Next Up for Hotel Revenue Management: Tackling Ancillary Outlets

As a large majority of hotels have adopted some sort of dynamic pricing for their rooms, the next evolution of revenue management is moving beyond rooms, and many leaders have adopted total revenue management strategies for a more holistic approach. 

One area that is ripe for innovation is F&B Revenue Management, and hotels are adopting the same principles and techniques that apply to room revenue management in their various F&B outlets, including full-service restaurants, bars, coffee shops, and grab-and-go marketplaces.

F&B revenue management techniques largely focus on dynamic pricing, or adjusting the prices of menu items based on customer demand; and menu engineering, or adjusting the menu offerings to maximize profits. 

To unpack F&B dynamic pricing, let’s identify four different “fences” that could influence dynamic price changes at your hotel F&B outlet:

• Time of day. Prices may vary depending on the time of day or meal period, such as breakfast, lunch, dinner or happy hour.
• Day of the week. Prices could potentially be higher on weekends or during peak times.
• Portion sizes. Prices may also vary depending on the portion sizes offered, with larger portions typically costing more.
• Location in the restaurant. Items may be priced differently depending on where they are located on the menu or where they are served within the restaurant, such as at the bar or in a private dining room.

A recent National Restaurant Association report on the State of the Restaurant Industry 2023 addressed dynamic pricing in restaurants. It found that 79% of consumers are favorable or somewhat favorable toward variable pricing. Just over 70% of consumers reported they would order smaller-sized portions if the price was lower, and nearly 80% of consumers would be favorable toward discounts on lower demand days and times. 

“Consumers are fine with variable pricing when done in a consumer-friendly way,” writes Cornell University Professor Emeritus Sherri Kimes. “This means offering value to the consumer. It doesn't mean discounting all the time. If restaurants offer lower prices during low demand times, it also means that restaurants can charge higher prices during other periods.”

The key to F&B revenue management is using data to analyze guest demand and purchase behavior. Data can also help you identify which items contribute to the highest average checks, which employees are skilled at tasks like upselling, and which menu items (or bottles of wine, for example) drive the most to the bottom line.

With some basic practices, you can improve performance in several areas, including traffic (covers), sales (average check), and service (improved reputation and guest satisfaction). Access to structured data and intuitive visualization across these outlets will allow you to make more profitable decisions.

Success Story: Analytics Power F&B Profits at Sea Island Resort

Sea Island Resort on St. Simon's Island off the coast of Georgia is home to 12 full-service and three quick-service restaurants, including the only Forbes Five Star restaurant in the state of Georgia, The Georgian Room. It is the only resort in the world to have received four Forbes Five-Star awards for 10 consecutive years.

Daniel Zeal started as a Sous Chef at Sea Island more than 17 years ago, and over time worked his way up through the kitchen into executive positions. For the past four years, he has served as executive chef. His time these days is spent less often hovering over a hot grill and more often in the office crunching numbers to ensure Sea Island’s 15 F&B outlets run with the highest profit margins possible.

“Every day we have a running P&L. Prior to working with [Otelier], when I needed to look at my labor costs or my food costs, every day I would be pulling those numbers from our Point of Sale systems at each outlet and frankensteining an Excel doc to make sure I was hitting my budget,” Zeal says. “About 10 years ago, I met with my F&B director and said, ‘There has got to be a better way.’ We built a spreadsheet, and [Otelier] began extracting revenue numbers by location from Micros into that. Now we just pull purchases for day prior, enter them and hit F9, and we have a running food cost.”

Zeal uses Otelier to monitor everything from revenues to quantity of items sold, all the way down to the individual check. He can see items sold by outlet, by meal period and by server.

“For the past 10 years, it's the only reason we've been able to consistently achieve food cost results,” he said.