Dubai
Don’t just tinker around with only topping up the hotel room features — give the same sort of attention on the food options. For hotel operators and landlords of those properties, food can be your way to bulk up on your revenues and margins alike.
According to a new hospitality industry update, Knight Frank states that F&B-based initiatives can stimulate outlet revenues by over 10 per cent, as would just focusing on room-based initiatives. “With the potential to drive up to 50 per cent of total hotel revenues (or more in some cases) the F&B department is often one that asset owners look to in order to drive value,” the report notes.
The key point is that hotel operators should become ever more flexible in how they leverage these assets. “F&B outlets in properties tend to have some meal periods that attract strong visitation and others that do not,” the report says. “While the tendency may be to shut the outlet for the less popular meal periods, more recently this issue has been combated through the creation of a third-party meal-specific “pop-up restaurants” as a means to stimulate demand.
“Under this framework, outlets are shut down, “soft decorations” are put in place, and the outlet is reopened as a different concept. By doing this, properties can increase their net returns in an e effective manner with marginal incremental investment.”
Some of Dubai’s city hotels have used their F&B options to create optimum benefits for the properties. Rather than serve just the guests, these outlets have won for themselves a wider clientele among those who are there just for the food and ambience. While it’s true that location is key in this — being near commercial hubs always helps — hotels farther out are also using variations of the tactic. Especially in pulling in weekend traffic.
But F&B is not the only course available for hotel properties to reinvent themselves or when it comes to generating more yields. “Through a combination of cost savings and revenue generating initiatives, hotel owners are able to increase asset value by over 20%, with nominal capital investment,” said Ali Manzoor, Associate Partner at Knight Frank.
What hotels decide to do with their offers during the off-peak season also counts. The easiest way would be to cut the room rates, and the second option would be to bundle up offers without cutting the rates.
With the second tactic, “the understanding is that during low season, guests are not necessarily drawn to the lowest rate, but instead seek the best value for money,” the report adds. Knight Frank did a case study of two hotels that employed either option, between May and August.
One property lowered rates (or offered three nights for the price of two) while the other packaged the rates with value added activities including a spa experience, a sports activity, breakfast and set menu dinner, which all had marginal incremental costs.
The difference in achieved room revenue (after allocations) was significant. “The property that packaged its rates — following a rate driven strategy over a volume driven one — was able to increase total rooms revenue by an average of over 12 per cent during slower months, which increased total rooms revenue by 3.6 per cent over the year,” Knight Frank says. “Unlike incremental occupancy, which has associated costs, strong rates go straight to the bottom-line.”
