For U.S. consumers, hotels are no longer just somewhere to sleep at night. They are increasingly finding hotels a place to relax and unwind. Hotel developers have been including amenities that will boost room rates and occupancy (pools, fitness) but have put limited money into the food and beverage amenities to meet brand standards. Most brands in the U.S. market don’t require upscale hotels to have substantial F&B offerings, so some developers have not included this in their projects.
According to Hans van der Reijden, CEO of Ithaka Hospitality Partners, many hospitality development companies lack F&B experts, so conservative investing in F&B amenities is prevalent in upscale hotels. However, F&B amenities have become an important factor in the decision process for consumers when deciding where to stay. A recent study conducted by Sung Gyun Mun from The Hong Kong Polytechnic University shows that high-quality F&B amenities will benefit upscale hotel room revenue. The study was based on 10 years of operational data from 389 hotels in New York and California and shows that upscale properties benefit more than luxury and upper-upscale hotels.
In today’s competitive environment, no market in the U.S. is a supplier market (i.e., the demand exceeds the supply), so F&B amenities have become crucial to upscale hotels. Having adequate F&B is not a guaranteed competitive advantage but lacking sufficient F&B has become a disadvantage. Search engines, such as Expedia and Google Maps, have increased the transparency of hotel information, allowing consumers to compare hotels of the same class within a region. Marriott International and Hilton loyalty members often have more than one brand in the same class and market from which to choose.
Driving Anticipation
Online information such as price, reviews, ratings and photos can help consumers visualize and anticipate their experience before making a decision. According to our research, online hotel booking behaviors for upscale hotels indicate that photos and atmosphere play the most important role in a consumer’s selection of where to stay. In other words, it is much more essential than brand awareness, rating/reviews and discounts. It is clear from our research that impressive photos and atmosphere increase customers’ price and rating tolerances as well as decrease the brand impacts.
Our research further suggests that, on hotel booking pages, photos of the room layout are rarely viewed by consumers. However, pictures of outdoor amenities (such as pool bars, outdoor restaurants and rooftop bars) are the most influential, followed by pictures of indoor amenities, photos of the local area and pictures of the hotel staff. The result shows that photos of F&B amenities that include bar operations, rooftop lounges, authentic local food from creative restaurants and innovative kitchens are essential in attracting business. Also, F&B guests often are more likely to write online reviews than room-only consumers.
The popularity of hotel amenities has increased, so hotel developers should view investing in creative F&B amenities for upscale hotels as an essential marketing tool to attract hotel business. An example is the upscale Hyatt Place in Athens, Ga., which has benefited by adding a rooftop F&B outlet with a separate elevator for direct access as well as a full-service bar in the lobby with indoor and outdoor seating. Another example is the Reverb Hotel by Hard Rock in downtown Atlanta, which added an indoor-outdoor rooftop bar, a lobby bar and special multipurpose rooms for private events.
However, with record construction costs and rising inflation, suggesting that a developer invest more than the brand requires is a difficult task. Paul Breslin, managing director of Horwath HTL Atlanta, said: “It is a case-by-case decision, not automatic; work with your hotel consultant and design team to find the best solution for your project. Choose wisely, as the ideal scenario is to find synergy and use what would be unusable space for additional revenue generation and added amenities. But don’t do it if you believe it will not give you a return on investment. Keep your ego out of the equation."
Chunhao (Victor) Wei is an analyst intern for Horwath HTL Atlanta.