Is the weighing scale of Hotel Revenue tilting towards F&B?
Updated: Mar 17
Isn't food quality the deciding factor while choosing a hotel today?
Well, it is for most of us since the room quality is well standardized and taken care of, by almost all the hotels today. For many hotel management companies in India, the focus has shifted from rooms to Food & Beverage- which can also be seen on the revenue mix of hotels in India. This trend has been buttressed by a recent Times Of India article, which clearly shows the number tilting towards F&B revenue in comparison to room revenue. Many resort management companies in India as well as 5-star hotels are also deploying F&B-based strategies to attract guests, like vegan cafes, calorie-based food selection and many more creative practices.
The shift in given data shows an increase from 37% to 43%, in favor of F&B revenue share. When we analyze it closely, the increase can be attributed to a mix of various reasons- for example, the significant decrease in room revenue owing to the dip in ARRs through past years. As confirmed by the top hotel management companies in India, the Average Room Rate (ARR) has decreased in past 10 years. This is due to a shift in demand-supply dynamics of hotel industry since the supply has increased drastically in comparison to increased demand. Another probable reason to attribute the increase of F&B share might be the inflation in food selling price, which has evidently risen in last 10 years without doubt. When we dig further into the numbers, many hotel management consultants in India believe there is a bigger underlying principle at work here- there are theories galore.
Nonetheless, irrespective of the underlying reason of this shift- the result remains the same for most of the big and small hotel management companies. F&B revenue today comprises of almost as much as the room revenue and this trend needs to be acknowledged for strategic decisions which affect hotel revenue. Evidently, it is time to step-up the game and focus on F&B-based strategies in addition to room sales in order to improve the overall hotel revenue. At least, this is what the hotel management consultants in India are swearing by for now.