BROOMFIELD, Colorado—It is no secret hotel in-room dining operations rank somewhere between a challenge and a workhorse in the test of popularity versus profitability.
Although in-room dining revenue accounts for about 5%, on average, of full-service hotels’ total food-and-beverage revenue, the range of in-room dining’s revenue share runs the full gamut across the hotels that reported detailed F&B profit-and-loss data to STR, parent company of Hotel News Now. Of more than 800 hotels that reported year-end 2012 in-room dining revenue, the average revenue on a per-occupied-roomnight basis was $3.49.
To get a better understanding of the effect in-room dining has on total F&B profitability, we have benchmarked hotels with significant (at least $5 POR) in-room dining operations against the average of all full-service hotels in the United States.
Although the overall F&B revenue share coming from in-room dining is only slightly higher among those hotels with significant in-room dining operations, their POR dollar amount averages more than three times that for total U.S. full-service hotels. Generally, the hotels classified as having significant in-room dining have larger F&B operations overall. The group of hotels selected has an average F&B revenue ratio-to-sales of 33.9% as opposed to 28.5% of total U.S. full-service hotels.
Some regions stood out with higher F&B revenue shares coming from in-room dining. The Middle Atlantic region came in on top, with in-room dining contributing an average of 7.5% of total F&B revenue. Interestingly, this market also has the lowest F&B profit, of just $9.15 POR. The Middle Atlantic region includes the New York market, which is notorious for high service costs. High service costs were cited among the reasons why Hilton Worldwide Holdings decided to discontinue in-room dining offerings at its prestigious New York Hilton Midtown property this past August. Hilton is among the first hotel companies to halt or severely scale back its in-room dining options, making its initial announcement at the Hilton Hawaiian Village Waikiki Beach property, in the autumn of 2012.
Of the hotels with significant in-room dining, those in urban locations had the highest in-room dining share of total F&B revenue (6.5%). Although guests staying in urban hotels have more eating choices within walking distance, those who decide to order roomservice are usually on the receiving end of higher food and service costs associated with top markets. Resort location hotels have the lowest in-room dining revenues POR, of just $9.71. Hotels in resort locations also saw the highest F&B profit POR, coming in at $45.14.
The New York and Chicago markets had a 9-cent difference between their in-room dining POR, coming in at $13.41 and $13.32, respectively. However, the New York market saw $4.16 of its total F&B departmental revenue POR actualize as profits, while the Chicago market saw $42.05 of its total F&B revenue POR ($202.38) carry through as profits. The Anaheim-Santa Ana, California, market came in third place with $11.81 POR contributing to its total F&B revenue. Of the top five markets, it had the highest F&B profit POR of $78.52. It also had one of the largest mix of midsize independent hotels in its list of hotels with significant in-room dining revenue shares.
In 2012, full-service hotels in the U.S. had an average F&B profit ratio of 25.9%, with the average for those with significant in-room dining reporting 17.9%. This comes as no surprise to most full-service hoteliers, but with many rating systems, such as AAA, based on the amenities provided, the focus shifts from whether in-room dining is a profitable feature, to finding the perfect balance of optimizing F&B options and still offering an often-expected convenience for guests.