From Drain to Gains

F&B strategy can transform hotel profitability

Food and beverage need not be a guaranteed drain on hotel profitability, according to Larry Spelts, president of Lodging & Lifestyle Adventures at Indigo Road Hospitality Group. “The biggest and most common mistake made by hotel managers is a business strategy attitude that originates from hotel industry culture that food and beverage is a necessary burden, and it is approached from the vantage point of making it as minimal a loss center as possible and focus the F&B outlets on driving room revenue, which has the best profit margin,” Spelts observed. Indigo Road Hospitality Group approaches its hotels differently—not as rooms with F&B offerings, but as F&B operations that offer rooms. “I believe that if more hotel industry leaders would adopt this attitude and see the F&B as not just a value-add expense for the lodging experience, but as the leading experience for the guest while at the hotel, it could transform the quality and profitability of F&B in the hotel industry.” 

Spelts noted that lenders and investors are increasingly willing to capitalize boutique and lifestyle hotel projects with gross revenues that are largely F&B-derived. “Just a few years ago, I had developers asking me to throttle back projected F&B revenues in underwriting for new projects because they were afraid investors and/or lenders would back away from a hotel project so reliant on F&B for its projected net income. Now, these investors and lenders understand the value of restaurants with rooms rather than the old hotel F&B attitudes.” 

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