Hospitality is a broad concept, rooted in our most basic human experiences and impulses, and, also, an expansive industry with a wonderful history and traditions. From limited service and extended stay to full service and luxury properties, the modern hotel encompasses a broad range of services and amenities, in addition a room.
An inviting lobby able to provide individual quiet spaces, as well as bring people together; yes, those days will return. Internet access and infotainment systems in our rooms. Comfortable pool, fitness centers and spas. Business center. Meeting rooms, ballrooms, and convention space. Outdoor terraces. Garage space. All these "amenities" take substantial resources and staff to provide and service properly.
Center stage among such functions areas is food and beverage operations. They touch every guest. They test our skills in many ways. It is one of our most complex businesses within a business. Inventory management, food safety, preparation and service, marketing all play their part.
We already know how competitive the restaurant business is as a whole is, but here we are, intrepid hoteliers, taking that challenge on. Not just as "breakfasteers." Interestingly, pre-pandemic, food and beverage operations and fine dining components were increasingly important to revenue generation (total spend, or gross profit per room) strategies for many hotels.
In addition to resorts and independent properties, many hoteliers have made their restaurants a feature player as part of urban renewal and historic renovation developments, helping generate new commerce and enhancing livability. The traditional prestige hotel as community anchor have been making a strong comeback.
Food and beverage operations are also important sources of revenue related to a wide range of group business, Kiwanis or Rotary Club meetings, baby shower, graduation or wedding anniversary party to corporate events and conventions.
Achieving "Calm" in the Storm
Then, the novel coronavirus pandemic hit.
Certainly, the last year and a half has tested our core hospitality skills; the quality of our underlying property and asset management systems; team member training and labor management; and overall leadership. The challenges came so quickly, as soon as we overcame one challenge, a new one presented itself. Rolling sanitation, social distancing and occupancy mandates from state and local authorities; the brands or our own organization. Stay at home orders. Labor issues. Food delivery snafus. This caused us to be light on our feet, reacting and responding, not tied to any one course of action.
Basic strategy and adjustments. Guests remain our best teachers.
In addition to being willing to be flexible strategically and practically, one other key principle has guided us through the pandemic and recovery so far. That is to maintain a sales focus across our organization. Early on, it became apparent that we could not just "save" ourselves through such challenging times. Yes, expense reduction was and is important, but you can only reduce expenses so far, certainly not enough to achieve profitability when occupancy and asking rates are also falling. Our organization's resolution to this dilemma was to create revenue opportunities, both through marketing to appropriate guests to generate room nights and tailoring food and beverage operations in ways that could generate meaningful sales.
We had some unique opportunities because of our mix of hotels, from limited service to full-service properties with conventional sit-down, table-service restaurants, including at an upscale independent resort destination property.
At our select service hotels, we reduced offerings, which meant we could reduce staff and accompanying labor costs. In many cases, labor costs approached zero. Admittedly, in the most restrictive days of the pandemic, this was not popular with all our guests. However, for some time, this paradoxical situation was of benefit from a cost standpoint. Going forward, this will be an important issue for all operators: how to modulate offerings to please guests (and generate favorable guest satisfaction scores and comments), while our bottom lines are still under siege.
A great example of this was our experience with breakfast service at some locations, where we continued to have a hot breakfast offering. This turned out to be successful, as that hot breakfast helped differentiate us from our competition that had a greater reduction of services. We applied this strategy across many of our properties.
In fact, a first impulse might be to ride reduced breakfast offerings, including cooked breakfast foods, for as long as the brands would cooperate with operators; and the brands have been excellent in understanding the issues we now face. However, we found that guests were far less tolerant than the brands about restricted breakfast services; we felt that push back and responded appropriately to our mutual benefit.
No One Should Dash to the Door
As we reopened our full-service restaurants at select properties, we were helped by the insights gained from the experiences just described. Overall, the order of the day was reduced menu items with fewer options on those offerings.
Trial and error also helped us arrive at practical solutions for simple things like spacing of tables. Initially, we thought that spreading out tables would be the best way to create required social distancing, but it just looked awkward. Instead, we kept the original table spacing, using every second or third table, as appropriate. It helped create a sense of normalcy, making people feel comfortable.
In recent years, many food and beverage operations seemed to be about expansion, nibbling at the edges to show growth, with more hours and more menu items. So far, our pandemic experience teaches us that we can achieve more profitable food and beverage operations, along with guest acceptance, by carefully modulating menu offerings and hours of service. There really is significant savings in opening a bit later for breakfast or ending dinner hours earlier or limiting weekend services, depending on the location's guest flow.
Albeit at lower volumes, food and beverage operations can be nearly as profitable as in pre-pandemic days.
Some examples:
-An airport location with rooms and suites, a hotel had a pre-existing restaurant that was retained during a brand conversion. At present, this restaurant is only open for dinner five days a week but is proving convenient and appealing to the hotel's guests, its intended market.
-An upper midscale hotel in a smaller community that is in the metropolitan area of a major market, opened in October 2020 in the depths of the pandemic. We developed our own cooked to order breakfast offerings, which have been well received by guests. The restaurant at present is only open for dinner five days a week, which has the bonus of giving the limited staff welcome time off. We will look at expanding service in the future.
-Two upscale all-suite hotels. Again, we limited service to dinner. We have also been successful in featuring comfort foods like Mac and Cheese or pasta dishes and through advertising on-property in common areas. Old-school advertising with posters does work.
-A coastal hotel in a popular vacation family area that has undergone extensive renovation since its acquisition. This hotel is one of our most efficient food and beverage operations, aided by an outstanding Executive Chef and property General Manager. We completely changed the menu during the pandemic, reducing offerings while focusing on food quality and a bit of flair to make the food stand out. At this property, we have increased food and beverage revenues over 2019.
-At an upscale hotel with a great natural location in a popular destination resort community, we have followed a similar strategy. Limiting hours, while focusing on quality and the experience. Here, the venue and the experience are even more important than the food and we are finding that guests still want that in-room dining experience, despite reports to the contrary.
At the latter two properties just noted, we do charge a non-trivial fee for breakfast, and more than half of guests do order it, reaffirming that food and beverage can be an important profit center for hoteliers.
Bottom Line: Adjust and Move Forward
As we can see, some themes are emerging based on our pandemic experience. These include emphasizing the quality, comfort, and fun factor of offerings over restaurant hours, total number of menu items and, even, variations of a given menu offering.
In the near to mid-term, at least, we don't see super expansive food and beverage operations coming back quickly. We are enjoying cost and logistical benefits with these streamlined operations, yet they can prove profitable and guests do want food and beverage services in-house.
It is also extremely important to emphasize just how hard many of our teams have worked to help the industry get through these demanding times, which are not yet completely over. Labor pressures remain intense, and the silver linings of reduced operating hours include not just reduced costs, but, also, breathing space for our team members. Clearly, these times call for patience in working food and beverage distributors, as all of us face supply chain constraints. Simpler menus are helping, as are up front communications with long-term partners.
We have also been in constant communication with the brands and they have been extremely supportive and helpful in developing strategies, as well as keeping consumers informed about what the hospitality industry is doing to best ensure safe and comfortable stays.
The pandemic has shaped our hospitality lives, but it needn't define us. Most operators already knew the basics of labor and product costs, pricing and marketing for food and beverage operations. Yes, we were forced to go to some extremes that some of us might not have considered or found agreeable in the past.
But this experience has provided insights that will guide many of us going forward. Guests will embrace us if we present the right messages and deliver the product and experience correctly. And food and beverage will remain an integral component of the hospitality experience - and our profitability.
F&B Remains Integral to the Guest Experience and Operating Revenue: Learning from the Pandemic