per available seat, while upper-upscale generated just under $30.
5. Service charges add up
When examining RevPAS, more than 50% of revenue classified as “other” comes from service charges, while 26% comes from audio visual and 22% comes from meeting rooms, according to Crenshaw.
Service charges for catering and banquet events typically run between 15% and 25%, though not all of that revenue is realized by the hotel, Crenshaw said.