The Hilton New York Midtown did away with traditional room service and in place created the Herb N’ Kitchen, an upscale grab-and-go market concept.
National Report – Sky-high prices, numerous add-on charges, and 30-minute waits, not to mention the prospect of having dinner alone in your guestroom. Is it any wonder U.S. room service revenue per available room has been decreasing steadily in recent years?
Hilton Worldwide raised the stakes considerably last summer when it discontinued room service completely at one of its trophy properties, the Hilton New York Midtown, New York’s largest hotel, citing softening guest demand. Faced with pushback, the company then took a fallback position, offering to deliver to guestrooms items guests had purchased in the hotel’s new upscale grab-and-go market Herb N’ Kitchen.
Other hotels are taking a more middle-of-the-road approach, scaling back room service hours and menu options. “Twenty years ago, you could order anything [through room service] the hotel was serving in its full-service restaurant. Nowadays, the room service menu is truly its own design. It’s smaller plates and items that are easier to prepare and serve,” said Joseph Smith, EVP of Chesapeake Hospitality.
The room service menu at the Eaglewood Resort & Spa in Itasca, Ill., outside Chicago, as an example, features some specialties from the on-site restaurant, but also a large number of what director of F&B John Santangelo calls “serious comfort food items and/or healthy items, reflecting guests’ preferences today.” Room service at Eaglewood, however, closes at 11 p.m. when the restaurant kitchen closes, rather than operating 24 hours a day.
How significantly have U.S. room service revenues fallen the past few years? From $1,157 in 2007 to $866 per available room in 2012, the most recent year for which data is available, according to the STR Host Report and PKF Consulting. As a percentage of total hotel revenues, this means room service accounted for 1.22 percent of total revenues in 2012, down from 1.52 percent in 2007.
“We suspect that fewer people are ordering,” said Robert Mandelbaum, director of research information services at PKF Hospitality Research, adding that other sources of hotel revenue except ADR have fallen as well.
“Part of the explanation is probably economic, including the perception factor. At a time when travel budgets are being scrutinized, room service can be expensive and still thought of as a bit of a luxury item,” Mandelbaum said.
In fact, the growth of grab-and-go markets like the Hilton’s Herb N’ Kitchen in upscale and upper-upscale properties can be said to parallel the decline of traditional room service. “The offerings can be quite sophisticated. Guests don’t need to wait the 30-minute delivery time, the price point is lower than room service, you can see what you’re ordering, plus it’s instant gratification,” said David Sangree, president of Hotel & Leisure Advisors.
It’s about giving the guest options, Smith noted. “When the grab-and-go concept started, it was primarily about providing guests with a quick, inexpensive option for breakfast. Now the markets are all-day enterprises, with the items available changing through the day,” he said.
Demographically, the guest is changing as well. “The millennials are known for being social. They’d much rather hang out with their colleagues in the lobby and if they can get a beer and a hamburger there, all the better. They generally prefer that than going back to their room, ordering room service and eating by themselves,” Mandelbaum said.
Luxury brands, such as St. Regis, offer not only room service, but butler service.
Always thought of as a loss leader, the cost for hotels in operating traditional, 24-hour room service operations has grown even more expensive with the continuing increase in labor costs. “Especially in large urban markets with strong labor union contracts, hotels are likely to be rethinking room service because of the lack of profitability,” said Sangree, citing New York and San Francisco as examples of such markets.
A major part of the labor cost is the delivery system, Smith pointed out. “You still have kitchen personnel that are either working on banquets or in the hotel’s restaurants, so they’re already occupied. But it’s the delivery person, waiting for the elevator with the made-up room service cart, who is an extra expense,” he said.
2012’s room service revenue per available room.
Source: STR, PKF
As advances in technology have transformed so many aspects of hotel operations, hotels have tried to apply technology to help automate room service delivery as well. “Trying to avoid having an employee who just sits and answers the room service phone, they’re looking for apps that will allow guests to order room service from their smartphone or iPad, thereby making the process much more cost-effective,” Smith said.
Younger travelers especially won’t mind not having a live person take their order. “Not only will they not have a problem with it, they’ll demand it,” he said. “Placing an order with an app on a smartphone, it goes directly to the cook station. The guest is sending it directly to the end production person who starts preparing it immediately. You’ve eliminated the order-taking position entirely.”
Even with change coming on so many fronts, however, traditional room service as we’ve known it is hardly in danger of becoming extinct any time soon.
“Upper-upscale and luxury guests still expect 24-hour room service to be available and hotels that cater to them are mostly still offering it,” Sangree said.
One example in New York—and a competitor to the Hilton—is the Grand Hyatt New York. “A lot of hotels are experimenting with different approaches to room service, but at our hotel customers still prefer the traditional approach,” said Edan Ballantine, director of F&B.
“We also operate a successful upscale grab-and-go market and, in conjunction with traditional room service, feel we’re able to cover all our bases. Our level of guest understands what room service entails—the cost, the wait time—and is okay with it,” he said. “We don’t see any big changes coming any time soon.”