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Category: Our Portfolio Updates

F&B Opportunities & Challenges hints The First Group Asset Management’s white paper for 2017

Hospitality is described as one of the most fast-paced industries, particularly in Dubai where room inventory is projected to record 18% year-on-year growth in 2017. While there are numerous opportunities related to the rising demand, it also adds pressure to compete with new brands and operators. Hoteliers, hotel owners and asset managers should craft strategies to emphasize their unique selling propositions to appeal to guests. In other words, what can hotel practitioners do to acquire higher MPI, ARI and RGI than the competitors? The answer certainly does not lie in a price war.

Traditionally, F&B has always served a support function to the rooms department. Hotel operators enforce minimum requirements on the number of F&B outlets within the hotel in order to set brand standards. However, based on Colliers’ survey which focused on hotels in the Middle East and North Africa, the all-day dining (where breakfast is offered) contributed to roughly 33% of total F&B revenue, followed by the specialty restaurant at 21% and in-room dining at 5%, while other sources and the minibar contributed 3% and 1%, respectively (Colliers, 2016). The highest contribution came from banqueting at 37%. STR Global research revealed F&B compositions in the UK with 59% from both all-day dining and specialty restaurants, followed by a 31% revenue contribution from banqueting and catering, 7% from in-room dining, 2% from others and 1% minibar. These percentages are similar despite the different geographic locations. Statistics highlight that a critical issue for hoteliers is that they are not investing or crafting strategies to capture higher footfall from F&B for revenue generation – and primarily focus on breakfast dining and in-room dining as services offered to in-house guests.

The resistance towards F&B innovation will likely hinder hoteliers from capitalizing revenue and profit. As standalone F&B units – direct competitors of hotel F&B – continue to innovate creatively, it is a critical time for hoteliers to reshape their F&B revenue management and business models. From an asset management perspective, identifying methods to optimize profitability of a hotel restaurant is an imperative exercise.

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