F&B Accounts for Bigger Slice of Hotel Revenue Pie
New Delhi: Hospitality chains are increasingly focusing on food and beverages operations to boost revenue and drive profits. Most hospitality chains say F&B operations now have a larger share in the overall revenue. While F&B operations have always been a critical function at behemoths like ITC and Taj, chains like Lemon Tree said F&B’s contribution to total revenue has increased by over 16% in the current financial year to about 23%.
ITC Hotels said its 7.3% increase in in December-quarter revenues was in part due to growth in the food and beverages business. Last year, Leela became the only luxury hospitality group to expand F&B operations beyond its properties and outside India by launching its Indian restaurant Jamavar in Mayfair London.
“Overall, F&B continues to have growth potential. For example, at The Leela Palace, New Delhi, its two outstanding international dining brands, Megu and Le Cirque, along with an Indian restaurant, Jamavar, and an all-day dining restaurant, Qube, contribute exceptionally well to the revenue via F&B, especially since they attract high footfalls from local diners and gourmands,” said a company spokesperson.
Raj Rana, chief executive for South Asia at Carlson Rezidor said F&B operations contributed about 50% to the overall revenue of its 4 and 5-star brands last year, and sees its share growing this year. Carlson Rezidor has also made changes to its existing F&B formats. It is trimming down its F&B offerings to provide an all-day dining bar and one other specialty restaurant in its upscale properties from multiple outlets earlier. In the mid-scale segment, it is leaning toward room service and a loungecum-restaurant. For its under-construction hotels, the company is following a single-plate F&B offering.
“Instead of having a main kitchen and then multiple satellite kitchens, which mean higher costs and more workforce, the layout of the new hotels is such that we don’t need satellite kitchens, which creates more efficiency,” said Rana.
Abhijit Umathe, associate director of hospitality and leisure for Knight Frank said growing F&B revenues could be attributed to market-driven room rates. “Over the past five years, room supply has been getting added in major cities. Demand is growing, but not as much. Room revenues haven’t grown. So, the only room for expansion was in F&B,” said Umathe. “Room revenue is driven by corporate clients and the market. Discretion for the spender lies in F&B. So every year, in line with food inflation, hotels have been increasing F&B prices. To a certain extent, F&B is a recession proof business.”
For Marriott, while the outlook for F&B operations is pretty much the same as last year (F&B contributed 40-45% to overall revenue), the company is making some changes in its existing and upcoming properties. “Our new hotels in Aero City, New Delhi and Sahar, Mumbai have large coffee shops, all-day dining and a huge catering space. Coffee and catering spaces drive huge profits. Going forward, we will rationalise the number of outlets. We will focus on one or two formats and get them right,” said Hemant Tenneti, senior area director of operations, South Asia.