Consumer spending at hotel food-and-beverage outlets on the rise

Hotel restaurants’ climb back to respectability—and in many cases, acclaim—has been a continuing story for several years. The positive buzz has resulted in concrete gains in food-and-beverage spending at hotels, and new research shows that it’s not just hotel restaurants that are benefitting.

According to Technomic, the hotel F&B space continues to show growth, with overall consumer spending increasing 4.9 percent in 2017 and showing a robust 5.5 percent annual growth since 2011. Total spending by consumers within hotels, which includes all restaurants, bars and lounges, banquets and catering, roomservice, in-room minibars and other areas, totaled $48.7 billion in 2017. For 2018, Technomic is forecasting continued growth of 5 percent in consumer spending, as demand remains strong.

Key takeaways from the report include:

  • Local and regional offerings are more in demand. Featuring local products, including adult beverage brands, has helped hotels compete against restaurants in the area that may otherwise be more attractive to patrons
  • Hotels are reinventing themselves to focus on social and community spaces. Many new hotels are putting emphasis on flexible lobby and outdoor areas that can help boost social interaction
  • Operators place emphasis on upscale casual-dining experiences. Many hotels are offering upscale eateries to appeal to a wider array of patrons and to enhance the overall dining experience.

"Hotels use their food-and-beverage programs as competitive differentiators and are investing to drive unique guest experiences,” said David Henkes, senior principal with Technomic. “As more options appear for consumers, not only in new and emerging types of hotel properties but also in alternative channels like Airbnb and VRBO, having a strong food and beverage program is more important than ever for continued hotel success."

Banquets and catering are the primary drivers for hotel programs, accounting for nearly 40 cents out of every dollar spent at hotels, and account for an even larger part of the overall revenue at upscale and luxury properties that cater to both personal and business events, according to Technomic. Other areas that are receiving more focus at hotels include grab-and-go areas, such as lobby pantries and kiosks; breakfast areas; bars/lounges; and preferred guest lounges that help create a unique amenity for higher-status guests.

The news isn’t so rosy for all F&B elements, however. Technomic’s research shows that traditional areas, such as minibars and roomservice, are being de-emphasized by many properties, and growth in these areas lags well below other parts of the hotel food-and-beverage program.

F&B Revenue Study

Technomic isn’t the only company following F&B trends. CBRE Hotels’ Americas Research recently released a study that analyzed the financial performance of hotel restaurants, lounges, roomservice and catering departments for the period 2010 through 2016. 

During that period, total F&B department revenue increased at a compound annual growth rate of 4.5 percent. This is less than the 5.6 percent CAGR in rooms revenue, and 5.2 percent CAGR for total hotel operating revenue during the same period. With total revenue increasing at a greater pace, food-and-beverage revenue measured as a percent of total revenue declined from 30.4 percent in 2010 to 29.2 percent in 2016. 

Revenue from hotel restaurants and lounges (venues) grew at a CAGR of 4.9 percent from 2010 to 2016. Beverage venue revenue (5.4 percent) has grown at a greater pace than food venue revenue (4.7 percent). The new self-service concepts have simultaneously reduced traditional restaurant sales and reduced the average food check per customer, according to CBRE.

In 2016, six of the eight food-and-beverage revenue categories tracked by CBRE were greater than the nominal dollars achieved in 2010. The two sources of revenue that still lag are in-room dining and minibar.

Of the four property types tracked by CBRE that offer restaurants, lounges and catering, the greatest gains in food-and-beverage revenue have occurred at resort and convention hotels. Guests at these hotels are more captive to the events, services, and amenities occurring on-site. Therefore, these property-type categories have a greater likelihood of capturing in-house food and beverage patrons. Full-service and all-suite hotels, on the other hand, cater to more transient demand that has a higher propensity to leave the hotel to find a restaurant or lounge.

While F&B department revenue increased at a CAGR of 4.5 percent from 2010 to 2016, total department expenses grew by just 3.4 percent. With revenues growing at a greater pace than profits, the F&B profit margin increased from 24.9 percent in 2010 to 29.5 percent in 2016. The net result of the relative changes in revenues and expense was a 7.5 percent CAGR in food-and-beverage department profits for the properties in the sample during the seven-year period.