The food and beverage (F&B) sector is struggling and that includes hotel F&B. From increases in energy costs to ingredients and labor, cost increases are outstripping revenues. Are we set to see an exodus of hotel F&B services, or are there ways around it?
“Across Europe, you can see that F&B and C&B [conference and banqueting] have not recovered anywhere near the same as the rest of the revenue streams,” says Michael Grove, chief operating officer at hotel market analysis and benchmarking platform HotStats. HotStats data shows that while room revenue per available room are up by 17 percent in Europe compared to January 2020, F&B is at just 5 percent.
“F&B is out of sync. It’s not like guests don’t want to spend money in hotels – they’re spending more on the average rate, they’re spending more on wellness, spa and leisure activities, golf, albeit it’s slowed down year on year. But they’re not spending money in the food and beverage outlets in hotels, or nowhere near enough to offset the cost increases,” explains Grove.
And while conference and events used to prop up overall food and beverage revenues, as those are down, profitability is too. The cost base increase that has really outstripped revenue has been wage costs, and with National Minimum Wage set to increase from April in the UK, margins are set to be even more squeezed.
UK hotels saw a 2.8 percentage point drop in gross operating profit margin between 2019 and 2023, and of that, 3.1 percentage points came directly from food and beverage profitability as margins fell from 30 percent to 22 percent.
“The profitability challenge is bigger than the energy cost challenge. It’s having just under 50 percent more impact on profitability margin than utility costs,” adds Grove.
Hotel F&B – profitable or a loss leader?
“People are going to have to work out what’s actually making them money and that could easily lead to a cutting down of services,” says hotel consultant Melvin Gold, who suggests owners may start to look at converting F&B space into something more profitable, such as additional bedrooms.
However, he points out that it’s not a no-brainer to simply cut out hotel F&B. The attractiveness of your overall offer may well be what makes guests choose you over a competitor – and that overall offer includes your F&B.
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