Hey there, fellow hotel & resort enthusiasts! Let’s delve into a burning question that’s been on everyone’s minds: why are hotel owners sometimes hesitant to push their management companies to take F&B profitability to new heights? We all know that some management companies, especially the big brands, have a reputation for sandbagging the numbers. So, what’s really holding hotel owners back? The inclusing of “soft brands” has helped the big boys get more assets under management, but are softer brand standards enough?
Running a successful hotel is no easy feat, managers and owners have their plates full with countless responsibilities, from ensuring guest satisfaction to managing staff. When it comes to F&B profitability, owners often rely on their management companies’ expertise to handle the nitty-gritty details. We are believers that product and profit are inextricably linked. We need to be always developing new menu ideas and engineering those menu items properly, so they get us where we need to go in terms of cost (using right product for the application), prep labor, presentation and execution timing, but that is only a part of the equation.
There is a catch, though. Many hotel owners fear that being too demanding might strain their relationship with the management company or even just take the word of the Manager as gospel. After all, these companies are responsible for day-to-day operations and maintaining the hotel’s brand image. Owners worry that excessive demands could lead to conflicts or compromises that harm the overall guest experience. We agree there is a balancing act here that has a razor-thin edge under it but reserve the right to ask the next question, and ask it!
We’re now knee-deep into budget season and the lenders are asking for ‘X’ in EBITDA. So, we work backwards from that number to calculate the budgets and end up with a number that is, well, doable? When it comes to F&B, the real only metric (other than ‘occupancy’ when it comes to capture, and group pace, of course) seems to be “check average”. Agree, well, mostly. The best way to improve F&B profitability is by driving revenue and NOT by cost-cutting. Check average is not necessarily the way to do this as the higher the check goes, the frequency of use is bound to drop and capture will suffer. How about “right-sizing” the labor to the bell-curve of business flow? I am not talking about cutting people out here, but writing the work schedules to the business forecast and not having any real “fluff” in the schedule.
Everyone is having a hard time staffing these days and it isn’t going to get better anytime soon. How about we acknowledge that fact and make efforts to need less people while still optimizing the Guest experience? Can it be done? I am willing to wager it can!
Another factor to consider is the fear of change. Hotel owners may hesitate to rock the boat when it comes to F&B profitability because they fear the unknown. F&B is the most variable part of the hotel/resort experience. The brix on the veggies and fruits changes sometimes multiple times a week. We all know our service experience is only as good as the most unhappy person we have serving our Guests. Owners worry that implementing new strategies or investing in upgrades could backfire and result in financial losses. It’s a classic case of “better the devil you know.”- even though you already know how I feel about the word”classic”! ( – :
Moreover, some hotel owners lack the necessary expertise or resources to effectively assess the F&B side of their business. They rely on their management companies’ reports and recommendations- and asset managers rarely have ‘current’ F&B backgrounds- assuming they have the hotel’s best interests in mind. Unfortunately, this blind trust can sometimes lead to missed opportunities for increased profitability and this is a business of nickels.
To overcome these hesitations, hotel owners must strike a balance. Active engagement and open communication are key. Don’t be afraid to ask tough questions and challenge the status quo. Together, owners and management companies can explore opportunities for growth while maintaining a healthy working relationship. We have successfully done this in multiple properties with a global luxury hotel brand, taking their assets from mid-single-digit GOP to upwards of mid-20’s and into the 30’s, which enabled the owner(s) to sell at a much higher valuation had they not engaged us. Now, THAT’s music to the ears of asset owners with hold periods of 5-10 years or so.
In conclusion, hotel owners’ hesitation to push their management companies for improved F&B profitability stems from concerns about strained relationships, fear of change, and reliance on management expertise. By fostering open communication and collaboration, owners can unlock the full potential of their F&B operations. Let’s raise a glass to a more profitable future!
