Address F&B profitability before it takes you under
F&B is increasingly a cost centre for hotels, steadily losing profitability since 2018. But there’s hope! Hoteliers should look beyond just the menu and decor to create a compelling F&B offering
Profitability in food and beverage (F&B) dropped by over 30% in the last five years. Operating with increasingly tight margins, many hotels can no longer support loss-making business units, yet F&B remains a pivotal service for the industry. It’s time to take action to improve the bottom line and remove revenue leakage.
The current market conditions for hotel F&B are exceptionally challenging. While Revenue Per Available Room (RevPAR) is up by 17% in Europe compared to January 2020, F&B revenue increased just 5%. But what does that mean in real terms?
In 2018, hotels’ F&B profit margin stood at an average of 32%, but fast-forward five years and this fell 10 percentage points to 22%. Cost increases due to inflation in the supply chain is certainly one eroding factor, but we also have to consider rising utility costs and labour costs.
In the UK, it’s not going to get better any time soon – the UK National Living Wage has just increased, and faced with ongoing staff shortages, hospitality companies are having to pay more to attract and retain teams. This highlights the need to ensure more intelligent cost controls across the business which improve profitability and drive operational efficiency.
The challenge at hand
F&B is a key contributor to hospitality’s decreasing GDP contribution in the UK, and with the challenging state of staffing and retention coupled with rising guest expectations, industry leaders need to urgently deal with the problem. To find the solution, we need to factor in ongoing challenges:
Total utility costs per available room have doubled between 2019 and 2023
UK business rates increased in April 2024, adding 6% to total expenses
Regional hotels are more severely impacted, due to their cost inflation being less well covered by RevPAR growth than London hotels.
Consumer behaviour and attitudes to F&B have shifted since the pandemic, with some outlets struggling to keep pace. These include:
Increased number of kiosks and grab-and-go venues
Reduced menu choices and operating hours of remaining F&B venues
A drop in in-room dining and mini-bar usage
Such is the change in guest expectation that the hotel industry’s cookie-cutter approach to F&B no longer cuts it. Hotel restaurants are competing with local authentic restaurants, as well as delivery services like Deliveroo and UberEats for diners.
It’s time to stand out of the crowd and differentiate your F&B offering in your area.
Addressing lost income
Revenue leaks in hospitality F&B are varied, including no-shows or – even worse – an increase in ‘dine and dash’, food waste, and overstaffing. Some of these are harder than others to prevent.
F&B management has traditionally worked to patterns such as time of day or seasonality, using forecasts to predict and manage costs. But consumer behaviour constantly changes so predictability is trickier than ever. More intelligent forecasting and cost control, enabled by technology, is able to help hotels more effectively respond to market changes.
Operational efficiencies
Implementation of technology should pay for itself, delivering a significant ROI as it improves overall profitability. By working with integrated technology solutions, F&B will work smarter, creating a more positive work environment by optimising productivity and enhancing operational excellence.
F&B teams need to ditch paper-based procedures for automated and digital processes; whether that’s prompts to upsell products or improve order customisation, maintain inventory management and quality control with real-time stock updates, process bills from the POS to the PMS, or waitlist management to handle walk-ins and no-shows to minimise lost revenue.
Essential business insights
It’s not enough to base F&B performance on assumption. Knowing your guest, their experiences, and how this drives profit will ensure business continuity. Rich data reporting highlights customer preferences and should shape menus, promotions, rewards and discounts which fit your guests’ profiles. By using data, hotels can improve revenue with dynamic pricing or tiered pricing for different customer segments.
Using systems that work together and share valuable insights can bring business opportunities. With a fully-integrated PMS, POS and procurement platform, hotels can automatically bill guests directly to their hotel room; understand the performance of peak and off-peak times via a single reservations view; assess inventory for improved stock control and revenue, by working only with high-profit margin items; and streamline and modify menus at a touch of a button to manage the supply chain and guest experiences.
Guests expect more
Your guests’ experiences will be shared with family and friends, across social and review sites, and could have a negative or positive impact on your business. Ensuring guest experience is central to your F&B outlet is key.
As well as great service, diners don’t expect a standard dish. Localised menus, authentic speciality dishes, and choice – all are important to today’s consumers.
It’s increasingly common for diners to self-serve using a myriad of digital options such as app, QR code, or digital touch-screen menu. In fact one in five travelling consumers want to be able to order digitally.1
Payment options must also be a core consideration when aiming for high customer satisfaction. Guests should be able to choose to add the bill to the room, with the ability to view their bill online; settle it or directly check-out online with their pre-authorised card; or pay in-restaurant via their phone, card or cash.
Don’t forget procurement
It’s not all about the guest. Digital technology also provides visibility of suppliers and costs, helping control costs and providing improved waste management, enhancing margins. Hotels can also maintain health and safety, nutritional, calorie and allergen insights, and automate regulatory compliance for hassle-free audits.
What you save in procurement goes straight to the bottom line of your F&B department. By working with a central hub to manage all suppliers, hotels can ensure contracts are regularly tendered, and prices compared and updated. With visibility into hotel occupancy, and meetings and events, F&B managers can place orders based on more accurate forecasts of in-house demand to prevent over-ordering and potential waste.
Breathe renewed vigour into F&B
Integrated solutions drive excellence in finance, customer experience and operations, promoting sustained business growth with impactful commercial data at its core.
By having the right insights from across the business, hotels can improve strategic financial planning to drive profitability, and effectively manage capital and staff resources to maximise ROI, with informed decision-making and risk management leading to operational improvements.
To improve the overall financial health of the business, technology can be used to help mitigate revenue leakage, ease complex tasks, and ensure effective staff management based on demand, supply and market fluctuations.
With the right insights, hotel F&B can claim back its profit margins and meet head-on the challenges of changing consumer preferences.
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