CBRE: U.S. Hotels’ F&B Revenue Trails Pre-Covid Levels

CBRE Hotels Research cites staffing shortages, cost control and straggling group travel through April 2022 among the top causes for the U.S. hotel industry’s lagging food and beverage department revenue, according to a recent company report.

While U.S. hotel rates and revenue per available room in 2022 peaked over pre-pandemic levels in 2022, which CBRE forecast to moderate in 2023, the research company found the same hotels’ F&B departments wanting—at least by some metrics.

CBRE projected U.S. hotels’ total F&B department revenue dollars per available room will hit $22,811 for 2022. While short of 2019’s $25,839 per available room, the year-end estimate is more than double that metric in 2021 ($10,816) and triple 2020 ($7,093).

CBRE calculated the F&B expenses, profits and revenues of U.S. hotels that supplied data for the company’s annual trends report from 2015 through 2021. Year-end projections were determined based on a sample of hotels through August 2022, which CBRE categorized in three types: convention hotels, full-service properties and resorts. Hotels only offering complimentary F&B were not included in the report.

Despite pent-up demand, growing RevPAR and average daily rate increases seen in 2022, CBRE estimates “2022 annual F&B revenue levels for the hotels in our sample will be just 88.3 percent of 2019 levels at year end.” That said, F&B revenue is climbing back from a 72.5 percent decline in dollars per-available room from 2020, according to CBRE.

Plus, there’s a sunnier way to look at the numbers: swap “available” for “occupied” room and the recovery picture looks different.

Total F&B revenue dollars per occupied room across all types of U.S. hotels in the report increased to $107.09 in 2022 compared with $94.07 in 2019. As of August 2022, “F&B revenue on a POR basis is on pace to be 13.8 percent above 2019 sales,” according to CBRE. These numbers can be attributed to increased menu prices as well as a rise in local meeting business that might rent an on-property room for the day and include food and beverage in the rental. The latter would offer a particular boost on a POR basis, since those meeting-goers are not hotel guests.

The Cost of Staffing Shortages

While F&B department revenue shows signs of revitalization, profit margin recovery is not at the same level. “F&B department profits PAR will be just 80.2 percent of the profits earned in 2019,” according to CBRE, which the report attributed to increased food costs and labor shortages throughout the industry.

“Labor and costs of goods are the primary contributing factor to the reduction in profit margins,” according to CBRE. Citing interviews, CBRE noted “individual position wages have grown 20 to 40 percent over 2019 levels as F&B outlets are struggling to re-staff and maintain. Food prices have increased more than 10 percent relative to 2021 and inflationary concerns are continuing.”

Attracting, onboarding and retaining valuable staff within hotel industry can be costly—especially in F&B departments—and adding in the rising cost of goods could push hotels toward a more economical route.

Some hotels have consolidated service styles—think grab-and-go options and shortened hours of operation—to mitigate rising costs and lack of staff. CBRE also sees outlets focusing more on quality over quantity to take the focus off rising costs.

“The cost of food and beverages [in 2021] increased at the greatest pace (67.6 percent) among all department expenses,” CBRE reported. “This was followed by salaries and wages (42.9 percent) and other operating expenses (35.7 percent).” The report noted a “reduction in payroll-related expenses (-20.9 percent) helped to moderate total F&B department expense growth.” Report authors expected these issues to continue to challenge margins in 2023.

Catering to All

CBRE also noted properties’ “aggressive” approach to F&B planning includes ramping up such offerings as “rooftop venues, active lobby bars or signature restaurants.”

Blending offerings across stay types to include all travelers is another way hotels are streamlining service. “The industry will continue to balance standards, service, efficiency and quality to maximize profit and reduce risk,” CBRE reported.

For conference and groups, CBRE noted an increase in “more varied [event spaces] with unique alternatives to supplement the traditional ballrooms, junior ballrooms and breakouts spaces.” That could be a bright spot for meeting organizers using hotels, report authors added, encouraging more creativity at the property level. “The pandemic was detrimental to the F&B space but potentially accelerated various trends the industry was initially sluggish to adopt,” they wrote.

Group and Corporates Can Close the Gap

As corporate travel demand increases, leveling up to if not outpacing leisure, full-service properties and convention hotels are inching closer to closing the gap as F&B revenues are expected “to be 18.6 percent behind 2019 levels,” in 2022, CBRE reported.

CBRE sees a strong move forward for full-service properties as “these hotels are frequently dependent on individual business travelers,” according to the report. “Group demand has shown some degree of revival, supporting the ability of convention hotels to return to 92.5 percent of their 2019 F&B revenue levels,” CBRE said in the report.

However great the strides for the corporate market, resorts will end the year ahead of convention and full-service F&B revenues. Due to the “strong resurgence in leisure travel,” CBRE estimates “resort property F&B revenue will surpass 2019 volume in 2022 by 15.7 percent.”

Angelique Platas www.businesstravelnews.com