Blog
Three Factors Driving the Growth of Hotel F&B
Lenny DeFranco
5 min read
Nov 16, 2019
Lenny DeFranco
5 min read
Nov 16, 2019
Heading into the 2020s, the hotel industry finds itself at an inflection point. Around the world, business has been booming. Travel & tourism has been the second-fastest-growing sector in the world over the last ten years, and US hotel bookings have been growing 6% annually since 2009, more than any other sector of the travel industry. While economic unease looms on the horizon, longer-term projections for the hotel industry remain optimistic.
With the core of their businesses intact, hoteliers are entering the new decade looking for different ways to maintain the momentum—to diversify their revenue and find new areas of growth. At the same time, hoteliers know they need to find ways to differentiate their offerings from the still-growing home rental industry.
Given these twin challenges, it’s no wonder hotels have been investing in food and beverage (F&B) outlets on-site. In a 2018 survey, 40% of hotel owners and 33% of independents expected to increase F&B square footage in the coming years; 60% expected the contribution of F&B as a percentage of revenue to increase, up from an already-sizable 25% of revenue. So why are all these fresh expectations being pinned on an age-old piece of the property?
In short, F&B offers solutions to both major questions facing hotels. Revenues, around $50 billion a year, are growing faster there than on the rooms side. “In the United States, the lodging industry is growing by 1.5% to 2% each year,” says Avendra’s Chip McIntyre. “Food and beverage is growing at about 2% to 3% each year, and represents about 25% of total revenue.” Hoteliers are eager to capture some of that growth.
F&B outlets also serve as venues for localized, high-quality guest experiences that distinguish hotels from vacation rentals. They are versatile spaces that can be used creatively—able to host everything from brunch to banquets to special events—that open up countless promotional opportunities for hotels with sophisticated marketing strategies.
One of the most important drivers of F&B growth is the fact that travelers reward hotels that offer great F&B experiences. In SevenRooms’ 2019 hotel industry research report, Checking In For F&B, a clear link emerges between hotel food and beverage options and a guest’s decision about where to stay.
According to the data, obtained in partnership with polling firm YouGov, one in three Americans think a hotel with great F&B options is more memorable than one without. Thirty-five percent prefer hotels with multiple dining options; 27% want restaurants and bars that are open late. And the role of F&B in offering personalized rewards and perks is huge: 32% of Americans are more likely to book a hotel stay if offered rewards that could be redeemed at the hotel bar or restaurant.
Perhaps the most important function of F&B is to connect hotel properties in different cities. Thirty-six percent of travelers are more likely to book at a familiar hotel brand in multiple locations if their loyalty program makes it easy to redeem loyalty points.
Travelers clearly prefer the experiences available when their hotels have F&B outlets that are varied, yet sufficiently equipped with data to recognize and be able to cater to them: 29% of travelers expect their personal preferences to be seamlessly and easily communicated between hotel properties.
Gone are the days when hotels and their on-site bars and restaurants could lead separate existences. For hotels to unlock the benefits of F&B, those outlets need to seamlessly integrate into the larger hotel experience. Here’s why:
Suppose your hotel is hosting two guests. The first is a business traveler paying $500 to stay one night. They’re checking in late, leaving early, and just hoping for a good night of sleep in between. The other guest is paying $400 for one night, but that evening, they have a $150 meal at your on-site restaurant.
Which guest is more valuable?
Clearly it depends on how you value F&B spend relative to room spend. Regardless, without F&B software connected to your hotel’s technology, you’d never have enough information to make the determination.
Not only is F&B a valuable attraction by itself, it also offers a valuable opportunity for operators to gain insights into their guests.
Service at a restaurant or bar is one of the richest interactions a hotel can have with its guest. It is during this interaction that you’re actually talking with them on their terms, in an exchange that they’ve chosen to have with you, about the food and drink items they prefer most.
Given the value of having good guest data, at least part of the growth of F&B is attributable to the fact that F&B venues offer a valuable flywheel effect: you can use and gather data on your customers.
When it comes time to get people back into your hotel, few offers are as impactful as an F&B experience.
According to our research, 65% of Americans would choose one hotel over another if one offered a complimentary breakfast. Fifty-one percent would choose the same for a free drink or meal upon arrival. Not only are these offers not discounting—as in, they don’t require the hotel or F&B outlet to lower their room rate or menu prices—but they better incentivize guests to come in and redeem the offer.
As hotels look to sustain the momentum of the boom years, look for F&B to continue to comprise a growing share of each hotel’s revenue. Expect more square footage to be given over to varying concepts, celebrity chefs brought in to create distinctive menus, and hotel tech stacks to integrate F&B data into their operations.
Ultimately, hotels understand that a great F&B experience is a chance for them to reinforce their branding. Service at a bar or restaurant is an important core of hospitality, and being able to leave a positive impression while gathering data that can be used to drive loyalty is a win-win for both customers and hotels looking to navigate a new hospitality landscape.
Download our 2019 hotel industry research report, Checking In For F&B.
