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THREG, London (01.24)


Philip attended The Hotel Real Estate Group (THREG) event and brought back the following take-away nuggets:

  • HotStats data showed that Total Revenue recovered well in 2023 but profit margins fell, especially in F&B (down from 30% Departmental Proft in 2019 to 17% in 2023), which had a greater negative impact on overall margins than those nefarious Utilities. 
  • Revenue recovery was ADR-led and not volume-led, especially in London, whereby more occupancy growth to come (a welcome good news item).
  • Labour costs an issue around the world, not just in the UK, with labour costs in F&B in New York City being circa 90% of Departmental Revenues. In London such cost line rose from 39% in 2019 to circa 49% in 2023.
  • For one operator, the margin on breakfast is only 10%, lunch is a big loss (especially with current ‘Work At Home’ culture) and must open for dinner as a brand standard. To be profitable in such a tough environment, operators must manage menus, list fewer items and create something different.
  • Big hotel brands are too slow to move with and respond to customer trends. There is no F&B creation team/function within the majors, resulting in staid hotel outlets. Thus brand-managed hotels tend to be slow to change, which gives grist to the franchise model whereby owners can implement new ideas quickly.
  • In a search for profit, some hotels have teamed up with Lean Kitchen Network (LKN), which provides any given hotel kitchen with skills and equipment to produce food for delivery to the local community (a kind of ‘not-so-dark’ kitchen). Such a concept works well in cities, not so well outside big urban areas. LKN had 20 units in 2023, now has over 80 generating incremental revenues for hotel owners.
  • Marketing and awareness creation are key to F&B success. Ideas included working with Twisted (a social media channel, with 1m views guaranteed) and hotel-related messages in LKN delivery bags.
  • OWO has 9x outlets and no margin to cut corners as a luxury offer. Margin enhancing ideas included: limited chef’s table hours, tweaking menus to be cheaper, afternoon tea margin high, a la carte limited to 5x days per week, Ballroom events should boost overall F&B Departmental Profit (MICE is ramping up). Initial plan was to open all 9x outlets simultaneously, but completion delays have resulted in a phased opening of outlets, which in hindsight was a good move. The residences are not driving much F&B Revenue (only 10x apartments have permanent residents out of circa 35 units sold out of 85 available). Outlets subject to a mix of operating agreements.
  • A hotel restaurant should be led by dinner and provide a breakfast service, not be led by breakfast and provide evening meals. Dinner-led outlets require more risk and are more likely to result in something different, which in turn is more likely to appeal to consumers.
  • A typical Hoxton hotel drives 70% non-hotel resident F&B demand from its local community, thanks to its open lobby approach and regular programming. They are well known and well liked in their neighbourhoods.
  • Are there any tech solutions to help reduce operating costs? Such solutions in UK are currently limited to programmable meals so anyone can cook. Tablet ordering and pdq capabilities at tables in business hotels are also working well. In China robotic delivery is a growing trend (difficult to do in UK owing to old layouts and designs). Tech solutions most likely in lower grade brands, difficult to incorporate in higher grade brands where meals are more complex, expectations higher and quality critical.
  • Apparently, chefs will complain bitterly at kitchens that are too big and only mildly if given a shoe box.
  • F&B outlets on Ground Floor and at Rooftop level work well. Anything in between should be an event space.
  • Standard F&B franchise fees are around 6% of Revenues.
  • If you can create a concept that competes with independents, topped up with program activations and intensify kitchen use, both revenues and margins can be improved in hotel F&B, so take heart, get creative and go innovate.

Many thanks to the hosts (Taylor Wessing) for their hospitality in their temporary home, and good luck with the refurb and can’t wait to experience the new terrace.

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