Hotel Food and Beverage: A Profitable Venture?

By Michael Haynie, SR., President, Parkway Hospitality Management

Restaurants have always been a good debate amongst hoteliers — both regarding the need for them and at what level of a property. Full service hotels mean just that, and they are basically called “full service” because of the inclusion of a restaurant. Limited service simply describes hotels without a restaurant. Years ago, the brand name hotels used restaurants to further define standards and try to create a sense of consistency and feel for decor and service. Needless to say, this was an evolving challenge which never seemed to quite get where intended. Brands even tried to standardize how an egg was cooked or even the size of glasses of juice. All good intentions, but what many of the owners were looking for was a model of profitability for their hotel.

Let’s go back to the late 1980s and early 1990s when hotel restaurants were the “in” trend, particularly in markets like Washington, D.C. and New York. Having a signature restaurant in your hotel was a sign that your hotel was truly upscale and had “arrived.” You saw many of these trendy five-star restaurants in independent hotels. Top chefs such as Michel Richard at the Latham in Georgetown or Jean Louis at the infamous Watergate Hotel were known for their high quality operations and absolutely fantastic food. It is questionable whether these hotels made money or even came close to breaking even, but the exquisite environment and top notch cooking were never in question.

Many hotels back then attempted to duplicate the “Jones” and found themselves in serious trouble, particularly with the oncoming recession in the early 90s and the change in tax laws. The hotel business was and is all about room profitability, and yes, there is something to having the right mix and type of amenities. But it became quite apparent coming out of the 90s recession that “limited service” hotels were the wave of the future. In many cases, it was far more cost effective to give away the food and beverage at a property than to attempt to have a restaurant. So what you saw emerge as a hotel business model were the branded limited service properties “giving away” breakfast and a snack later when you arrived back to your hotel after a day out. Many of the more successful real estate investment trusts (REITS) today still have as a significant portion of their portfolio quality limited service brands. Earnings per share was and is still the nature of the day, and hotel restaurants were seen as a cash drain.

Let’s fast forward to the 21st century to see if the model for restaurant operations had changed and we had learned our lessons from the past, or if we just stopped having restaurants in our hotels. Well, I am happy to report we still have the term “full service hotel” in our vocabulary; however how we view these full service hotels and the food and beverage operations has changed with the times. For some, leasing space to an experienced operator of restaurants and figuring out the complicated issues of how to do room service or cater small meetings became the challenge. For others, it was to ensure the general manager could continue to entertain clients at the establishment without the ugly glares of the staff and management. Then there are the full service establishments who still believe the way to driving market share, including rooms, is to have a signature chef’s name on their establishment. Not the chef — just the name. Back in the old days, you would truly see Jean Louis, Michel Richard and Jim Papovich actually cooking your meal! With the advent of cooking shows and the outcrop of celebrity chefs because of the exposure of these shows, it has truly helped drive restaurant traffic to the hotel. Because of the up and down nature of occupancy, the reliance on hotel guests is still not enough.

Modern day hotel food and beverage operations need to be geared towards profitability. Here are some things that should be taken into consideration by hotel management in regards to their restaurant operations.

• Modernized updated décor: Is your restaurant serving four-star dinners but still stuck in the last decade with dated tables, chairs, linens and wall coverings? No matter how delicious the food, first impressions count, and diners want to feel that your space is welcoming. Be sure to keep your décor clean, fresh and modern.
• Well-trained staff understanding the nature of great service: Again, you can have great food, but an inexperienced or rude server can ruin even the best of meals. Guests are spending their hard-earned money for the entire dining experience, and servers should ensure that they are providing excellent customer service from beverages to dessert.
• An experienced food and beverage person managing the operations: A well-run kitchen and dining room is key to both a good customer experience and profitability. A good manager can streamline operations, including staffing and food purchasing, and help promote success.
• Excellent wine selections: Beverages could be the difference-maker in profitability. A well-stocked bar and wine cellar can help entice new customers and keep customers coming back. Consult with a sommelier or local wine experts on the trends of the moment and what longtime favorites are a must to have on hand.
• Understand the fantasy and loyalty to “locally grown”: For customers, locally grown food means that the items are fresh and contribute to the local economy. Research your profit margins when it comes to locally grown food to see if this can be part of your marketing strategy. Just a mention of “locally grown” food can attract diners.
• Including the local flavor in the menu: Many hotel restaurant guests are guests of the city as well. Travelers enjoy tasting local specialties when they visit somewhere new. Make it convenient for them to try these dishes at your hotel.
• A simplified menu: Streamline your menu to keep costs of ingredients down and to eliminate waste. Evaluate your customers’ orders and see what selections may not be cost efficient.
• Larger convention type properties should have multiple outlets for various tastes and budgets: Does your hotel offer restaurants/eateries at various price points? For example, a coffee shop, a casual dining café and a five-star restaurant may be found in larger hotels, meeting the needs of guests of all ages and incomes.
• An exterior entrance: You should absolutely consider an exterior entrance, as many people still have an affinity to walking into a hotel for a good restaurant meal even if they are in their own home town.
• Social media networking: Marketing, public relations and social media are all important ways to promote your restaurant. Word-of-mouth through social media reviews and posts can help boost a restaurant’s client base and keep people returning.

All of the above items are very helpful as you venture into the highly volatile world of hotel restaurants. With all of this, to be able to achieve a profitability margin of 10 – 12 percent would be a considerable victory.

And with the hotel restaurant also comes to mind catering. Catering can offer tremendous profitability. If you do it well, you can expect profitability margins as high as 35 – 40 percent, but that is not necessarily the norm. The predictability of the number of guests expected helps immensely in food purchasing and staffing, and should help in controlling related overhead. So how do you get catering customers coming to you?

• Flexible banquet space is critical. Flexibility means you can service 50 guests as well as 650-700 guests, which has an effect on your profit margins.
• Excellent environmental controls are essential. There is nothing worse than having a reputation as a “cold” or “hot” facility.
• Only do events which are within your comfort zone. Don’t do Mitzvahs or weddings if you have no experience or the ability to do so. It will only hurt your reputation.
• Hire a good cost conscious banquet chef who understands the critical aspects of timing and center plate design. You don’t want your banquet food looking like everyone else’s. Local flavor again would be highly recommended, as well as locally grown food products.
• Be sure to have a highly motivated sales force who are “out there” in the public and are very social media conscious.
• Great service is non-negotiable. Your staff should be well trained, and the equipment used in the banquet needs to be in excellent repair. Clean seats and linens are a must.

Profitable food and beverage in a hotel environment is possible, but it needs to be taken seriously as a priority. Owners no longer tolerate amenities in hotels with one hundred plus percent cost. Understanding your market and what you want to be, as well as hiring the right food and beverage skills to suit your operations will give your restaurant a chance to succeed. Bon Appetit!

Michael Haynie has devoted his entire professional career to the lodging and hospitality industry. After attending Northeastern University in Boston, MA, he took on various entry level positions before rising through the ranks to the executive level positions he has held for many years. Mr. Haynie has experience in every facet of hotel operations and has served in leadership capacities in hotels ranging from economy to luxury. Prior to launching his own hotel management enterprise, Mr. Haynie served as the Vice-President and Managing Director of Baltimore’s Tremonts Hotels which encompassed the upscale Tremont Plaza Hotel and the economy Tremont Park Hotel. Mr. Haynie, SR. can be contacted at 443-604-3835.

Hotel Spas: The Potential Challenge in Profitability

By Michael Haynie, SR., President, Parkway Hospitality Management

More than a decade ago, spas in general were “in.” Like low-calorie menu items and personal trainers, everyone wanted to talk about and be seen at the spa. Hotels soon followed the trend, and spas began cropping up in hotels all over the country. Many establishments tried to expand the health club concept which they had adopted in previous years, upgrading their workout facilities to transform them into the latest trend at that time — the health spa kick. The profitability model for these never seemed to make sense nor be achievable, but many operators and companies looked at this amenity as just that: a potential loss leader which would attract additional market share because it was an amenity the property had.

Fast forward to 2012 and the current economic situation, and everyone is watching their wallets a little more closely. For some, spa services might be seen as a necessity for health or beauty reasons, but for most people, they are still a luxury. With the ever-increasing cost of air travel and gasoline prices, travelers need to cut corners. Marketing to outside customers, providing complementary services and partnering with local spas and treatment professionals are just some of the ways that hotels can provide their guests the spa services they want without having to sacrifice profitability.

Marketing to Outside Customers

Just like a good signature restaurant, a hotel spa must have the ability to attract transient or outside customers and not be wholly reliant on hotel guests. Resort hotels have a much better opportunity to capture hotel guests within the spa, as many resort guests go to the resort exclusively to experience the amenities such as a spa, pool or health club. It does make perfect sense for an actively marketed “resort” hotel, which is typically a four- or five-star property, to consider a spa among its amenities. The key ingredient to the resort spa’s success is the ability to market the services to transient customers and hotel guests alike.

In hotels that are geared more toward business travelers, many guests are off at meetings during the course of the week, and thus have very limited opportunity to go to a hotel spa. That’s why it is crucial to market to customers outside of the hotel. Offering locals discounts for spa services is a great way to attract new customers and create a solid customer base who can become repeat customers.

Incentives for locals can include discounts off of certain spa packages; frequent customer cards which allow them to buy a certain number of services and get the next one free; and “slow day” discounts to draw customers in on the least busy days of the week. As an offshoot of the frequent customer cards, the hotel spa can create a rewards program for customers, in which every dollar spent can equal points. When customers get to a certain number of points, they can be “cashed in” for free services at different levels. Direct mail and email blasts to locals offering them a “welcome” discount (or a “welcome back” discount for past customers) can help encourage people to visit or revisit the spa.

Facebook and other social media promotions can be an inexpensive way to gain exposure and attract new customers. Offer exclusive discounts for Facebook followers, or hold an online contest where people can return to the page each day for updates and to see winners announced. Hotels should be sure to promote their spa’s Facebook page on all printed collateral as well as the hotel’s website, which should have a link directing visitors so they can “like” the Facebook page.

Marketing to area businesses such as medical practices and hospitals, law offices, banks, major retailers, and other corporations can also benefit the hotel spa. Spas can offer a discount for these businesses who may want to purchase a set dollar amount of gift cards for their employees or their clients. Or, if the businesses can secure a certain number of employees to receive services at the hotel spa on a given day, they will receive a group discount.

Providing Complementary Amenities

In some cases, the hotel spa is still regularly booked with appointments but the average sales ticket has decreased. It could be that guests aren’t dropping hundreds of dollars at a time on massages, facials and aromatherapy wraps like they used to. This is yet another reason to increase marketing efforts and provide other services which are usually associated with a healthy lifestyle and diet that will act as an incentive for the spa customers.

For example, adding a healthy “spa menu” at the hotel restaurant, carving out space for a juice bar, or offering yoga classes poolside would add to the overall spa experience and help attract potential spa customers. In addition to selling skincare and beauty products at the spa, hotel spas can increase their bottom line by creating a boutique-like atmosphere, selling items such as robes and other loungewear, jewelry, relaxation CDs and gift sets.

Going Above and Beyond

Additionally, a very proactive staff of professionals who understand the health conscious customers is paramount, and it can be very costly to hire the best of the best. The heart of the hotel spa is its staff, and the staff can “make or break” the hotel spa experience for the customer. Being knowledgeable in their profession and experienced in providing their unique service is a given, but in addition to knowing what to do, it is just as important to know how to do it. Ensuring excellent customer service is a surefire way to keep people coming back.

As mentioned previously, people are carefully choosing where to spend their hard-earned money these days. When they want to be pampered, they expect an excellent customer service experience from the time they are greeted by the receptionist until the time they are out the door, hopefully feeling better, relaxed and free of stress. Staff of all levels should be trained to provide superior customer service. By word of mouth — and on the Internet — customers will choose to recommend your hotel spa or not. If the massage was great but staff was rude and the customer had to wait too long or wasn’t offered a beverage, that will add up to a less than stellar review and people spending their money elsewhere.

Reevaluating the Hotel Spa

The nature of the hotel business — particularly over the past four years — is to run a good business with streamlined cost. Many properties that had full-scale fitness facilities or spas have had to reevaluate their hotel spas. Management has had to consider each facility and determine whether they were room generators that could sustain on their own or expensive amenities which made the hotel profile look good but at the end of the day did very little to add market share or appeal.

But if hotel management concludes that the full-scale spa is no longer a profitable venture, there are other options for the hotel to provide customers with some of the services they are looking for. Some hotels have chosen to include “pieces” of the spa feel, such as in-room saunas or quiet rooms with lighting effects and mood music. This would give the property some uniqueness in amenities but stop short of the labor intensity and operating costs of a full spa. Guest seem to welcome alternatives which are tasteful and cost effective.

Partnering with Local Spas

Unless a property is in a very unique high-end market with transient generators, such as in an office building, near office parks or near major hospital centers, it may not be feasible financially to get into the spa business at all. However, associations with spas and a partnership arrangement at a nearby facility would make sense. For example, hotels could build a relationship with a local spa to offer a percent-off of services to all hotel guests or establish a discounted package that is designed for their location. Guests who stay a minimum number of nights could receive a free spa service, offered to the hotel at a substantial discount.

Another way hotels are able to offer spa services without incurring internal cost is partnering with local spas or independent professionals to offer services to guests. Hotels can offer on-call services with the local spa for services at the property, which allows the guest to enjoy a massage, manicure, facial or other spa treatment in the comfort of their hotel room.

While hotel spas can be a profitable venture in some markets, there are hotels in other markets that need to reevaluate the way they provide spa services to their guests. For some hotels, that might mean stepping up marketing efforts and offering discounts and other incentives to recruit outside customers. For others, downsizing their spa or partnering with a local spa to offer the services either off-site at the spa or in the guest’s hotel room might be the best solution. Whatever the case, hotels can find a way to offer guests the spa services they want without having to sacrifice profitability.

Michael Haynie has devoted his entire professional career to the lodging and hospitality industry. After attending Northeastern University in Boston, MA, he took on various entry level positions before rising through the ranks to the executive level positions he has held for many years. Mr. Haynie has experience in every facet of hotel operations and has served in leadership capacities in hotels ranging from economy to luxury. Prior to launching his own hotel management enterprise, Mr. Haynie served as the Vice-President and Managing Director of Baltimore’s Tremonts Hotels which encompassed the upscale Tremont Plaza Hotel and the economy Tremont Park Hotel. Mr. Haynie, SR. can be contacted at 443-604-3835.