5 Tips for Cutting Down Food Costs

By David Eisen - Director of Hotel Intelligence and Customer Solutions for HotStats

17 September 2020
Eisen

With COVID-19 slicing into hotel profit, cutting food costs is more important than ever—especially with so many hotels now relying on food and beverage (F&B) services to meet guest expectations.

If hoteliers want to drive profit in the wake of COVID-19, it's crucial to monitor F&B costs. Otherwise, the expenses from these important operations could be draining critical cashflow.

Luckily, there are simple ways a hotel or resort can grab control of its F&B expenses and increase profit. And lowering food costs is at the core of that plan. Here are five ways to lower food costs in the hotel industry in the face of COVID-19:

1. Track Where Money Is Going

Now more than ever, it's critical to get a handle on money streams. Getting to the bottom of a hotel's F&B operation can shine a light on exactly where money is being spent. More importantly, a hotelier can see which investments are turning into actual profit.

Consider this: In Europe, from 2012 to 2018, F&B profit rose 13.3%. However, costs also jumped during that time span:

  • Payroll rose 16.3%
  • Cost of sales increased 10.9%

When hoteliers understand all the data, they can see exactly what it takes to increase profit, and they can identify what moves to make in a COVID-19-influnced market. By diving into the numbers, savvy hotel pros will see the full picture of F&B expenses as well as how those costs translate to profit. This crucial first step essentially exposes where hotel restaurants can afford to cut back or invest.

2. Hire Profit-Focused Managers

COVID-19 forced hoteliers to cut staff by historic numbers. As employers hire employees back, it's important to weigh decisions against profit.

If the past is any guide, hiring will have a massive impact on any hotel's bottom line. Throughout the first half of 2018, labor costs as a percent of F&B revenue landed at 47%. That's why a crucial step toward lowering food costs is hiring people who understand how food fits into the big picture.

Successful managers will take a holistic approach to F&B operations. They should focus on more than what revenue is coming in. As they're working toward a more efficient operation, they should be asking questions that address the bottom line:

  • Which food items are best sellers?
  • Which items have a short shelf life?
  • Which food items are high margin?
  • Can local sourcing improve food costs?

3. Take Weekly Inventory

It may seem like a great deal of work, but taking inventory can give a hotel control over its F&B operation—something that's especially critical in the midst of market uncertainty. Counting up exactly how much product is in stock and how much product has been sold has several advantages:

  • It saves on waste
  • It prevents overstocking
  • It protects against oversold items and disappointed customers
  • It shows food managers which menu items are in high and low demand

4. Use Math to Set a Better Menu

As food costs and customer demand for F&B services change, hoteliers need to perfect their menus. And there are proven formulas that foolproof the menu-crafting process. Hoteliers who are serious about reforming their menu can use the food cost formula. Here's what this equation looks like:

Total ingredient costs/Price of menu item = Food cost percentage

This simple equation will expose how much is being spent on ingredients for each dish. Not only does it help restaurant managers adjust to market changes, but it also makes it easier to know when it's time to raise menu prices.

5. Cut out Waste

With revenue drying up, hoteliers need to retain cash any way possible. Unfortunately, food waste costs have the potential to eat away at hotel restaurant profits. Full-service restaurants are responsible for an estimated $14 billion of food waste in the U.S. In order to salvage those astronomical food costs, hotel F&B operations can take a few steps:

Audit food waste — Conducting a food waste audit doesn't just mean zeroing in on how much food a hotel is throwing out. It should identify the causes. Are there cooking mistakes? Are spills or over preparation the culprit? By finding the causes of waste, a hotel's F&B department can trim the fat off of wasteful practices and save money.

Track inventory — Knowing inventory shows hotel pros which items are in demand and which dishes are overhyped. That means less food expires on the shelf or is thrown out after guests pass it by on the buffet line.

Consider a POS system — Point-of-sale (POS) systems make it easier to track what food is going out. Essentially, it makes it simpler to monitor inventory and stops managers from buying the wrong item in bulk.

See How Food Costs Fit into Hotel Profitability

With the right data, hoteliers can drive higher operational efficiency in a hotel's F&B department and thrive in a changing market. And higher efficiency requires deeper hotel benchmarking data.

In the end, food shouldn't just feed guests. It should contribute to a broader hotel performance strategy that drives higher profit.

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David Eisen

David Eisen is Director of Hotel Intelligence and Customer Solutions for HotStats, a monthly profit-and-loss data benchmarking service. He is responsible for business development activity in the Americas and developing marketing strategies to drive HotStats’ brand awareness. Prior to joining HotStats, David served as Editor-in- Chief of the Questex Hospitality Group, which includes Hotel Management magazine. His responsibilities included overseeing content direction for the magazine and website, and leading content creation for events and conferences under the Questex umbrella. Prior to Questex, he was hotel editor at Business Travel News. David has a master's degree in hospitality industry studies from New York University’s Jonathan M. Tisch Center for Hospitality and Tourism. He frequently participates on panels and roundtable discussions on myriad global hospitality industry trends and topics.

David Eisen

Director of Hotel Intelligence and Customer Solutions for HotStats
david.eisen@hotstats.com