By Sashi Rajan, Executive Vice President – Advisory & Asset Management, Hotels & Hospitality at JLL
Hotel owners are looking to food & beverage as a source of profit once again, after years of neglect and competition from standalone outlets.
The pandemic has highlighted the untapped potential in hotel food and beverage (F&B) industry.
Once the darling of the hospitality sector—restaurants such as the Savoy Grill in London were the center of high-society, attracting the rich and famous from near and far—F&B has played second fiddle to room sales in an industry preoccupied with margin on rooms and RevPAR. Hotel F&B fell out of favour alongside the proliferation of standalone casual and high-end restaurants.
But the harsh impact of COVID-19 on the travel industry has highlighted the need to unlock fresh cashflow through ancillary income streams and F&B operation represents fresh potential. At a recent asset management conference in Florida, a side conversation turned to the fate of hotel F&B outlets. My industry colleagues acknowledged that it was an obvious target to unlock dormant or dwindling revenue streams.
While the industry suffered the impact of the pandemic, some outlets stood the test of time with innovative and fresh dining experiences. As such, owners and operators who understand the key ingredients to successful bars and restaurants were able to breathe life back into their own venues and reap the rewards.
Food for thought for hoteliers
1. Operate like an independent business
Well curated menus with ingredient provenance and engaged staff in a well-designed—without being ostentatious—setting can distinguish independent restaurants from hotels. They further benefit from well put together websites, sleek reservation engines and lively social media channels without the restrictions of a bigger brand guides to adhere to. Oftentimes, hoteliers try too hard and simplicity is the most engaging style.
Crucially, these venues attract a wide cohort of diners. Hotel restaurants are often preoccupied with measuring in-house covers capture and, while important, they must attract local residents to enhance their credibility, authenticity and value.
2. Look beyond breakfast
Lunch and dinner service should be the focus for restaurant design and concept in a format that can then adapt for high-volume breakfast service. This is usually done in reverse, conceptualising a breakfast room that then has to transform and be relevant for lunch and dinner. The creation of adaptable spaces that can transition through the day are important concepts that could be considered particularly for new builds or during a refurbishment.
3. Substance above style
Concepting, interior design, operating supplies, uniforms: these are all critical details in creating an overall ambience, yet they do not have to be over-thought or over-invested. Instead, the focus should still be on the cuisine and then invest in curating the overall guest experience (customer journey) finding ways to engage at all touch points—from making the reservation, quality interactions to post-dining feedback and re-marketing.
4. Building and retaining a motivated team
Put simply, happy staff translate into happy guests. To achieve this, restaurants need a robust plan to build the right team of passionate front-of-house staff. This requires industry employers to make themselves more attractive through improved benefits and conditions of work through flexibility, rewards and incentivizes, as well as matching pay with performance. Training is also key. Invest in team education such as menu tasting and service role play, upselling training. These efforts, whilst not new in the industry, need to be re-instated as they will help drive results while engaging employees will help to retain and attract talent.
5. A scientific approach
Data science in F&B usually begins and ends with engineering the menu by looking at what sells and what doesn’t; occasionally this goes a step further to consider contribution margins. Other areas ripe for data analysis include seat utilization and peak and low periods to establish strategies to increase spend during peak times and drive volume during the down times.
Take this a step further and use a data-driven approach to marketing. Explore how enhanced reservations systems can serve as CRMs. Can you analyze customer buying habits then share targeted marketing material? For example, someone who has a high wine spend may wish to know about a wine dinner at another outlet within the hotel. If the marketing content reaches its intended target, it has achieved the right level of engagement and hopefully drives action.
On the cost front, most hotel restaurants would be left with minimal profit if any should we allocate the Undistributed Operating Expenses (OUE) let alone include an arbitrary element of rental. This is where hoteliers need to be agile in looking into controlling the cost of sale further through data-driven menu engineering and overall cost management below the departmental profit line.
While these steps won’t necessarily guarantee success, they should illustrate how much room there is to re-think the current approach to hotel F&B. Gone are the days where a club sandwich, a ‘hotel-named’ burger, some local delicacies in an elaborately designed space were enough to distract from the competition outside of the hotel foyer. Discerning diners expect more and we need to work harder to across the segment to create value for hotel goers and, ultimately, hotel owners.
Breaking away from the traditional hoteliers’ approach and a mindset shift will help steer hotel F&B closer to its former glory.