F&B, Hotels and IHIF 2018

In a world where foodservice is simultaneously becoming to look oversupplied on the high street and lacking imagination in hotels, we are often tasked with creating the best F&B strategies for our hotel clients. This is the reason I joined our Hotels and Hospitality JLL colleagues at the International Hotels Investment Conference (IHIF 2018) this week.

Last year at the same conference, F&B was talked about around the edges but this year it was more of a major discussion point for lots of people. With world economics becoming increasingly “interesting”, hotel owners, developers, operators, and managers are looking to squeeze as much value out of their assets as they can. An undervalued, underprovided and underperforming F&B department is a great place to start creating value.

I have said it before and I will say it again, there are 2 types of hotels, those who do F&B very well and those who don’t. In the past year alone, I have seen hotel F&B profits ranging from -10% to generating +40% of total profits.

Those who get it right are not special, they have just put the time and effort needed to provide the public and the hotel guest with what they want. Notice that the hotel guest came second in my last sentence? Controversial it may be, but when looking at the F&B offer, the hotel guest can often be a secondary market.

For example, if 100% of guests in a 200 room hotel, with an occupancy of 81% at 1.5 people per room, use the hotel restaurant once a day then the restaurant would serve 243 guests per day. As you can imagine an uptake in hotel guests of 100% is impossible. Our experience shows that 20%-40% on average, depending on the hotel type, could be achievable. This leaves the restaurant with less than 100 covers per day, highlighting the importance of being attractive to the surrounding market.

For those who are still not convinced how beneficial F&B can be, let’s look at hotel and F&B Sales Densities (Revenue per m2) in London, a very strong hotel and F&B market. Our research shows that in 2017, London achieved the following averages:

  • Occupancy (OCCP) of 81% and Average Daily Rate (ADR) of £146.

If we were to assume an average room size of 30m2 to 40m2 then the hotel would achieve a sales density from rooms of £1,079 to £1,439 per m2 per year. Having recently completed a benchmarking exercise for restaurants in London, I can tell you with confidence that the above sales density can easily be achieved by an independent restaurant.

Fully aware that hotels are in the “room” business, rather than the restaurant business, many will argue that revenue is irrelevant as the bottom line is what counts, I will leave you to contemplate two questions:

  • What is the difference between a hotel restaurant and an independent restaurant that means one delivers a profit whilst the other one struggles?
  • Why are restaurants in hotels viewed as a hassle when there is a clearly a profitable restaurant market worth £65.1bn between hotels, pubs and restaurants in the UK?

My personal opinion is that we have hotel people doing F&B and this doesn’t work. Would you let a Chef or Restaurant Manager run your hotel? We must focus on F&B as a completely different business, like a stand-alone restaurant that just happens to sit within a hotel.