As hopes rose about the global rollout of a vaccine to allow us to leave the pandemic behind, owners were eager to hold onto some of the gains made from the brands and keep costs down. Sagar V. Shah, Dharam Goragandhi and Rich Gandhi, co-founders of Reform Lodging, called on the leading global operators to consider eliminating or reducing complimentary breakfast requirements. Polling of Reform Lodging members revealed that 90 percent were requesting change, as we entered the next phase of the pandemic.
In an open letter, the trio wrote:
Dear Hotel Franchisors,
Our team at Reform Lodging represents the interests of over 1,900 hotel owners from across the United States and overseas. We are a nonprofit hotel owner advocacy organization and think tank founded in April 2020, at the height of the COVID-19 pandemic. The founders of this organization are franchisee hotel owners affiliated with all major hospitality franchises including Marriott, Hilton, IHG, Best Western, Wyndham, and Choice. The leadership team at RL therefore has an acute awareness of the plight our members are currently facing, most of whom own and operate hotels across the country under your respective franchises.
From the onset of this unprecedented global crisis until now, our members remain grateful for the various relief measures instituted by your companies. The amended complimentary breakfast standard in particular, continues to be an extremely meaningful concession for two crucial reasons—in ensuring the safety of our employees and guests alike, as well as the significant positive impacts to operational cash flow. For many hotels, especially those that are in the upper midscale segment, the complimentary breakfast standard leads to an annual expenditure well into the low six figures with the average hotel spending $3.50 to $5.50 per occupied room. These costs are referencing food and related supplies alone, and do not take into account the insurance, payroll, and other expenditures that are required to keep this department operational. This means that on a monthly basis, the amended breakfast standards are saving thousands of dollars, and allowing our members the ability to use those savings towards essential expenses such as payroll, property taxes, debt service obligations, and franchise fees.
We support our members in lobbying hotel franchisors to have a conversation about permanently eliminating some breakfast requirements, while amending others in a post-COVID environment—one in which hoteliers are simply attempting to survive another day. While the hospitality industry at large is suffering, our friends in the restaurant industry have been utterly devastated with many closing their doors forever. New data from the National Restaurant Association says 40 percent of operators are not sure whether they will make it six more months. The survey further found that nearly one in six restaurants are closed either permanently or long-term.
RL being comprised of small business owners stands in solidarity with the restaurant industry and believes permanent changes to the complimentary breakfast model at hotels will benefit our local communities and provide restaurateurs, from the quick service/fast food side to traditional sit-down outlets a means for survival.
We propose the following changes for your consideration:
- For budget and economy hotel brands, provide an option for owners to completely opt-out of any complimentary breakfast requirements. Owners who choose to provide some complimentary items such as coffee and pastries should be allowed to choose the vendor of their choice.
- For mid-scale hotel brands, provide an option for owners to completely opt-out of any complimentary breakfast requirements if financial performance thresholds are not being met. For owners that choose to continue offering complimentary items, relax mandated vendor requirements and allow owners the ability to procure food and supplies from the vendors of their choice.
- For upper-midscale hotel brands, provide owners the option to offer a significantly reduced complimentary breakfast offering such as grab-and-go bags indefinitely, if financial performance thresholds are not being met using RevPar levels as a benchmark. In many secondary and tertiary markets, upper mid-scale hotel brands, do not meet the system-wide averages and have performance figures that are more in line with midscale or lesser tiered hotels. Expand procurement options and relax mandated vendor requirements for owners who continue offering complimentary breakfast options to allow for continued savings.
- Similar to full-service hotels, other brand segments should be able to charge a certain amount for breakfast and pass down the cost to the guest tiered by level of breakfast service, like continental (cold) $2 per person, continental (hot) $3 per person, full hot buffet $5 per person, etc.
- Develop partnerships with national QSR and restaurant chains, as well as local non-chain small business restaurants where hotel guests receive a percentage discount off of their bills if they dine with those particular outlets.
The above permanently relaxed complimentary breakfast measures will deliver substantial cost savings to franchisee hotel owners, afford them an opportunity to use those savings to fuel their recovery, and ensure our local communities are also able to benefit from an eventual resurgence in domestic and international travel. Benefits of permanently relaxed standards include savings on insurance costs, a reduction in payroll on the attendant that is required to staff this department every morning, and a reduction in health and safety related issues moving forward. The substantial savings from these expenses alone will allow owners to concentrate on providing superior customer care and offer front line employees a more competitive rate of pay, finally bridging the gap between hospitality wages and locally higher paying jobs—a significant issue across the country.
We ask for your serious consideration in making the above changes to our limited-service hospitality model. While guests initially will have hesitation in accepting some of these measures, the hospitality industry is one that is resilient and innovative. Potential franchisor partnerships with national restaurant chains and non-chain, local restaurants can offer a meaningful alternative for our guests to consider upon departure from our hotels.
Our membership looks forward to a productive conversation and appreciates your relief efforts to date.
Yours in Hospitality,
Rich Gandhi, Dharam Goragandhi, Sagar V. Shah
The letter was sent to: David Kong, president and CEO, Best Western Hotels & Resorts; Patrick Pacious, president and CEO, Choice Hotels International; Christopher J. Nasetta, president and CEO, Hilton Worldwide; Mark Hoplamazian, president and CEO, Hyatt Hotels Corp.; Elie Maalouf, CEO Americas, InterContinental Hotels Group; Arne Sorenson, president and CEO, Marriott International; Geoff Ballotti, president and CEO, Wyndham Hotels & Resorts; Andrew Alexander, president, Red Roof; Jim Alderman, CEO, Americas, for Radisson.
This article originally appeared on Hospitality Insights.
Rich Gandhi, Dharam Goragandhi, Sagar V. Shah are all co-founders of Reform Lodging, a nonpartisan hospitality industry think tank and advocacy organization.