NASHVILLE, Tennessee—Maximizing food-and-beverage revenue at full-service hotels has become an important piece of the profitability puzzle, according to a speaker at the recent Hotel Data Conference.
According to data from the 2015 HOST Almanac, F&B departments outperformed rooms departments in 2014, based on profit growth. During a presentation titled “The dish on F&B,” Veronica Andrews, STR’s director of active data, broke down the profit center’s performance, focusing on long-term trends in F&B profitability.
For the purpose of this analysis, Andrews pulled data from HOST study participants who also shared their F&B revenues on their profit-and-loss statements and then compared it alongside participants of STR’s F&B STAR report (which was announced last August). Andrews then searched for properties that had full participation for 24 consecutive months across the three data sets through June.
She came up with a sample size of 773 hotels, with the bulk of the properties being in the upper-upscale (68%) and luxury (23%) segments. Upscale accounted for 6%; upper midscale accounted for 3%; and only one midscale property made the cut.
Following are five takeaways regarding the hotels’ F&B profitability trends:
1. Luxury, upper-upscale RevPAS trending up
Both segments are showing promising year-over-year growth in revenue per available square foot, Andrews said.
RevPAS is calculated by taking catering and banquets revenue and dividing it by the amount of square footage available to rent, and multiplying it by days in a period (not accounting for meal periods on a monthly basis), Andrews explained. The metric is then broken into three categories: food (which accounts for any food and non-alcoholic beverage), beverage (alcoholic beverages) and other (meeting room rental, A/V rental and 24-hour holds).
For 2013, luxury’s total RevPAS sat at $1.13. For 2014, its RevPAS was at $1.23, an 8.8% increase over full-year 2013. Upper-upscale total RevPAS ended 2013 at $0.59. In 2014, upper-upscale RevPAS sat at $0.63.
There’s a big difference in profitability, but Andrews explained why:
“There’s so much more meeting space in upper upscale,” she said. “The contributions may seem small but are actually just relative to how much space they have.”
2. In-room dining still changing …
In-room dining is going through “interesting changes,” Andrews said. For example, some companies are trying different things with in-room dining such as partnering with local eateries, cutting out in-room dining altogether or getting food supplies from a local market, she explained.
While in-room dining accounts for the smallest portion of F&B revenues, that could change in the future, Andrews said. “It’ll be interesting to see how that plays out,” she added.
3. … but luxury making most revenue per occupied room
Revenue per occupied room is calculated by taking the in-room dining revenue and dividing it by total occupied rooms, Andrews explained.
Luxury led the way, notching $9.74 in total in-room dining RevPOR. Upper upscale sat at $3.40, which is less than the average $4.54 for the total sample (all 773 hotels from the study).
These results are still evidence that in-room dining can be profitable, Andrews said.
4. Food and ‘other’ contributions growing
Two revenue categories experienced more growth in 2014 than the rooms department: other F&B revenue and rentals & other income, according to the HOST study.
- Read “The winners and losers in hotel profits” for more on the 2015 HOST Almanac.
Andrews’ analysis of RevPAS broke down the revenue-generating silos based on data from July 2014 through June 2015.
When it comes to luxury RevPAS, revenue generated from the "other" category accounted for 31% of the total RevPAS. A/V and meeting room rental accounted for 51% and 18%, respectively. For upper-upscale RevPAS, the "other" category accounted for 22% of the total RevPAS. A/V and meeting room rental accounted for 49% and 29%, respectively.
Seventy-three percent of luxury's in-room dining RevPOR was generated by food, 12% by beverage and 15% by "other" (service charges). Seventy percent of upper upscale’s RevPOR was generated by food, 10% by beverage and 19% by service charges.
5. Sizing up the contribution mix for F&B RevPAR
F&B revenue per available room is calculated by taking all F&B-related revenue (catering and banquets, venue and in-room dining) and dividing it by the amount of rooms in the hotel times the number of days in a period. Once again, this number is calculated monthly and does not account for meal periods, Andrews said.
When looking at the luxury and upper-upscale segments, the contribution mix was roughly the same as the total sample’s contribution mix. For instance, in the luxury segment, 59% of F&B total RevPAR came from food, while 61% of upper upscale’s total F&B RevPAR came from food. Sixty percent of the total sample’s F&B RevPAR came from food. Below is a breakdown of the other contributions:
