In the food and beverage equation, the beverage piece has proven to be much more profitable than food for the hotel industry. But operators of full-service hotels with restaurants say that one doesn't work without the other.
Food and beverage services need to be holistic in the hospitality industry, said Kyle Allison, who manages off-premise catering sales at the DoubleTree by Hilton Hotel Reading in Reading, Pennsylvania.
“If you look at it as just based on profit margins, what generates the most profit — those who say B would be correct. But in what world do you have B without F?” he said. “Maybe B generates the higher profits, but I think you can’t have the profits of B without embracing the F.”
Steve Palmer, founder and managing partner of The Indigo Road Hospitality Group, said that even though the beverage side of food and beverage drives profits and can lead the charge, the food aspect is also a necessity.
“Could you have a cocktail program where a beverage is the star of the show? Yes. Do I think you could run an entire hotel food and beverage program without meaningful food? I don't think so,” he said.
The Profitability of B
Beverage service will always be more profitable than food due to the profit margins of the two, said Bill Kohl, principal and restaurant development director at Greenwood Hospitality Group.
A $20 bottle of liquor along with a mixer can produce up to 20 shots that can be sold for about $9 a shot while costing $1.50 to make — for a 16.7% profit margin, he said. On the food side, a $40 steak can be sold for $80, a 50% profit margin, which provides value in terms of the sheer money brought back, but the profit margin per drink makes investing in beverages a smart move.
“The cost percentage on liquor is much lower,” he said. “You're never going to get those two percentages to be at par.”
Kohl said another factor is beverage service only requires staffing a bartender or two to make and deliver the drinks, whereas food services requires staffing a kitchen full of cooks and servers.
Making F More Profitable
To make food service profitable, menus need to have a level of intention and a selection that balances value and quality, Palmer said.
The Indigo Road Hospitality is focused on "our chefs curating some more value-oriented proteins, more value-oriented offerings,” he said. “Food costs is one function of a great menu, but it also has to be delicious. It has to be things that people want to eat.”
Kohl said hotels have to be smart with their food concepts, including streamlining menus with more bar-food items than full-entree dishes to complement the beverages and help drive profit margins.
“I will guarantee you that if you don't have a relevant concept, you're going to lose money because people aren't going to want to go there,” he said. “They have to be relevant and competitive with every other restaurant in the market because that's where the guests are going to be looking to go if they can't find it inside.”
Maximizing food services starts with embracing it as a profit center rather than an amenity to the hotel. Too many midscale, full-service hotels do the bare minimum with their restaurants, accepting a loss of money because they don’t put enough effort into putting out desirable menus, Allison said.
“Food and beverage is the energy. It's the pulse feed of the hotel,” he said. “You have to be creative with the space that you have.”
Allison’s DoubleTree property is near a theater that is a demand generator in the area. He said his hotel put chairs and stools in the lobby to accommodate customers on busy days when its 200-seat restaurant fills up. The hotel also got its liquor license extended to the sidewalk outside to serve alcoholic slushies along with small food items to try and attract people inside the property.
Having several menu options readily available for different events or times of the day is another way to maximize profits with food, he said. That includes lunch, dinner, late-night and show menus, for example.
Knowing your guest is of top importance, Allison said. This includes putting out specialized menus for events and learning from the results to have further success the next time around.
“We see from what we tailored for this time what was most popular there and then we get so focused that we know that we have clear winners that we've precisely associated the cost to do it,” he said. “We know they're going to do it, we know how much we need to order, and then it's profit at that point because we worked at it over time.”