“There has been a marked, double digit growth in food and beverage revenues over the past couple of years. Within the F&B segment, banqueting is showing great potential, which is powered mainly by MICE and this has positively impacted our F&B revenues, boosting overall revenues at ITC Hotels,” said Dipak Haksar, chief executive, ITC Hotels and WelcomHotels.
With F&B in hotels across India becoming a key revenue driver and contributing anywhere between 35 and 50 per cent to overall revenues, hoteliers say the success of food and beverage can make or break a hotel.
For the Oberoi Group, close to 40 per cent of its revenues come from food and beverage. “For us, the ratio has moved from 35 per cent to 40 per cent on an overall basis. As more and more Indians start dining out, we believe that food and beverage will play a very important role going ahead. To give you an example, Indians only dine out twice a month while the Chinese are dining out 60 times a month – an average of twice a day. Even Indonesians dine out 15 times a month,” said Kapil Chopra,” said Kapil Chopra, president, The Oberoi Group.
Luxury hotel Sofitel in Mumbai has seen the ratio of room to F&B revenue change to 51:49 from 70:30 three years back. Biswajit Chakraborty, general manager of the property, says that a strong F&B element automatically gets good business for the rooms. “If you enhance your F&B elements, locals constantly patronize your restaurants and hotel and bring room business too.”
The importance of F&B revenues has increased as profitability from room revenues has declined over the past decade in India. What seems to be driving this growth in F&B is a change in cultural trend of eating out often.
Hotels are aggressively promoting their F&B through discounts and offers to maintain their topline. In fact, new hotels across the country have come up with large meeting spaces and restaurants. Developers are including banqueting spaces in resorts in leisure locations too to attract MICE business.
Shrem Resorts-owned Novotel Hotel and Grand Mercure Hotel in Goa, for instance, together have 20,000 square feet of banquet space. Krishani Chhatwal, director of Shrem Resorts, says the company invested in importing a German hangar specifically for its banquet at Grand Mercure. “It’s important to have banquets because that’s what drives business during the weekdays and summers,” says Chhatwal, adding that revenue from F&B and banqueting has shot up by 30 per cent in 2015 over 2014. The properties host close to 25 events every month.
Moreover, with standalone restaurants giving upscale hotels a run for their money, hotels are trying to exploit the potential of this segment to the fullest and are coming up with newer ways to offer more than just good food and drinks.
“We are gearing up our F&B outlets to compete with freestanding restaurants and so we are constantly doing R&D and new things like flying down international chefs, food promotions, designing new menus, etc,” says Chakraborty of Sofitel Hotel.
Haksar of ITC Hotels says the company has incubated new brands in cuisines like Japanese and Italian to stay relevant and contemporary in its offerings. The company also launched a premium vegetarian dining restaurant Royal Vega at its luxury property ITC Grand Chola in Chennai.
While hotels are earning good share of their revenue from F&B, margins from room revenue still continue to be higher than F&B. Hotels try to maintain their food costs at around 25 per cent but additional costs such as labour and heat, light, power (HLP) increase the spends.
“The margins in the room business is always higher than the food and beverage business due to the fact that the room business does not have the food cost associated with it,” says Chopra of Oberoi Group.
This article originally appears on The Economic Times