F&B Remains a Key Driver of Hyatt’s Business

HoplamazianDuring Hyatt’s first quarter 2015 earnings call, CEO Mark Hoplamazian took a deeper dive into its food and beverage business, which continues to be an important growth driver for the company.

According to Hoplamazian, F&B represented approximately $3.5 billion of total chain revenues in 2014 and more than $1 billion of profit for the chain, excluding franchised hotels. It’s also approximately 35 percent of total chain revenue on a global basis.

“Food and beverage revenue is a considerable driver of our business, particularly as group business continues to recover, which enhances operating leverage in our business,” Hoplamazian said.

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In 2014, F&B revenue was directly responsible for approximately 35 percent of base management fees globally, he said. In the United States, F&B drives approximately one-third of base management fees, while outside the country, it drives 40 percent of base management fees.

While banqueting revenue per group room night in the United States has already exceeded prior peak, food and beverage margins during the first quarter are still approximately 100 basis points below peak levels, he said. Hyatt is seeing strength in corporate banqueting revenue, especially from technology companies. As a result of the overall strength in corporate group demand, Hoplamazian said the terms on which business is being booked include higher F&B components.

“We believe we have a significant opportunity to increase overall margins by driving higher-rated corporate group business, which will translate into higher incentive fees and improved owned and leased margins,” he said.

Hyatt employs approximately 50 percent of its global workforce base in F&B operations. In fact, 40 percent of its full-service general managers have F&B backgrounds. “The strength of our F&B platform drives owner and guest preference for our brands and provides significant operating leverage, particularly as group business continues to improve,” Hoplamazian said.