Thanks to favorable margins and exciting new strategies, hotel F&B offers a strong opportunity to grow revenue from group bookings. Here, we lay out six smart ways hotels can optimize their F&B offerings to see gains in the year ahead.
At the end of the day, hotels really only have two options to choose from when it comes to growing group revenue.
- Increase group sales by booking more events.
- Increase the revenue brought in from each booking.
Banking on number one is great if you have the team, but for properties that already struggle to provide the supply for demand — or larger hotels with disproportionate and ever-growing group acquisition costs — efforts here may not yield significant returns. It’s also a less viable option for properties in the 42 out of 60 CBRE-tracked markets where supply growth is predicted to outpace the already high national average.
For properties like these, the most impactful way to grow group revenue is through optimization. But with so many moving pieces involved in booking and executing events, where should hotels be directing their focus to see the greatest rewards from their efforts? While some larger chains are trying to accomplish this by cutting commissions to third-party planners, not every chain or property wants to follow suit (or even can in some cases).
Luckily, there’s a solution that almost all group hotels can benefit from — regardless of their respective acquisition costs or room counts.
Group F&B statistics tell the story.
For properties that keep operations in-house, F&B typically represents 25% of total revenue — a portion that continues to grow year over year. Group F&B (A/V, room rental, banquet F&B) represents just under 50% of that F&B revenue across the industry, but is a larger driver at upscale and luxury properties. In fact, in 2017 catering and banquet sales accounted for:
- 57% of F&B revenue at luxury hotels
- 59% of F&B revenue at upper-upscale properties
- 58% of F&B revenue at upscale hotels
That number is expected to climb, as 61% of hotel GMs and F&B Directors plan net growth in catering by the end of the year. Why? In large part it’s the margins. Between 2010 and 2016, CBRE reports that F&B profit margin increased from 24.9% to 29.5%.
F&B is the third most important factor in site selection.
While location and price are the two biggest determining factors in site selection, a recent IACC survey shows that hotel F&B is the third most important factor in choosing an event venue. For planners deciding between multiple viable event spaces, F&B becomes the the difference maker. That’s why hotels are, as Technomic’s Senior Principal David Henkes puts it, “[Using] their food-and-beverage programs as competitive differentiators and are investing to drive unique guest experiences.”
Grow hotel F&B numbers with these six ideas.
1. Monetize hotel spaces by transforming them into F&B spaces.
In an experience-driven events industry, nontraditional spaces are calling to planners more than ever before. The AMEX Global Meetings Forecast reiterated this earlier in the year by reporting a predicted 3.8% increase in demand for nontraditional spaces. So how can properties compete?
For one, by looking for nontraditional spaces of their own. Turning the focus to social and community spaces allows properties to take advantage of attendees’ desire to network, creating revenue from cocktail hours and post-event spend by attendees. In June 2017, for instance, properties in Chicago with rooftop access saw a $13 increase in revenue-per-seat compared to those without, averaging $68.20 in revenue per available seat compared to $55.22.
This is why hotel owners and general managers are allocating a growing amount of square footage for F&B within new hotel builds and remodels. Some hotels are even in unique situations to monetize the spaces around their properties, including walking trails, waterfronts, city parks, and beyond.
2. Grow F&B efficiency through event technology.
Whether it’s handling special meal requirements or visually communicating upsells in proposals, new technologies offer properties a unique opportunity to boost efficacy and drive more F&B revenue. Perhaps most importantly, the right event management platform can eliminate some of the friction that occurs in collaboration between planners and properties. Elements like the ability to create accurate diagrams and 3D renderings while working together in real-time go a long way in making that happen.
While these are tangible benefits for any property, the ROI is equally tangible. STR recently confirmed this by analyzing F&B numbers over a three-year period for 123 customers of Social Tables’ Event Services technology (compared against totals for 631 non-customers). Ultimately, the study showed that those equipped with the technology averaged 1.82% more F&B profit than those without.
3. Ditch set meal times for continuous refreshments.
A majority of planners strongly agree that there’s benefit in providing continuous F&B throughout the day as opposed to set times. Guests aren’t confined to their seats throughout the duration, and the ability to choose creates an added layer of personalization, which planners and attendees both love. Being able to stand up at any time during the event to get a refreshment creates a feeling of freedom that events often lack.
While these beverage and snack stations must be constantly monitored and replenished, they offer hotels a unique upsell opportunity that should be included in proposals.
4. Cater to the locavore.
Authentic local experiences are taking precedence amongst attendee expectations, and planners are scrambling to deliver it for their events — starting with F&B. Luckily, it’s one of the event and food trends that properties can use to their advantages, and recent lodging F&B research from Technomic shows that hotels are doing just that. By using the local trend, properties are able to compete with local restaurants that might otherwise be more attractive to attendees and planners.
It starts by looking at the menu. Does it feature local bites and brews? After all, a locally-sourced menu includes not only produce and menu items native to the area, but also local craft brews, local wineries, and cocktails made with liquor from local distilleries. These options offer a deeper, more authentic connection to the locale, while saving on shipping costs and elevating brand image. Some properties are even going so far as to grow a portion of their produce onsite.
5. Diversify menu offerings to accommodate dietary restrictions.
Diverse and elevated F&B goes a long way in creating the personalized experiences that planners crave for their attendees. Plus, by broadening the menu, hotels can negotiate spend that’s well above F&B minimums. The same survey from the IACC mentioned earlier shows promising opportunities for this type of personalization, with planners providing a rating of 8.4 or above (out of 10) for the following statements:
- Food and beverage is a key part of the meeting design and experience.
- In the past two years, there has been an increase in the number of requests to accommodate allergies, personal eating plans, or preferences.
- There is a link between food types served at different day parts and delegate energy levels.
Number two provides the easiest opportunity for upselling. Today, event planners need to take into consideration a slew of allergies, food sensitivities, and dietary needs. No attendee wants to forego a meal because of an allergy or a food sensitivity, and rarely do they want to make a fuss about their dietary restrictions. These foods should be readily available, easily identifiable, and separated from other foods. Venues that can accommodate vegan, vegetarian, gluten-free, and dairy-free options allow planners to request an inclusive menu. Just having these items available is all that it takes to lock in a higher price sometimes.
6. Make F&B an experience in itself.
It’s on properties to help planners bring unique elements to life, and group F&B provides a fantastic opportunity to lure planners in with a little bit of creativity. “[Planners] want experiences to happen, so [they say] ‘Let’s incorporate food and beverage in there… Let’s do a craft-brew taster, a wine tasting or maybe a cocktail-mixer contest or something.’ And with these trends, really in generating revenues, we’re seeing that contribution across the board,” says Allie Hanson, a client manager at STR.
Marriott’s LG Studio – This unique dining experience at the world’s first hotel innovation incubator, the Charlotte Marriott City Center, puts a full LG kitchen in the property’s meeting space. This allows the food and beverage experience to be perfectly tailored to any type of event, while offering attendees a more exciting and engaging experience overall.
Movers and Shakers – The Beverley Wilshire in L.A. is creating its own unique experiences with a one-of-a-kind mixology challenge where attendees compete against one another for the title of ‘Best Movers & Shakers.’
Consider it food for thought.
While not every hotel property is in a situation to take advantage of all of these ideas, most should be able to easily implement one or two. Hotels can choose which to pursue by taking a look at the unique nuances of their properties and capitalizing accordingly to satisfy their appetites for growth.
Published July 2, 2018
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