Increasing importance of F&B in driving hotel revenue

The hospitality industry is slowly reviving back the lost revenue of the past two years. Food and Beverage have played a key role in the revival. With ancillary service coming into the limelight post pandemic, one department which was a star performer was the F&B. From innovations like food delivery or preparing home-like meals to offering huge deals, the hotel’s F&B played a huge role in reviving the hotel’s lost spirit. 

Today, for hotel groups, the F&B side of the business is no longer just an additional revenue stream: it’s becoming a proper customer acquisition channel. At the restaurant, diners get a broad stroke of what they can expect from the brand. If their experience is positive, they're more likely to stay at one of the hotels during future trips. F&B managers now have the tools to make the best of the first part of this customer journey. Five years ago, according to HVS, it was projected that hotel chains will start earning more from F&B than room revenues as F&B revenue has been growing constantly over the past five years while room revenue has been dipping.

Contributing equal to room revenue

Standing on the projection, if not surpassing the room revenue, F&B now stands equal responsible for generating equal revenue for a brand. Novotel Mumbai Juhu Beach is one of the few hotels whose revenue structure is 50-50 pertaining to F&B and rooms. The hotel takes pride in its six restaurants, The Square, Gadda Da Vida, Sampan, Bageecha, Olio, Peche Mignon and indoor and outdoor banquets.

“Post pandemic, four of our restaurants are operational for all guests namely The Square, our multi-cuisine all-day dining restaurant; Sampan, our Indo-Chinese restaurant; Gadda Da Vida, our seaside Lounge Bar and Bageecha, our seasonal pleasure. To continue to delight our patrons, we have made sure to keep the menu updated with numerous classics and specialty dishes. These delicacies can be made available at our guests’ doorstep through our delivery and takeout partner services,” Gorav Arora, general manager of Novotel Mumbai Juhu Beach commented.

More walk in guests than in house guests

Arora informed that since the property reopened for dine-in business, they have noticed a small but steady increase in the number of regular customers. “Our staff is always considering new strategies and techniques to improve our F&B selection and services in order to satisfy every desire of our guests and provide cherishing experiences,” he added.

With F&B in hotels across India becoming a key revenue driver and contributing anywhere between 35 and 50 per cent to overall revenues, hoteliers say the success of food and beverage can make or break a hotel. Luxury hotels infact is witnessing a ratio of room to F&B revenue change to 51:49 from 70:30 post pandemic. A strong F&B element automatically gets good business for the rooms. 

The importance of F&B revenues has increased as profitability from room revenues has declined over the past decade in India. What seems to be driving this growth in F&B is a change in cultural trend of eating out often. Hotels are aggressively promoting their F&B through discounts and offers to maintain their topline. In fact, new hotels across the country have come up with large meeting spaces and restaurants. Developers are including banqueting spaces in resorts in leisure locations too to attract MICE business.

Hotels launching their own F&B brands

“It will not be an exaggeration to say that F&B outlets are the star attraction for any hospitality brand. At Roseate Hotels & Resorts, our focus has been on a world class ambiance, elegant décor, mindful guest service and the finest cuisine. We take great pride in our expert team of chefs,” Kush Kapoor, CEO, Roseate Hotels & Resorts commented. 

Besides resident guests, the restaurant walk ins guests form a sizeable part of the group’s revenue. “We often receive feedback that one of the attractions of staying at our properties is the stellar dining experience,” Kapoor added. For Roseate Hotels & Resorts, F&B has a dominant space in their future expansion plans. Looking at the potential, the group has even launched standalone F&B brands like Roasted By Roseate.

Moreover, with standalone restaurants giving upscale hotels a run for their money, hotels are trying to exploit the potential of this segment to the fullest and are coming up with newer ways to offer more than just good food and drinks.

While hotels are earning good share of their revenue from F&B, margins from room revenue still continue to be higher than F&B. Hotels try to maintain their food costs at around 25 percent but additional costs such as labour and heat, light, power (HLP) increase the spends.

Integral part of overall brand value

According to Pratiti Rajpal, director of operation, Hyatt Regency Dehradun, F&B experiences at hotels are no more service or facility offered at a hotel but are part of the overall positioning and brand value.  “It’s a great USP for the acquisition and retention of customers in all markets whether business or leisure,” she shared.

“Since opening our doors in late March 2022, we have seen a positive trend of guests coming for drivecations, family vacations with kids, pet friendly stays and big small celebrations from across the length and breadth of the country and even overseas.  There have been great reviews on the local and international food offerings with many guests opting for the cook with chef activities to learn about Tibetan and also Garhwali cuisine,” she further informed.

Most other hotels show equally impressive F&B revenue inflows, across different segments, from markets as diverse as Tier I and Tier II. In pre pandemic times, at Mayfair Hotels, F&B contributed 50 percent of the total revenue, with corporate hotels in Bhubaneswar and Rourkela accounting for 60 percent revenues. Contemporary restaurants, in fact, serve as perfect platforms to showcase a hotels’ other offerings, the more vibrant they are, the more likely is a guest to come back.  With increased focus on F&B, the personnel working in this crucial department chase major goals, in a bid to offer differential guest experiences.