Food and beverage profitability in hotels has been challenging recently in the U.S. as many hoteliers know, but generally operators in the United States have been better in managing the costs, according to Michael Grove, CEO of HotStats. Grove spoke during a session at the F&B Theater at The Hospitality Show last week in San Antonio.
U.S. hotels have generally been better able to manage F&B profitability compared to European hotels over the past few years. The main driver of this difference is labor costs—U.S. hotels have been more successful in passing along rising labor costs to customers, while European hotels have struggled more with these cost increases.
"Food and beverage is still hovering around the 27 percent of total revenue for a hotel," Grove said. "So if you take it from why we focus so much on rooms over the years, we've become very good at rooms analytics. We're really, really good at driving all areas of rooms demand, but from a food and beverage perspective, we're totally forgetting about this area, where there's 26 to 27 percent of our total revenue. So there's quite a good understanding as to why hoteliers are seeing the opportunity. As rates start to slow, as rooms demand starts to slow, food and beverage becomes not just for the operators, but actually for investors."
However, U.S. hotels are still facing challenges in maintaining F&B profitability, with the flow-through from incremental F&B revenue to the bottom line declining significantly compared to pre-pandemic levels.
As rates start to slow, as rooms demand starts to slow, food and beverage becomes not just for the operators, but actually for investors."
"After a couple of years of real strong demand growth coming out of the back of the pandemic... the general trend is things are slowing down," Grove said. "So the revenue performance is slowing, but luckily enough, at the same time, the costs are also slowing. They're still growing, but they're slowing down the growth."
To offset the cost pressures, hotels need to focus on driving more revenue from F&B operations, such as increasing guest spending, better integrating F&B with other hotel operations or exploring partnerships like food delivery commissions. Operational efficiency and automation, particularly in back-of-house areas, will also be crucial for hotels to manage rising costs and maintain F&B profitability.
"A lot of the additional cost increase we've experienced, we've managed to pass on to the customer," Grove said. "But there are limits to that. So embracing innovation, embracing ways that we can do things more efficiently, is going to be one angle. But I still really think the big angle is going to be how we can manage to continue to add bolt-on revenues and do our food and beverage operations in a much smarter manner in order to continue to offset these cost increases we're going to see."
Looking ahead, hoteliers will need to develop more creative strategies to drive revenue and control costs of the hotel F&B in the face of significant inflationary pressures.