HOTEL magazine, № 3, 2003

Three Trends in Hotel Dining

The big news in the hospitality business in the CIS these days is the development of the next tier of hotels. In Moscow and St Petersburg there is a good inventory of luxury hotels available with more on the horizon. If you want to stay in these cities and don't mind paying $259 a night you have several choices. Of course you can pay more, that option is always met with joy on the part of the hotelier. But, if you are like most business people and tourists, you do not have an unlimited budget. You need to be in the CIS to do business or sightsee and you have little choice for accommodations. Enter the hotel developer. This is an easy lesson in economics. Supply and demand. Build the hotel and they will come. Charge whatever you like! The CIS needs hotels. Anybody can be a hotel owner. All you need is cash. Most people have stayed in hotels, ordered room service and eaten in a restaurant…

How difficult can this business be?

Many irreversible mistakes will be made in the coming years. As interested parties rush to fill this shortfall of hotels many details will be overlooked. The already high cost of construction increases every day. Sure, there is a tremendous need for hotels but at what location? How many rooms should they have? What services should they offer? How many restaurants should they have and what type? Should it be an independent hotel or "branded"? By what name should it go by? Who is the guest?

One area that continues to befuddle the hotel owner or operator is the food and beverage side of the business. Some of the most successful hotels in the world struggle with poorly run, boring, empty restaurants. The restaurant becomes an amenity. This is a nice way of saying the restaurant is a money loser instead of a moneymaker. The hotel offers food service as a convenience and tries to do it without losing too much money. What were intended to be wonderful part of the overall hotel experience become a liability and a constant source disappointment.

How can this be avoided?

There are several trends emerging in the hospitality business in regards to the food and beverage operations. At CHC International, we are prepared to guide you through the best way to position your hotel in this arena. In this article we will look at three of those trends. This is simply an overview. Your hotel would require a property specific study to see what best suits your location, style of hotel, immediate needs, development budget, local market etc.
The first trend is the number of restaurants or outlets the hotel needs to have. Gone are the days when a hotel was developed and automatically had four or five restaurant concepts regardless of its location and local market. The thought was the hotel creates the demand and is here to "educate" the local population about dining options. Sadly what it creates for the owner or operator is several options for the same guest. They can't eat in all five so they have to choose. They then stroll around the hotel trying to choose between several nearly empty restaurants. There's no flash, no excitement, no people…
One of the oldest gauges of a good restaurant that most people use is, is there anybody dining in there? If the restaurant is empty and it's a traditional time for the meal well, that's a bad sign.
Better to focus your energy and resources on one great restaurant as well as a full service lobby bar. The restaurant can have a theme that works for lunch and dinner. It will always need to open for breakfast and can function during this meal period without concern for the overall theme of the restaurant. It would not need to be an "all day dining" concept as the lobby bar can handle late afternoon snacks and late evening meals when the restaurant is closed to prepare for the next meal period. The addition of a lobby bar also allows for the use of this space for overflow. When the hotel is extremely busy the lobby bar can open for a light breakfast. Light snacks, sandwiches, stews etc. also gives the hotel guests another option for dining. Now, rather than having fifty guests spread between five restaurants you have one restaurant that's busy and looks appealing to your potential guests.

The second trend is the utilization of an ongoing restaurant consultant. In this instance the hotel owner or operator would bring an outside consultant into the restaurant to provide experience and the ability to so evaluate the operation in an unbiased way. This relationship can start at anytime during the restaurant's life. From the conceptualizing stage or just joining the team during the daily life of an operation, an outside consultant can study the concept and make meaningful contributions to the restaurant's success.
In the tight and competitive personnel market, it's difficult to find a great restaurant manager. When you do, they can be quite good at the daily operation of the outlet. However, when you add additional responsibilities like attracting new staff, hiring, training schedules and promoting the restaurant, something will start to slip. This is where the consultant comes in. They can spend time developing your manager, assisting with sourcing staff and directly handling the training effort. The training plan can include service evaluation, up-selling techniques, beverage service, role-playing and teambuilding all in a healthy non-stressed planned environment. The consultant can bring marketing know how to the table. Develop an events calendar, advertising schedule or a promotional plan. Financial analysis can be performed with the manager to further their development. All of these things are required to successfully run a restaurant in today's challenging market. Your restaurant manger, no matter how great he or she is, will not be able to do all these things well.

A third trend is the leasing of the food and beverage space to an outside firm. As mentioned earlier in the article, many extremely successful hotels suffer with restaurants that don't perform. In a hotel, in most cases the guest room side of the business operates at a higher percentage of profit. The food and beverage operation with its constant variables and perishable product can take away rather that contribute to the profit potential of a hotel. Often times the space the restaurant occupies is worth more as real estate per square meter than can be made by the owner or operator of the hotel. A company who only business is operating restaurants can be a worthwhile "partner".

In Moscow, the need for restaurant space has grown. In a study done in May the following projections for the value of this space per square meter was determined.

Restaurant Real Estate Costs$ Per Square Meter, Per Annum*
Low Medium High
800 1,500 3,200

*Source Russia Journal (May 2003 edition)

Therefore, if you lease the space to an outside restaurant operator and you have an area of 250sqm of space, at the reported market rates, this could generate between $200K and $800K per annum. This is clear profit. If you had an interest in this, CHC can assist you by identifying possible concepts, locating interested parties and putting the deal together with you.

As you well know, there are many variables in this business. There is absolutely no need to try to think of all the possible angles on your own or just with your "in house" team. At CHC International, we are here to assist you, to come along side of you and your team and using our experience help you to make the right decisions. We can structure our relationship with you to include specific projects, studies, and hotel or restaurant concept development or retain us as an ongoing member of your team, available, as you need us.

The business of hotels doesn't need to be difficult.

Terry Rawlins, Senior Hospitality Consultant with CHC Int.