June 2008 project 12819
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June 2008 Project #12819. Food Industry . Facts. Insights. Consulting. Understanding the Hotel/Lodging On-Premise/Foodservice Segment A Strategic Evaluation of Trends and Opportunities A Common Interest Study. Prepared by:. I. Introduction. Study Background.

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June 2008 Project #12819

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June 2008 project 12819

June 2008

Project #12819

Food Industry. Facts. Insights. Consulting.

Understanding the Hotel/LodgingOn-Premise/Foodservice Segment

A Strategic Evaluation of Trends and Opportunities

A Common Interest Study

Prepared by:

I introduction

I. Introduction

Study background

Study Background

  • In recent years, the lodging segment has been one of the fastest growing on-premise segments in the United States. It is, however, a complex segment that is not widely understood by the supplier community, and selling into this channel involves providing solutions within not only the restaurant area, but also banquet and catering, room service, bars and lounges, breakfast, minibars and a number of other areas.

  • To provide clarity and insights into this channel, Technomic has collaborated with the leading trade publication in this segment, Hotel F&B Magazine (HFB), to develop an omnibus, authoritative study on this critical segment. While the macro trends continue to favor growth in hotel foodservice, this study provides a greater understanding of the niches and sub-segments that contribute to the overall attractiveness of this segment. This study is intended to provide the basis for strategic and tactical planning purposes for any supplier that wishes to better target this segment.

  • Our methodology for this study was multi-faceted, which allowed us to gather the depth of intelligence that was necessary. From the outset, Technomic was tasked with conducting:

    • Segmentation of the market by type of property.

    • Evaluation and opportunity assessment of sponsor product categories within the lodging segment.

    • In-depth trade interviews with decision makers at all levels of hotel property types.

    • Quantitative research among a representative sample of unit-level food & beverage management.

    • Supplier/channel interviews.

    • A thorough review and analysis of the collected data.

  • The primary objective of this common interest study is to provide information, insights and perspectives to supplier sponsors to most efficiently target and exploit opportunities in the hotel foodservice area and its representative subsegments.

Scope of the engagement

Scope of the Engagement

  • This study examined the current state of the hotel/lodging on premise industry. The segment has numerous tiers, and Technomic provided a comprehensive and robust perspective on each:

  • Note that B&B (bed & breakfast) locations were not be included in the scope of this study.

  • For major property tiers, market size data are presented, generally in terms of food & beverage revenue or supplier shipment dollars. Given that this report is being issued in mid-2008, all figures shown are estimating the full year’s value.



  • To meet study objectives, Technomic utilized a research intensive, multiple step methodology consisting of seven inter-related steps.

  • Step One: Program Initiation

  • Technomic met privately with each sponsor (in person or via teleconference) to review the proposal and discuss study goals, issues and deliverables. Proprietary requests are being reported confidentially to each sponsor at the conclusion of the project.

  • Step Two: Secondary Review

  • Technomic gathered and reviewed all publicly available information (e.g., industry trade publications, general and business publications) as well as Technomic’s prior non-proprietary research on the lodging segment, key players, and major trends. Our collaboration with HFB was also critical here, as HFB also maintains a large and relatively untapped database of available secondary insights.

  • This information was used as background to determine current and developing trends and issues in the segment.

  • Step Three: Initial focus group/roundtable discussion with hotel F&B executives

  • Prior to initiating research, Technomic convened a roundtable discussion together with Hotel F&B magazine. The purpose of this discussion was be to begin evaluating and assessing F&B executive perceptions regarding key issues, challenges and opportunities facing the lodging industry. This roundtable allowed our study team to develop hypotheses that were tested and confirmed throughout the course of this study.



  • Step Four: Quantitative hotel on premise operator research

  • Technomic assessed attitudes and behavior with an in-depth survey of hotel F&B executives at the unit level. In total, Technomic conducted 456 interviews at the unit level. The purpose of these interviews was to understand operator issues, preferences and plans, and to gather usage data to develop and update macro market size estimates as well as individual sponsor category information.

  • Step Five: In-depth corporate/headquarter interviews

  • In addition to obtaining unit level data (see previous step), Technomic also targeted and interviewed approximately 30 of the largest hotel and casino chains including both franchisors and franchisees. The purpose of these interviews was be to gather more strategic perspectives on the segment, potential opportunities, unmet needs, supplier requirements, and other issues included in the final scope of this study. We obtained a wide cross section of opinions and insights from executives in each tier/level of lodging property. Technomic’s membership in, and association with, the Advisory Board of Hotel F&B magazine, provided unique access to key F&B decision makers in this segment. This step included a series of half-day, in-person meetings with the food and beverage management from the largest Las Vegas hotels.

  • Step Six: In-depth distribution channel interviews

  • Technomic conducted a series of in-depth, qualitative one-on-one interviews with important links in the distribution channel. Broadline distributors and specialists were targeted, and all of the major players were interviewed. The purpose of these interviews was to obtain a detailed understanding of the hotel segment, and the sponsor product categories as they relate to the distribution channel.

  • Step Seven: Developing a Strategic Analysis

  • At the completion of all field work, Technomic prepared this written report to document study results and conclusions. This report will provide each supplier sponsor with recommendations for how to leverage the opportunities within the lodging segment, including which types of venues/properties provide the best prospects. It also provides a baseline of industry and Technomic’s projections regarding likely future developments.

Structure of this report

Structure of This Report

  • Given the large amount of data and insights included in this report, it is broken into a number of sections, each of which explores a specific area of interest for the sponsors. The overall structure of this report is as follows:

    • Executive Summary of Findings and Recommendations

    • Segmentation and Review of the Lodging Segment Overall

    • Review and Segmentation of Lodging F&B Revenues

    • Daypart Findings

    • Best in Class Supplier Attributes

    • Food & Beverage Findings

    • Equipment Findings

    • Opportunities within Las Vegas

    • Supplier Sourcing and Selection

    • Distributor Perspectives and Outlook

    • Appendices

Ii executive summary and recommendations

II. Executive Summary and Recommendations

Current size and segmentation of the lodging segment

Current Size and Segmentation of the Lodging Segment

  • In total, there are over 46,000 hotel properties and nearly 4.5 million hotel rooms in the United States. In addition, there is a robust pipeline that indicates new hotel construction will be consistent through at least the early part of 2010. Some other key facts about the lodging industry include:

    • The Southern U.S. has the largest number of properties and rooms

    • Independent hotels account for almost half of all units

    • Over 90% of properties are midscale or economy hotels

    • Roughly 60% of hotels are branded hotels

  • Some of the largest hotel companies are household names. From a food and beverage size perspective, leading hotel chains in the country include:

  • Within the 46,000+ properties are over 15,000 restaurants. It should be clear that only 26% of hotel units maintain restaurants, a figure that is shaped by the fact that only 1 in 10 economy hotels operates a restaurant on-site.

Implications:The hotel food and beverage industry is large and complex, with rather large differences in service styles and offerings by type of property. Overall, Technomic believes that there are above average opportunities within the lodging segment. This report provides the baseline insights necessary to evaluate the go-to-market structure and activities to more effectively reach this market segment.

Lodging f b overview size of the industry

Lodging F&B Overview – Size of the Industry

  • The U.S. lodging on premise industry currently generates over $33 billion in revenue. The market has shown steady and generally above average growth over the years. More recently, the industry has shown renewed signs of vibrancy as hotel operators dedicate greater resources toward expanding their on premise offerings.

    • Upscale properties, with their market presence and higher number of on premise outlets per property, lead the market with revenues of over $18 billion. Economy hotels have a very large presence in the U.S., but their lack of complete on premise solutions (they typically focus on breakfast; often complementary) leaves their revenue share of the market far behind other property tiers.

    • From the perspective of service area revenue generation, banquet and catering operations are the biggest F&B business for hotels. On-premise full service restaurants are #2 in revenue generation. These top two service areas account for approximately 2/3 of hotel food and beverage business.

Total Hotel F&B Revenues 2008 = $33.735 billion

Lodging f b overview growth and outlook

Lodging F&B Overview – Growth and Outlook

  • The size of the overall lodging F&B market is expected to expand as hotels are increasingly incorporating new F&B service areas and multi-use space. The objective of a majority of hotels is to support food and beverage operations as a profit center. As a profit center, resources are being dedicated to space expansion, service area expansion, and menu expansion. Far more consumer understanding and insights are being gathered and operators are looking to partner with on premise suppliers in order to develop leading edge F&B practices.

  • In short, the hotel F&B market looks very different today than it did even five years ago. New efforts to develop high culinary standards and foodservice “buzz” (all in the name of profits) are re-shaping the business.

  • Positive indicators include:

    • Clear emphasis on F&B by hotel operators

    • Expansion of foodservice throughout properties (new service areas)

    • Strong new construction pipeline

    • Changing impression of hotel foodservice among consumers

    • Exchange rate attracting more international travelers

  • Negative factors that could impact the industry in the coming years include:

    • Economic recession impacting U.S. consumers’ disposable income

    • Inability to attract non-guests to hotels through promotional activities

    • Rising food costs and potential food shortages impacting hotels’ menuing capabilities

  • All things considered, Technomic anticipates growth in the lodging segment to surpass that of many other on premise segments. Specific growth forecasts can be found in this report for each sponsor’s major product lines.

Implications:While growth has exceeded the industry over the past several years, like the broader industry, hotel F&B revenues are expected to slow. Given the economic realities, having a stronger, more targeted program to reach specific hotel customers is critical for sponsors to continue to see above average growth.

Daypart evaluation

Daypart Evaluation

  • The two dayparts that receive the most attention from operators are breakfast and dinner. While all hotel operators emphasize breakfast offerings one way or another, it is only the full service properties that are generally making dinner a priority. Lunch is considered a slower daypart and a lesser opportunity by most hotel chains.

    • There is heated competition among limited service hotels to attract customers, and the competition is centered around breakfast offerings. Many value-oriented customers are making hotel selections based, in large part, on the quality, variety, and price of the breakfast offering. In turn, a high percentage (85+%) of limited service hotels are providing breakfast as a complementary service. So the competition has evolved into which hotels can offer the most varied, well rounded breakfasts for no additional cost.

    • Breakfast is also critical for most hotels because it “sets the tone” as far as guest perceptions. A poor breakfast experience will cause guests to seek out other meals elsewhere.

    • Dinner is considered the most profitable meal service for hotel operators. Like breakfast, consumers are looking for high quality meals. Unlike breakfast, the prices of these meals are often quite high. Executive chefs and their culinary teams throughout the industry are transforming the perceptions of hotel dining as they are offering menu items and culinary expertise that did not exist in lodging foodservice 5 to 10 years ago (except in the luxury segment).

    • Other dayparts, such as mid-afternoon snacks and late-night dining have not yet become a priority for most operators. There are some new developments in these areas but they are not commonplace.

Implications:The breakfast daypart is one that all operators, regardless of tier/level, are actively focused on growing. Dinner too remains an emphasis, and suppliers need to provide daypart-specific solutions to their hotel customers. While other dayparts are receiving less emphasis, they may provide incremental growth and profitability options for both operators and suppliers.

Perceived best in class suppliers

Perceived “Best in Class” Suppliers

  • Throughout the course of this study, Technomic consistently asked hotel operators to identify the food and beverage suppliers that they consider best-in-class. While the questions were asked about specific service areas, for the purposes of this executive summary we are identifying the companies that were most often mentioned across the board. Leading-edge hotel F&B suppliers include:

    • Coca-Cola

    • PepsiCo

    • Starbucks

    • Sara Lee

    • Tyson Foods

    • Hormel Foods

  • The reasons for their best-in-class status often comes down to a combination of quality products, good availability and service levels that surpass the competition. High marks for service levels were based on such factors as collaboration on consumer insights, banquet and catering support, cross-training, and consistency in billing and pricing practices.

Implications:Best in class sponsors were typically noted to be doing a higher level of volume with the hotels interviewed, and being “best in class” gives suppliers a competitive edge. Understanding the criteria operators use to rate best-in-class, and building the sales, marketing and promotional initiatives around these will provide suppliers with a differentiation factor that is extremely important in a slower growth environment.

Supplier selection criteria

Supplier Selection Criteria

  • Some of the most important selection criteria being used by hotel purchasing management include the following:

    • Quality

    • Health characteristics

    • Application flexibility

    • Service area flexibility

    • Brand image

    • Value

    • Consumer demand

    • Ease of use

  • However, in addition to these factors, hotel F&B executives were also asked during this study to provide insight into other, less traditional factors, with the goal being to assess tier two factors and those considerations that are becoming more important. Therefore, it has been recognized that the following are also important in the purchase process:

    • Manufacturer-supplied equipment or packaging to supplement product

    • Manufacturer-supplied training in food preparation or use

    • Strong reputation as a foodservice/on-premise brand

    • Experience in using brand

    • Corporate specifications

Implications:Many of the most important selection criteria are “table stakes” for entry, but suppliers need to first focus on these areas. Other lower rated factors may not be “critical” but can provide suppliers with a defining edge over competition, and it is in these areas that a “best in class” supplier may be formed.

Sourcing distribution overview

Sourcing/Distribution Overview

  • All indications suggest there remain two camps in the industry as it pertains to food and beverage sourcing: those that are advancing the function with automation and advanced cost control practices and those who are laggards and are operating independently without any outside purchasing support.

    • It is also important to recognize that there is a wide range of approaches in the selection of products. Corporate mandates, approval lists, recommended lists, and unit discretion all continue to be viable alternatives. suppliers should be familiar with the practices of each individual hotel chain. Ultimately, the decisions around purchasing continue to be made by corporate food and beverage executives and independent hotel owners. Chefs have a very influential, but often supporting role in the decisions.

    • As expected, this study identified Sysco and US Foodservice as the two primary sources of distribution for the industry. Fifty-six percent (56%) of hotels named one of the two as their primary F&B distributor. Club stores are considered a valuable sourcing option, but only for small hotels or emergency situations.

    • During the research phase of this effort, many distributors echoed the forecasts developed for this report: the segment holds very strong potential but must overcome the tendencies to operate in a status quo manner. Distributor locations in metropolitan or destination cities were also far more likely to see the upside of lodging F&B.

Implications:While “selling” corporate is typically a first step for suppliers to get a product placed, typically these provide nothing more than a hunting license to sell into the individual properties. Understanding differences by chain and type of property is a critical first step; distribution also plays a role here, as properties are more likely to “spec” a brand or supplier with strong penetration and national distribution.

Overall assessment and recommended action steps

Overall Assessment and Recommended Action Steps

  • The lodging segment is one that presents unique opportunities given the needs of hotel customers and the variability of hotel performance based on economic and political conditions. The segment is subject to many of the same trends as the greater on premise industry, but has a unique customer base split by business travelers (“required” travel) and leisure travelers (“pleasure” travel).

  • Without question, there are opportunities across categories from entrées to sides to beverages to equipment. In order to take advantage of the opportunities, however, suppliers need to recognize the differences in needs between property types. Limited service properties and full service properties have very different goals and serve customers in different ways. Even within the larger classifications are sub-segments that are approaching the marketplace using distinct strategies.

  • As an outcome of this study, Technomic has prepared a number of recommended action steps. They are listed below and further described in the pages that follow.

    • Develop unique strategies for limited service properties, built around simplicity and minimal preparation

    • Build full service strategies around banquet and catering needs, but also promote secondary service area advantages

    • Prepare customer sub-group profiles in order to help banquet and catering managers target customers by event

    • Develop robust staff training programs to appeal to hotels’ need for multi-use flexibility

    • Recognize the unique nature of the hotel on premise business and structure sales activities accordingly

    • Create action plans that take into account the sometimes opposite requirements of purchasing and culinary decision makers

    • Maximize R&D investment by emphasizing the extremes of 1) limited prep and 2) high quality and versatile product

    • Ensure that negotiated business is optimally profitable

    • Position your organization as a hotel on premise consultant, presenting solutions for expanding on premise throughout a property

Recommendation 1

Recommendation # 1

  • Develop unique strategies for each primary service area

  • Full service properties are experiencing their strongest food & beverage revenues and profitability in their banquet and catering service areas. For beverage alcohol suppliers, this service area provides the highest amount of revenue potential, and there is a strong opportunity here to help the properties develop and excel in it’s catering beverage program. Potential areas of assistance include:

    • Training and education for banquet servers

    • Promote packaging that fits with higher volume

    • Drink recipes

  • Beyond banquets and catering, there are other service areas that are also ripe for incremental growth and which should require a different strategy, approach and offerings. Bars/lounges and to a lesser extent pool bars, especially in upscale areas, may have similar needs. At the same time, many higher end properties are also experimenting with flexible drinking areas, and developing and offering the right mix and type of products here is critical.

  • At the same time, across classification levels, brands are trying to maximize space and generate new F&B revenue streams. For example, breakfast service areas are being transformed into luncheon coffee bars during the midday. Restaurants are being utilized for banquet gatherings when appropriate. And kiosks are being used for happy hour and sample displays during evenings. F&B managers are seeing more value in multi-use space, and expect suppliers to be able to recommended ongoing improvements in space utilization. Helping the properties clarify their expectations for beverage alcohol will be important to maximize the potential for space that may not be clearly dedicated.

Recommendation 2

Recommendation #2

  • Prepare customer sub-group profiles in order to help banquet and catering managers target customers by event

  • As mentioned in the previous recommendation, banquet and catering functions are critical to the success of a hotel’s food and beverage business. However, it must be understood that banquets and catering is a large segment that needs to be further compartmentalized in order to achieve optimal results.

  • Some properties have established a reputation as a wonderful wedding venue, but a sub-par corporate facility. Others have built their convention business but have little success in personal/family functions. Hotel operators are looking for support from suppliers in further breaking down the banquet and catering business into event specialties.

  • Leading edge suppliers have the capability of developing menu and drink ideas based on event and can share insights into the preferences of different groups. Suppliers that provide general support in developing event menus and strategies will be positioning themselves as a banquet and catering partner.

Recommendation 3

Recommendation #3

  • Recognize the unique nature of the hotel on premise business and structure sales activities accordingly

  • The lodging segment is unlike the rest of the on premise industry. There are any number of service areas to operate; there are price sensitive customers (most leisure travel) and price immune customers (many business travelers on an expense account); there is a strong breakfast component to the market as well as a vibrant late-night/alcoholic beverage business. Suppliers must have a strong understanding of the hotel operator and the unique challenges they face.

  • Hotel executives are quite clear that the least capable suppliers are often those that approach them with a general on premise sales force focused on selling broad product lines using tactics that are not tailored to the hotel industry. Unless the products being sold are necessities, those suppliers are often at a disadvantage because they are incapable of presenting creative solutions to purchasing management.

  • Use of a dedicated sales force or segment managers/champions is an increasingly important alternative to consider. Many operators are giving more credibility and consideration to organizations that have a segment expert on the sales/consulting team.

Recommendation 4

Recommendation #4

  • Create action plans that take into account the sometimes opposite requirements of purchasing and bartender/mixology decision makers

  • The majority of hotel chains employ a Vice President or Director of Food & Beverage who is typically the primary decision maker for the organization, or who delegates the decisions down to subordinates. However, there is often a tremendous amount of influence wielded by executive chefs, as well as director level F&B executives, banquet and catering managers, bar managers and even bartenders at times.

  • In many circumstances, there is a pull between the factors important to purchasing managers (price, marketing dollars, sales representation relationship) and the “mixology” experts (attributes such as “on trend,” high quality, health characteristics, versatility). It is critical that suppliers develop sales strategies that address all concerns and emphasize the areas of commonality (value, reputation, availability). Property level involvement is critical to define and delineate a success beverage program that is unique to that property and that builds upon the special attributes of that particular property.

  • The food and beverage director is usually the key contact person because of their involvement with all service areas. But failure to acknowledge the needs of the executive chefs and other within the beverage alcohol decision-making process is a major mistake, as they will be an important influencer on any banquet, catering, or full service restaurant decisions.

Recommendation 5

Recommendation #5

  • Maximize R&D/drink menu development investment by emphasizing the extremes of 1) limited drink preparation and 2) high quality and versatile product

  • The lodging industry is continually placing a greater emphasis on food and beverage service. However, there are the “haves” and the “have nots” in the industry when it comes to culinary and mixology capabilities. Suppliers need to be cognizant of the two very different groups.

  • Limited service properties (where alcohol is less important to the overall business) consider the idea of on premise to be a necessary evil in many cases. But they recognize it is a necessity that requires a great deal of attention and competitive positioning. Lacking significant bar areas or a great deal of function space, and with little kitchen and prep facilities, these limited service operators are heavily reliant on suppliers to provide generally “good” quality products that require little labor, prep, or handling. These properties tend to be less oriented toward spirits based drinks, and even wine is not a major driver for much of their beverage program.

  • Full service properties are most interested in signature drinks using premium quality brands. Other attributes that they’ve noted seeking include high flavor, versatility, and often healthy offerings. Preparation considerations are less of a concern for these properties, particularly in the bar where they have the staff and equipment to prepare even complicated or elaborate drinks. However, the banquet and catering space has similar demands of premium quality, versatile drink products, but their need for assistance is much greater.

Recommendation 6

Recommendation #6

  • Ensure that negotiated business is optimally profitable

  • Hotel chain purchasing departments are negotiating contracts at a National Account level, but often local properties are not taking advantage of the negotiated contract. Obviously, in many cases, these national contracts do not guarantee any level of sales volume. They merely establish a particular supplier as an approved or preferred vendor and provide a “hunting license” to obtain business from individual properties. At the same time, buying groups such as Avendra are providing purchase efficiencies to individual properties as well. While these negotiated contracts are often necessary first steps, there are compliance issues that generally diminish the overall value of this negotiated business.

  • Suppliers are only now beginning to realize the inefficiencies in such a system. There is often “double” or “triple dipping” in terms of program and trade dollars spent, with corporate programs, Avendra, and often the distributor programs receiving credit on volume sold into hotels. In this segment, as in other segments that involve group purchase organizations or other 3rd party buying groups, managing these programs is critical, and profitable growth often rests on effective oversight. Many suppliers do not understand the true costs to serve hotel F&B customers and do not take into account low levels of compliance or higher trade costs when evaluating these customers.

  • To ensure that this negotiated business is optimally profitable, suppliers must:

    • Develop a system for tracking trade and promotional dollars and compliance to this segment. There are a number of software tools and other systems available.

    • Understand that hotel management at a corporate level is often frustrated by the fact that properties are not taking full advantage of these negotiated contracts. Many spirits contacts stipulate a premium brand “or similar,” but property-level decision makers tend to have a high degree of autonomy in many brand selections. Corporate is often committed to increasing the percentage of properties that are “on the program”. Some properties even admit that they are not always fully aware of the benefits of these negotiated contracts. It is sometimes the responsibility of the supplier to inform the property.

    • Recognize that all hotel chains have a different set of reasons and objectives in establishing these contracts. It remains very important to negotiate at the national level and it is an important, but forgotten, step in the process to have corporate advise your company on the optimal way to approach and sell to properties. Most chains understand the “hot buttons” of their properties and can provide insights into key issues, selection criteria and positioning of the national contract.

Recommendation 7

Recommendation #7

  • Position your organization as a hotel on premise consultant, presenting solutions for expanding on premise throughout a property

  • One of the more recent trends in the lodging industry that is emerging as a necessary growth vehicle is the idea of expanding on premise to areas of a property that have not previously been a food and beverage destination. Areas such as lobby lounges, registration desks, bars/pubs/social spots, and reception areas. The conversion of these locations within the hotel is a growing priority for operators. They are trying to utilize space more profitably and are attempting to give customers more (and more varied) food and beverage options. “Flexible alcohol zones” appear to be taking hold, particularly at the higher end, and beverage alcohol is a critical component for their growth strategies.

  • However, aside from a select few major hotel chains, operators are struggling with how to enact such a multi-use plan. Many hotels are engaged in “trial and error” efforts and are not experiencing much success. Many hotels are looking for suppliers to present best-in-class ideas and insights into how the market leaders are making expanded on premise successful. Suppliers need to be prepared to review optimal locations, product/beverage mix, promotional success stories, employee training, and equipment needs.

Requirements for success

Requirements For Success

  • Each of the recommended growth initiatives have different requirements and functional areas that will be required to drive success. While some are marketing driven, there are also sales, operations and general management areas that are required to assist in moving the business forward. As a summary, the following details the areas that will have primary and secondary roles in making each recommendation a successful piece of a lodging growth strategy:

√√ = primary responsibility; √ = secondary responsibility

Iii segmentation and review of the lodging segment

III. Segmentation and Review of the Lodging Segment



  • The U.S. lodging industry is a complex segment that requires examination at a number of levels. From a macro-perspective, this is an industry that is greatly impacted by economic, political, and general consumer trends. For example, the dramatic decline in overall industry revenue in 2001/2002 as a result of terrorism/traveler fear was rather quickly overcome as consumer worries shifted and travel was again perceived as viable and important (albeit more difficult).

  • At a more micro-level, lodging foodservice must be reviewed by property tier, hotel size, and regionality (among other things) in order to get a real sense of performance and needs. Full service properties and limited service properties are serving very different customer bases with distinct needs and demands. The breakfast daypart, examined closely in this report, is a prime example of the differences between classifications. One set of customers is seeking a wide variety of meal solutions, menu items, and price points, while the other is seeking extreme value in a simplified setting.

  • All told, there is real growth in the lodging industry, both in terms of overall revenues and foodservice revenues. The first step in assessing opportunities is to take a comprehensive look at the overall conditions and statistics relative to the lodging industry as a whole. In this section of the report, we provide a high level of detail into the size of the industry, focusing on such details as segment, hotel size, brand affiliation, brand ownership and regionality.

  • Please note, much of the data included in this section was developed by Meinrad LP, an industry leader in tracking the size and growth of the hotel business.

  • Also, throughout this report, you’ll see reference to various segments and classifications. Technomic made every attempt to provide consistent definitions of segment and property tier, but there are some instances when that was not possible, as organizations in the industry continue to use different terminology and classifications to describe properties. Therefore, in some cases, you’ll note, for example, a classification of ‘upper upscale’ and elsewhere that segment would fall within a ‘luxury or first-class’ classification.

U s hotel industry analysis regional totals

U.S. Hotel Industry Analysis – Regional Totals

  • The table below identifies the size of the U.S. lodging industry, by region and property tier. In general, the majority of properties and hotel rooms are located in the South, which accounts for 1/3 of properties and an even higher percentage of rooms. The North Central region offers the lowest number of properties and rooms.

Region Lodging Totals by Segment

Source: Meinrad LP

U s hotel industry analysis brand management company analysis

U.S. Hotel Industry Analysis – Brand Management Company Analysis

  • Below is a table indicating the number of hotels and rooms in the segment, broken down by management affiliation. As can be seen, corporate managed hotels tend to be more an exception rather than a rule. Only 14% of all properties are run by the corporate headquarters; midscale and economy properties are more likely to be managed by a 3rd party management company.

Brand/Management Company Analysis by Segment

Source: Meinrad LP

U s hotel industry analysis brand affiliation

U.S. Hotel Industry Analysis – Brand Affiliation

  • The table below shows the number of hotels and rooms in the U.S. lodging segment by brand affiliation. “Branded” properties (representing those that carry a national chain brand) account for nearly ¾ of all rooms and 60%+ of total properties.

Brand/Management Company Analysis by Segment

Source: Meinrad LP

U s hotel industry analysis regional totals by size of hotel

U.S. Hotel Industry Analysis – Regional Totals By Size of Hotel

  • Below is a regional assessment of the lodging industry, segmented by hotel size.

Region Totals by Number of Rooms

Source: Meinrad LP

Property growth and outlook

Property Growth and Outlook

  • As mentioned earlier, the U.S. lodging industry took a significant hit in the early 2000s after 9/11. Not only did consumer travel decline sharply, but new hotel development projects were essentially put on hold. The rebound in new property development did not occur until 2004, but we are now in the midst of a lodging mini-boom. Every quarter since 2004 has seen an increase in the number of announced hotel construction and expansion projects.

    • The revitalization of the industry is expected to continue for the foreseeable future (though 2009). Construction into 2010 and 2011 will depend, in part, on the economic conditions, but the are a significant number of major chains with preliminary construction plans for that timeframe.

    • New construction room growth has risen 8 to 10% from 2007 to second quarter 2008.

Sources: Technomic, Lodging Econometrics

Iv review of lodging f b segment

IV. Review of Lodging F&B Segment



  • Technomic believes that real opportunities exists in the lodging food and beverage segment. It is true that all of on premise will continue to experience difficulty throughout the remainder of 2008 and into 2009, but this particular segment is one that has not been targeted to any real extent by on premise suppliers and even hotel operators until recently. Because of the renewed focus on the part of many suppliers in the industry, the long-term potential in this space can be significant.

    • Up to, and well into, the 1990s, many properties considered hotel foodservice to be a necessary evil. Hotels were providing basic service to customers, but clearly saw foodservice as secondary (or even tertiary) in importance to the business of selling room stays. On-site foodservice was basic in its presentation, and many hotel chains simply chose not to provide the amenity to their customers; customers were forced to seek meal service away from the property.

    • Within the past 10 to 12 years there has been a shift in the foodservice strategies of hotel operators; at first the shift was slow, but it has accelerated tremendously in the past 4 to 5 years. Foodservice operations are now considered a key to profitability, and full service properties are now in the business of attracting both guests and non-guests to their dining facilities. Foodservice is spreading throughout properties to include new and innovative service areas. And larger consumer dining trends (currently including healthy menus, exotic flavors, and grab n’ go practices) are all clearly evident in this segment. In many cases, leading edge hotel operators are at the forefront of some of these trends.

    • This section of the report begins our overview of the lodging food and beverage segment. It includes a thorough sizing of the opportunity from the standpoint of number of physical foodservice locations, as well as key high-level data on such key issues as kitchen availability and service area usage, .

U s hotel f b industry analysis

U.S. Hotel F&B Industry Analysis

The tables on this slide identify the total number of restaurants and bars/lounges in the U.S. lodging segment (by property tier). Also shown is the amount of function space in the segment (by segment).

Source: Meinrad LP

*Averages represent hotels with restaurants, bars/lounges and/or function space only

Other f b service areas

Other F&B Service Areas

  • The table below provides additional detail on the subject of smaller service area operations other than full service restaurants, bars/lounges and catering facilities.

    • The data is shown by property tier, and identifies the percentage of hotels offering food and beverage.

Service Area Operations

Q11. Do you offer food and/or beverage sold in the ________ areas?

U s hotel f b industry analysis1

U.S. Hotel F&B Industry Analysis

The tables on this slide identify the total number of restaurants and bars/lounges in the U.S. lodging segment (by hotel size). Also shown is the amount of function space in the segment (by hotel size).

Source: Meinrad LP

*Averages represent hotels with restaurants, bars/lounges and/or function space only

Total f b revenues in the lodging segment 2008

Total F&B Revenues in the Lodging Segment, 2008

  • Total revenues generated by the hotel foodservice/on-premise segment totaled $33.7 billion in 2008. This is driven by revenue in a wide variety of service areas and from all types of properties.

    • Luxury properties, while only representing about 1% of total properties and 2% of rooms, nonetheless accounted for 12% of total revenue.

    • First class properties are similarly over indexed. These properties represent 8% of properties and 24% of rooms, but account for 55% of total segment revenue.

Average size revenues of typical hotel properties

Average Size (Revenues) of “Typical” Hotel Properties

  • The average foodservice revenues by type of property varies greatly within the lodging segment. The average hotel generates just over $700,000 in revenue, but as the graphics show below, these numbers vary dramatically by type of property, with luxury properties achieving over $14 million per property.

    • When evaluated from a per room revenue basis, the “average” is about $7,500 per room, but there are again major differences by type of property.

Average Annual Revenues per Property ($000)

Average Annual Revenues per Room

Source: Technomic

Total hotel f b revenues by service area

Total Hotel F&B Revenues, By Service Area

  • The table below shows total revenue broken out by service area. The overall share number is shown as well as a comparison by property type to indicate the relative strength (or lack of strength) of each service area in each type of property.

Profitability evaluation by service area

Profitability Evaluation By Service Area

  • In looking at the gross margins for each service area (defined as sales less food/beverage costs and labor), it can be seen that banquets and catering are incrementally more profitable to the lodging operator.

Total operator purchases and manufacturer shipments to the lodging segment 2008

Total Operator Purchases and Manufacturer Shipments to the Lodging Segment, 2008

  • For manufacturers of food and beverage, the total size of the lodging industry is $8.4 billion in shipment dollars. Food makes up the majority of this, with 61% of manufacturer shipment dollars from food. Beverage is 39%, with non-alcoholic (i.e. carbonated, juice, etc.) accounting for 26% of the 39%. Alcohol accounts for 13% of total shipments to this segment.

    • While luxury properties only account for 1% of total properties and 2% of total rooms, this sub-segment has a disproportionate share of purchases, accounting for 8%. Upscale accounts for half of all manufacturer shipments, while midscale accounts for just under 40%.

Total Lodging

2008 Manufacturer Shipments$8.4 Billion

Total Lodging

2008 Manufacturer Shipments$8.4 Billion

*Includes food, beverage and non foods. Excludes equipment.

Source: Technomic Inc.


Profiling the top ten

Profiling the Top Ten

  • Although exact figures are difficult to determine, Technomic evaluated the major lodging chains properties to develop some estimate of total revenue for each. These estimates were based upon the number of restaurants, bars/lounges, function space, existence of limited service or breakfast areas, and other determining factors, such as the number of rooms.

  • The following pages describe the top ten parent lodging companies and shows details on total properties, rooms, function space, and provides additional details on volume for each.

  • The top ten are:

    • Marriott

    • Hilton Hotels Corp.

    • Starwood

    • Intercontinental Hotels & Resorts

    • Hyatt

    • Wyndham

    • Carlson Hotels

    • Four Seasons

    • Choice Hotels

    • Best Western

  • Several parent companies were not included in this top ten list; however, depending on how the revenue is calculated, these operators should be considered high volume:

    • Harrah’s

    • Walt Disney World resorts

    • MGM Mirage

Profiling the top ten hotel f b chains 1

Profiling the Top Ten Hotel F&B Chains: #1

Profiling the top ten hotel f b chains 2

Profiling the Top Ten Hotel F&B Chains: #2

Profiling the top ten hotel f b chains 3

Profiling the Top Ten Hotel F&B Chains: #3

Profiling the top ten hotel f b chains 4

Profiling the Top Ten Hotel F&B Chains: #4

Profiling the top ten hotel f b chains 5

Profiling the Top Ten Hotel F&B Chains: #5

Profiling the top ten hotel f b chains 6

Profiling the Top Ten Hotel F&B Chains: #6

Profiling the top ten hotel f b chains 7

Profiling the Top Ten Hotel F&B Chains: #7

Profiling the top ten hotel f b chains 8

Profiling the Top Ten Hotel F&B Chains: #8

Profiling the top ten hotel f b chains 9

Profiling the Top Ten Hotel F&B Chains: #9

Profiling the top ten hotel f b chains 10

Profiling the Top Ten Hotel F&B Chains: #10

Assessment of kitchen space number of kitchens

Assessment of Kitchen Space/Number of Kitchens

  • The table below shows the percentage of hotels in the different property tiers that maintain specific types of kitchens. At the bottom of the table is the total average number of kitchens by tier. Clearly, the higher-end full service restaurants are operating more kitchens and more advanced kitchens. The majority of limited service properties are utilizing one kitchen, often a combination or simple food prep kitchen.

Category usage

Category Usage

  • Breakfast foods, beverages, and equipment are categories in which hotels have ongoing sourcing needs. On the other hand, only about half of all properties are serving products in the appetizer, dessert, entree and side dish categories.

  • Limited service properties are less frequently offering lunch and dinner service to their customers. Therefore, it stands to reason that the traditional lunch/dinner food and beverage categories are less utilized. Minus limited service restaurants, 63% of properties purchase appetizer and dessert products, and 62% of properties purchase entrée and side dish items.

Use of Food and Equipment

Q10B. Do you serve or use any of the following in your operations?

V daypart findings

V. Daypart Findings

F b daypart emphasis

F&B Daypart Emphasis

  • The majority of hotel chains and independents are building their food and beverage strategies around the expansion of breakfast. The breakfast daypart is considered a means of growth and is also considered strategically important as an image builder. According to an executive chef for Swissotel,

    • “Breakfast does set a standard of who you are as a hotel. Our style, standards, and offerings – from European smoked meats all the way to breakfast cereals – set the impression of who we are as a hotel. We believe that breakfast is the best way to establish ourselves in the mind of the customer; both in terms of overall brand and food and beverage quality.”

  • Breakfast is considered to be a universal requirement regardless of the economic tier of lodging. Not only does it have a significant impact on the perception of a hotel banner, but it also has a significant influence on a customer’s willingness to frequent that hotel’s foodservice areas during afternoon and evening dayparts. An underwhelming breakfast experience is considered a “kiss of death” for a hotel’s lunch and dinner traffic.

  • Generally speaking, breakfast traffic is considered to be on the rise. Both business travelers and leisure travelers are taking advantage of the convenience of on-property breakfasts, as well as the low cost/no cost savings of on-property breakfasts. As economic conditions in the U.S. continue to squeeze travelers, the expectation amongst hotel executives is that breakfast will show continued expansion in the segment.

  • It should be noted that ongoing growth among limited service properties has a caveat. These hotels (98% of which currently offer breakfast) are trying to develop breakfast activity, both in traffic and menus, but are adamant that suppliers have to maintain an ongoing pipeline of breakfast products that require little prep work or equipment usage. Variety and quality expectations of their customers are on the rise, but their kitchen capabilities remain limited.

Point of Interest:

73% of hotel operators believe it is important to offer a breakfast that is better than the competition.

F b daypart emphasis1

F&B Daypart Emphasis

  • As noted in the chart below, breakfast and morning snacks are made available by virtually all properties. A significant drop-off occurs for the lunch and dinner dayparts, in part because few limited service (limited service midscale and limited service economy) properties offer these meals. In fact, fewer than 10% of limited service properties are offering dinner to their customers.

  • Among full service properties, 68% offer lunch and afternoon snacks, and 65% offer dinner service.

F&B Daypart Availability

Point of Interest:

53% of hotel operators believe their breakfast program is a key driver for overall F&B sales growth.

Q10. Which of the following dayparts do you offer meals or otherwise make food available to your guests?

Complementary breakfast offerings

Complementary Breakfast Offerings

  • Nearly 6 in 10 hotels are offering a complementary breakfast buffet to customers. Interestingly, it is the limited service properties that are most often offering the meal on a complementary basis.

  • Ninety percent (90%) of limited service economy hotels and 86% of limited service midscale hotels are providing complementary breakfasts to all customers. Comparatively, less than 47% of luxury and upper upscale hotels are offering the same breakfast amenity.

Hotels Offering Complementary Breakfast

Q15. Do you offer a complimentary breakfast buffet for your guests?

Complementary breakfast offerings1

Complementary Breakfast Offerings

  • Limited service properties are offering breakfast in response to the demands of the price-conscious customer. The battle for the value-driven customer has traditionally been won by hotels that offer complementary breakfasts. However, now that virtually all limited service properties are treating customers to breakfast items, the competition has escalated to include more premium breakfast alternatives. For example, a customer who once was enticed by complementary muffins and coffee is increasingly expecting an economy property to offer eggs and other buffet items at no additional charge.

  • In contrast, full service operations consider complementary breakfasts to be a missed opportunity. According to the Director of Food and Beverage for Carlson Hospitality Worldwide,

    • “The general rule for the industry today is that full service hotels and their corresponding F&B have breakfasts that are not complementary. Our brands like Regent, Radisson, and Park Plaza are all full service F&B, but not complementary. This arrangement is best for us because it allows us to take advantage of up-sell opportunities that don’t exist for the economy brands. It also makes our F&B experience more seamless for our customer – we’re not comping one meal and then turning around with pricier lunch, dinner, and late night dining.”

Complementary breakfast offerings2

Complementary Breakfast Offerings

  • Again, as the competition continues to expand within the different properties segments, the quality of the complementary breakfast offerings continues to expand. Two-thirds (66%) of hotels enticing customers with complementary breakfasts offer eggs, and more than ½ (54%) offer waffles. French toast and a variety of breakfast meats are also on the complementary menu of over 1/3 of hotels comping breakfast.

  • Numerous purchasing executives stated during the course of this study that the percentage of hot and “gourmet” items being added to complementary service is rising rapidly. It is clearly on the rise among limited service properties, but sources also indicate that any mid- to upscale property offering complementary breakfast must provide these items or be at risk of “cheapening” their F&B image.

Complementary Offerings

Q24. What food items are included in your free/complimentary breakfast?

Breakfast offerings

Breakfast Offerings

  • Only a small percentage of hotel properties are offering cold items only during the breakfast daypart. Most in the industry (at all property classifications) believe that a lack of hot items is a clear competitive disadvantage. One executive at Best Western International (which currently offers cold meals) comments,

    • “We’re in the process of putting together a mandatory hot breakfast program as we speak. We want to implement it as soon as possible. The biggest problem we face is that only 600 of our 2300 properties have functional kitchens. We are asking our members to make the necessary space adjustments to enable prep space. It’s a complex process, but necessary in the short-term.”

Hot vs. Cold Breakfasts

Q22. Please specify the style of breakfast served at your location.

Breakfast item availability

Breakfast Item Availability

  • The table below identifies the percentage of hotel service areas that offer select breakfast items (e.g., 37% of banquet and catering service areas have adult yogurt on the menu). The items in the table are some of the most popular breakfast offerings in the lodging segment.

Breakfast Items by Service Area

Q28. Please indicate in which service areas __________ is being offered.

Lunch daypart

Lunch Daypart

  • The lunch daypart is currently the daypart generating the least amount of attention from hotel operators. It does not receive the same amount of traffic or “customer requirements” as breakfast and it is not as profitable as the dinner daypart. Some operators contend the nature of their business suggests that customers will most likely not be on-site during the middle part of the day, thereby making lunch a less critical food and beverage activity.

  • However, the lunch daypart is still very important from a banquet and catering perspective. For hotels doing a strong corporate or conference business, lunch is a priority. Having said that, culinary advancements have been slow to occur even in these situations. Lunches continues to consist primarily of cold sandwiches and traditional hot buffets.

  • The lunch business is particularly slow for properties outside of metropolitan areas.

  • Regarding the likelihood for growth in the daypart, the Vice President of Food and Beverage for InterContinental Hotels Group comments,

    • “Lunch is a marginal business. We’ve got to concentrate our resources and right now they go into breakfast and dinner. Sit down lunches, outside of business functions, are limited. Any operator determined to build their lunch business is going to have to go about it in non-traditional ways. Build your grab n’ go selection. Appeal to the business traveler who isn’t going to get a meal on the plane anymore. Get him on his way out the door. Being creative will be really important if you make lunch a priority.”

  • In order to appeal to this more nuanced daypart, suppliers will have to concentrate on developing appropriate lunch meal solutions (smaller lunch portions, lower price points, light/healthy items), appropriate portable packaging in many cases, and will have to advise hotels on the ways that lunch can be integrated into non-traditional foodservice areas.

Dinner daypart

Dinner Daypart

  • As more hotel operators continue to put an emphasis on food and beverage profitability, the dinner daypart will see an even greater importance than it does today. Dinner, considered by many to run from as early as 4:30 to as late as 11:00, is especially important in full service operations, where 2/3 of operators offer dinner service.

  • Hotels are making every attempt to keep guests on-premise for the dinner daypart, and are doing so through atmosphere, promotions, and by staying on-trend with consumer demands.

  • From a culinary perspective, hotel chefs are emphasizing such things as bold flavor, less commonly used ingredients, high quality items (especially seafood and beef) and local sourcing. There is also a push toward healthier dining. Consumer research has indicated to many hotel chains that guests are having difficulty maintaining a healthy diet while traveling, and are not familiar with local restaurants that offer healthier alternatives. Hotels are trying to capitalize by offering those healthy items on-site and promoting them aggressively.

  • There is also a determined effort to combine good meals with a high quality beverage list. Hotels are describing a vibrant bar scene early in the evening and are looking for ways to keep the social bar customer on-premise for the dinner daypart. One development in the industry is the expansion of traditional hotel bars into high-quality dining experiences (taking the bars beyond snacks and appetizers). This theme of expanding dinner foodservice alternatives is prevalent, as described by the Corporate Director of F&B for B.F. Saul Company,

    • “There is still tremendous potential for money to be made during the dinner daypart. Some people still have the automatic stereotype of ‘never eat a meal in a hotel’. So we still have the potential to capture large numbers of guests who’ve shied away from hotel dining in the past. But you have to be creative. We’ve developed a concept like the O’Malley’s Pub so that we’re appealing to guests’ unique needs and we’re attracting the community as well. But you have to be professional and provide an experience that is superior to an independent restaurant. Not just the food but the whole experience. Look at some of the Holiday Inn dining facilities that haven’t been updated in 20 years and you’ll see how important the overall experience has to be. Dinner guests want to be impressed with the food and the experience.”

Vi best in class supplier review

VI. Best-In-Class Supplier Review

Overview of best in class supplier practices

Overview of Best-In-Class Supplier Practices

  • Food and beverage suppliers are being asked to provide an increasing number of services for hotel operators. However, the basic building blocks of a strong supplier/hotel operator relationship continue to be quality products and good service. Most best-in-class suppliers are recognized for achieving excellence in those two areas. It should be noted that availability is quickly becoming a leading factor in the evaluation of best-in-class suppliers.

  • Also, good service and promotional campaigns/capabilities are often the leading best-in-class criteria with respect to lounge areas. Operators are looking for a degree of service that has not typically been provided. Part of that good service is the ability to advise operators on the ways to optimize lobby lounges and other emerging food and beverage areas.

  • Finally, as mentioned above, suppliers are being asked for additional services, and to become more involved in the “consulting” aspect of hotel foodservice. Many operators indicate that they are requiring that suppliers provide such things as:

    • Staff training (hotels need employees to be competent across F&B service areas)

    • Consumer research analysis

    • Case studies (to be used in “building up” products to potential customers)

    • Flexibility in pricing and billing activities

  • A handful of suppliers consistently come up in conversations of best-in-class hotel suppliers. Those suppliers include:

    • Coca-Cola

    • PepsiCo

    • Starbucks

    • Sara Lee

    • Tyson Foods

    • Hormel Foods

Best in class banquet and catering suppliers

Best-In-Class Banquet and Catering Suppliers

  • A number of foodservice suppliers were named by multiple hotel operators as leading-edge banquet and catering suppliers. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Reasons for Perception of Excellence

Q21. Why do you think your supplier of BANQUETS AND CATERING does the best job of supporting you?

Best in class banquet and catering suppliers1

Best-In-Class Banquet and Catering Suppliers

  • Many hotel executives are very clear that the banquet and catering business is the “lifeblood” of their food and beverage operation. For full service hotel chains (as well as major independents), the banquet and catering business often drives sales and contributes heavily to overall F&B profitability.

  • That being the case, hotels are very focused on developing relationships with suppliers that are capable of best serving the banquet and catering customer. According to sources, a supplier needs to have a strong sense of the needs and preferences of the end consumer; and there needs to be a distinct understanding of all major banquet and catering consumer groups (i.e. wedding customer vs. corporate conference customer vs. convention customer).

  • The perceived ability of a supplier to help a hotel best serve the end customer often comes down to variety of product offerings and the ability to pair meal alternatives with customer needs. The Vice President of Food and Beverage at Davidson Hotels explains,

    • “There is a growing sophistication in the banquet and catering business. It is so important to show a potential customer or organizer that we understand what their guests will want, and that we have spent considerable effort developing a plan and options for guests just like theirs. Before a wedding customer or a Bar Mitzvah customer or a corporate customer comes in to discuss options, we’ve got to have a presentation already optimized. For us to be able to do that, we’ve got to have supplier partners who help us see trends and customer patterns and who have developed products that will appeal to the different banquet targets.”

  • A supplier’s capability in this aspect of the business is reflected in the “good product” and “good service” ratings on the previous page.

Best in class suppliers

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for on-premise full service restaurants. Those manufacturers include (listed in order of most mentions):

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for on-premise limited service restaurants. Those manufacturers include (listed in order of most mentions):

Best-In-Class Suppliers

Reasons for Perception of FSR Excellence

Reasons for Perception of LSR Excellence

Q21. Why do you think your supplier of FSR/LSR RESTAURANTS does the best job of supporting you?

Best in class suppliers1

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for breakfast service areas. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for lobby kiosk areas. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Best-In-Class Suppliers

Reasons for Perception of Breakfast Excellence

Reasons for Perception of Lobby Kiosk Excellence

Q21. Why do you think your supplier of BREAKFAST SERVICE AREA/LOBBT COFFEE KIOSK does the best job of supporting you?

Best in class suppliers2

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for on-premise bars and lounges. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for on-premise pool bars and lounges. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Best-In-Class Suppliers

Reasons for Perception of Bar/Lounge Excellence

Reasons for Perception of Pool Bar Excellence

Q21. Why do you think your supplier of BARS/LOUNGES/POOL BARS AND LOUNGES does the best job of supporting you?

Best in class lounge suppliers

Best-In-Class Lounge Suppliers

  • Hotel operators are typically very optimistic about the prospects for growth in lounges throughout properties, particularly in lobby lounges. The optimism, however, is dependent upon the ability of hotels and suppliers to bring “something new” to the setting. Hotel executives believe that they need to create a unique atmosphere, while suppliers need to help them introduce unique menu items that will distinguish the lounges from restaurant dining. According to a Swissotel executive,

    • “The lobby lounge is a big development for our industry. It has given us the ability to bring new menu items to customers, but we’re still working out the kinks. Little appetizers, finger foods, and smaller portioned items like mini-burgers can bring a new element to the lounge atmosphere. It’s a growing opportunity.”

  • Furthermore, the lobby area is a major element in identifying the image of the hotel. As more hotel operators are trying to establish food and beverage as a cornerstone of the hotel business, the lobby environment has to contribute to shaping that image. An executive from Marriott states,

    • “Our job right now is to upgrade and improve the experience for the customer. Frankly, that means we’re moving more toward food and beverage and making that central to the guest’s stay. In the end, it translates into extending food and beverage into the lobby area, even it that means new build-out designs that allow us to visually separate the lobby from other business space. We have to be able to take advantage of the lobby’s lounges, kiosks and grab n’ go areas, and we need suppliers to partner with us to pair their foods to our idea of what the lobby experience should be.”

Best in class suppliers3

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge companies supplying food and beverage products for lobby gift shops. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge companies supplying food and beverage products for room service operations. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Best-In-Class Suppliers

Reasons for Perception of Gift Shop F&B Excellence

Reasons for Perception of Room Service Excellence

Q21. Why do you think your supplier of F&B IN THE LOBBY GIFT SHOP/ROOM SERVICE does the best job of supporting you?

Best in class suppliers4

Hotel purchase directors had a difficult time singling out suppliers that were doing a particularly strong job in the area of in-room mini bars. A number of manufacturers were mentioned by one hotel operator as leading-edge, but only Southern Wine and Spirits received multiple mentions for being best-in-class.

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for vending machines. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Best-In-Class Suppliers

Reasons for Perception of Mini-Bar Excellence

Reasons for Perception of Vending Excellence

Q21. Why do you think your supplier of IN-ROOM MINI BAR SERVICE/VENDING MACHINES does the best job of supporting you?

Best in class suppliers5

A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for grab n’ go carts or kiosks. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Only PepsiCo and Stouffers were identified by multiple hotel operators as best-in-class for supplying employee-only feeding areas. This service area is an afterthought for most hotel operators, and most indicate that suppliers do not need to be making special accommodations for hotel employees. The hotels are simply looking for quality, value, and availability.

Best-In-Class Suppliers

Reasons for Perception of Grab N’ Go Excellence

Reasons for Perception of Employee Area Excellence

Q21. Why do you think your supplier of GRAB N’ GO CART OR KIOSK/EMPLOYEE FEEDING AREA does the best job of supporting you?

Best in class suppliers6

Best-In-Class Suppliers

  • A number of foodservice manufacturers were named by multiple hotel operators as leading-edge suppliers for in-room coffee. Those manufacturers (or specific brands singled-out) include (listed in order of most mentions):

Reasons for Perception of Excellence

Q21. Why do you think your supplier of IN-ROOM COFFEE MAKER AREA does the best job of supporting you?

Vii food and beverage findings

VII. Food and Beverage Findings

Beverage offerings

Beverage Offerings

  • The two beverages that are a constant for all hotels in the U.S. are coffee and juice. Besides coffee and juice, only bottled water and single serve soft drinks are offered by more than half of hotel operators. This can be explained, in part, by the fact that such a small percentage of limited service restaurants are providing lunch or dinner service to customers. By providing only breakfast, those operations have a lesser need for soft drinks, other bottled beverages, and liquor.

Beverage Use in Hotel F&B

Q32. Do you offer any of the following products in the BEVERAGES categories?

Overview of f b alcoholic beverage needs

Overview of F&B Alcoholic Beverage Needs

  • There are many trends that are affecting hotel alcoholic beverage purchasing behavior. Hotels are generally bullish on the performance of alcohol and the near-term potential for growth in sales. Being a “social gathering spot” is a way that many operators are trying to promote themselves, and alcoholic beverages are a key component to that strategy.

  • There is also clearly a movement toward upscaling alcoholic beverages. Consumers are experimenting with more wine and spirits and are showing a willingness to splurge (particularly business travelers expensing their purchases). Even those choosing not to upscale their offerings are becoming more concerned with at least aligning the alcohol brands to the image of the hotel and drinking/dining establishment.

  • Certainly the solid profitability being shown by many hotel establishments is another major reason for the emphasis on alcoholic beverages.

  • It also should be noted that operators are asking for design and “ambiance” support from beverage suppliers. Many recognize that it may sound like an odd request, but hotel operators believe that alcohol suppliers have such a strong understanding of their end consumer, that the operators want assistance in creating an environment that fits the lifestyle preferences of their customers.

  • Over the next few pages, we outline key purchase criteria and strong category performers.

Alcoholic beverage performers

Alcoholic Beverage “Performers”

  • Alcoholic beverages are currently a strong performer in lodging food and beverage. Hotel operators are high on the category because of solid profitability.

  • Notably, wine is experiencing a surge in popularity within the segment. Many operators are trying to design lounges and other gathering spots that “announce” the hotel as a “place to be”. According to a F&B executive at New Castle Hotels,

    • “We’ve begun a focus on beverages and the relationship that beverages have with food. We’ve created a wine program that is affordable and brand recognizable that the average consumer can understand. Wines by the glass are a big seller right now because of the interest in having a gathering place at the hotel. We have one property where wine sales are up to 52% of all beverage sales.”

  • Beer, on the other hand, is experiencing mixed results. Many operators report strong beer sales, but there is also a growing sub-segment of operators who are noting a decline. Some reasons cited by those seeing a decline include the desire for “something lighter” and the growing “marketing” emphasis on wine because of higher profitability.



Q25. What specific ALCOHOLIC BEVERAGES have you seen GROWING/DECLINING in popularity at your property?

Alcoholic beverage purchase criteria

Alcoholic Beverage Purchase Criteria

  • Selling price and consumer demand and the two most important factors that hotels consider when deciding whether to add a new alcoholic beverage item to their menu. Interestingly, beverage quality did not make the list of top 7 considerations. Most operators believe that consumer demand is more important than their own perception of quality. The Executive Director of Food and Beverage for Accor North America states,

    • “The customer wants to have fun and sometimes that means splurging for a $16 or $20 glass of wine. They want to experiment with different drinks, so we have to menu some of the more in-demand wine and spirits. It’s funny, our F&B has suffered a bit in ’08, but our bar sales are 15-20% higher than they were a year ago at this time. People are seeking refuge so we have to listen to what they are demanding.”

Purchase Criteria

Q33. How important is ________ when decided whether to add an alcohol item to your menu or bring it into your property?

Alcoholic beverage trends

Alcoholic Beverage Trends

  • There are a number of trends/”hot” ideas that are being cited by hotel operators and distributors. One of the leading trends is the interest being shown by consumers in healthy drinking. Operators report that this trend had been limited to healthy food until the past 18 months, at which time consumers began asking more questions and making more purchase decisions based on health characteristics. According to one major upscale hotel executive,

    • “We’re going to follow what suppliers are telling us and make sure that we have healthy alcohol alternatives. We know, for example, that Bailey’s Irish Cream will be a less popular drink because of the higher fat content. We’re also hearing that consumers are going to be seeing much more advertising comparing healthy drinks. Beer companies are going to be pushing their health advantages over wine and spirits. Wine will be promoting itself as a better option than beer. Same with liquor. The message consumers will be getting is not just about what to avoid, but also how certain drinks actually have some benefits. Knowing the messages consumers will be getting is important because it will eventually impact what customers order. Usually does.”

  • Along those same health and freshness lines, operators indicate that fresh juices are a major trend. Use of pre-made juice flavorings is declining.

  • Another hotel trend that will impact alcohol purchases is the emphasis on “flexible drinking zones” in hotels. Properties are increasingly allowing guests and customers to order drinks in a larger number of locations (lobbies, etc.) and carry those drinks throughout the hotel. Many hotels want customers to have access to beverage order takers throughout the property. This trend will have an impact on both the variety of drinks served and, potentially, the glassware being utilized.

  • The industry is also seeing greater use of mixologists or beverage consultants. These consultants can be either specialty distributor employees or independent experts. Many hotels are really still learning about alcoholic beverages and these consultants are perceived to be adding value. One midscale purchasing manager comments,

    • “There is a real difficulty in understanding quality. That’s why in the past we’ve relied so heavily on price, consumer requests, and brand name. But now we have consultants come in and have us sample 5 whiskeys and 5 vodkas and 5 chardonnays. They help us understand quality levels and we can pass that information on to our customers. We’ve learned that the most well known brands aren’t necessarily good quality. If we’re going to be upscaling our bars and drinking areas, then we have to know this stuff. It’s interesting and really important.”

Alcoholic beverage trends1

Alcoholic Beverage Trends

  • Some of the “hottest” alcoholic beverages and ingredients being named by hotels and distributors include:

    • Regional wines – customers are looking beyond California wines in an attempt to experience new flavors (German and Spanish wines are on the rise, as are rose wines)

    • Specialty drinks – mojitos are an example of a strong performer; hotels indicate that certain drinks have a “fun” factor that customers have not traditionally associated with hotels

    • Energy drink combos – some distributors have indicated that a younger demographic is increasingly asking for drinks that combine alcohol with energy drinks; hotels are requesting recipe assistance

    • Fresh mint – very popular among purchasing managers in the upscale and luxury segments

  • Less popular alcohol alternatives, at present, include vodka (the market is considered oversaturated) and “heavy” American beers.

  • In this period of growing hotel “education”, hotels and specialty distributors are asking for far greater levels of alcohol supplier involvement. Three areas in which segment insiders want more information/assistance are:

    • Quality and product understanding

    • Market research/insights

    • Promotions

  • As mentioned earlier, hotels are just now beginning to appreciate and understand quality levels. But hotels are also asking for more general product understanding (i.e. what are the real differences between regional wines). Hotels are also in need of more data and insights sharing. A number of purchasing managers throughout this study mentioned the need to be examining property-level performance against industry performance. Finally, hotels and distributors are asking for more help around promotions. Distributors, in particular, want more joint sales calls with major customers and customer prospects.

Alcoholic beverage trends2

Alcoholic Beverage Trends

  • There is a growing movement to expand the decision making process in hotels as it relates to alcoholic beverages. In the past, purchasing managers have made these decisions. However, as the segment moves more toward premium beverages, higher price points, and the pairing of food and alcohol, more executive chefs and culinary experts are getting involved in the process (as are mixologists/consultants). A District Manager for Southern Wine & Spirits comments,

    • “The end customer has become so much more discriminating. It is at the point that a purchasing manager who bases decisions primarily on price and basic product knowledge needs help. Decisions have to involve a greater level of expertise. One problem with that is that alcohol decisions, unlike food decisions, do get made more so at the local level. So properties have to be able to make sound decisions. Granted, places like Crowne Plaza and Doubletree are mandating from corporate, but many chains need property-level employees who are good judges of alcohol quality and who understand their local customer.”

  • There also continues to be disparity in what is being served at the different hotel service areas. Fine dining and lounges require a greater selection of fine wines. Pool bars and portable banquet bars may only require one white variety and one red variety. The popularity of spirits is also highly dependent on service area. Hotels are investing much more time and resources into studying service areas and designing drink menus accordingly.

Attitudes usage and outlook brown forman

Attitudes, Usage and Outlook: Brown-Forman

  • Outlook:Brown-Forman can expect very solid growth in the lodging segment based on its product portfolio and the direction of the segment. There are real trends that point toward more sophisticated drinking, more up-selling potential, and an expanding number of alcohol purchase points within a hotel. The company is also well positioned as wine and spirits look to be taking share from beer with respect to hotel guests.

Competitive customer insights

Competitive/Customer Insights

  • The following table indicates hotel operator agreement with statements made about competitive and/or customer positioning.

Q55: Please indicate your level of agreement with the following statements.

Viii equipment findings

VIII. Equipment Findings

Overview of lodging f b equipment needs

Overview of Lodging F&B Equipment Needs

  • The reality of the situation is that hotels have traditionally dedicated major resources to the selection and sourcing of food and beverages, but have often made equipment planning and investment an afterthought. Equipment has often been given attention upon only upon original construction and during short-term necessary replacements. But the changing needs of the hotel operations and the changing demands of the hotel guest are changing that mindset.

  • Full service restaurants talked extensively about all of the following during the course of this study:

    • The need to add more sophisticated equipment for purposes of speed and culinary differentiation

    • The need for more multi-use equipment

    • The need for more training to go along with multi-use equipment; in other words, ‘how do we take best advantage of a unit that is intended to serve multiple prep or storage purposes’

    • The need for more innovation in equipment, namely equipment solutions that improve prep time

  • Limited service operations are also very concerned about equipment, and their concerns can typically be categorized as price/value and the need for equipment that optimizes space and can prepare a large variety of products.

  • The main purpose of this section is to outline the purchase criteria of hotel operators when deciding upon new equipment, as well as quantify the purchases that have actually been made in the past 12 months.

Equipment purchases

Equipment Purchases

  • The table below shows the percentage of hotels that have these specific types of kitchen equipment on-premise.

Q35: Do you have ____________ located in your property’s food and beverage areas?

Equipment purchases1

Equipment Purchases

  • The table below shows the percentage of hotels that have these specific types of kitchen equipment on-premise.

Q35: Do you have ____________ located in your property’s food and beverage areas?

Equipment by service area

Equipment by Service Area

  • The table below indicates the areas where specific equipment is most commonly located.

√ √√= heavy usage area; √ √ = moderate usage area; √ = light usage area

Q35: In which service areas are your _______________ located?

Equipment by service area1

Equipment by Service Area

  • The table below indicates the areas where specific equipment is most commonly located.

√ √√= heavy usage area; √ √ = moderate usage area; √ = light usage area

Q35: In which service areas are your _______________ located?

Ix las vegas

IX. Las Vegas



  • In terms of the hotel industry, Las Vegas presents unique challenges and tremendous opportunity. While this study focuses on broader food and beverage trends, dynamics and issues within hotel foodservice, it would not be complete without a special perspective on the Las Vegas marketplace.

  • This section presents data and insights regarding opportunities within the Las Vegas market. Included in this section are the following insights:

    • Total current properties and rooms in Las Vegas

    • Properties and rooms coming online in the next 3-4 years

    • Notable expansion plans

    • Slowdown in Las Vegas visitors and traffic

    • Las Vegas Hotel Foodservice Market – Banquets and Catering

    • Las Vegas Hotel Foodservice Market – High End Restaurants

    • Las Vegas Hotel Foodservice Market – Purchase Practices

    • Best in Class Supplier Attributes

Total current properties and rooms in las vegas

Total Current Properties and Rooms in Las Vegas

  • Overall, Las Vegas has over 130,000 rooms available in it, with over 300 hotel and resort properties. A large majority of these rooms are controlled by two major firms – MGM Mirage and Harrah’s. Wynn and Las Vegas Sands Corporation are also major players on the Strip.

Properties and rooms coming online in the next four years

Properties and Rooms Coming Online in the Next Four Years

  • Despite some softness in the current business environment, there are a number of large-scale projects either planned or currently underway that are scheduled to significantly expand Las Vegas’ room and property count. Through 2011 (and including projects either scheduled to open in 2008 or have already opened), room counts are expected to grow by 25% and will swell to over 165,000 available rooms.

    • Over the next several years, Las Vegas also expects to add over 3.3 million square feet of convention space, adding to the 9.7 million square feet already available. Most of this is scheduled to come online in 2009 and 2010, particularly with the opening of City Center in 2009 and expansion of the Sands Exposition Center in 2010.

Source: Las Vegas Convention and Visitors Authority

Notable expansion plans in las vegas for 2008

Notable Expansion Plans in Las Vegas for 2008

  • The following is a partial list of notable expansion plans for hotel/resorts in Las Vegas that are expected to open or have already opened in 2008.

Notable expansion plans in las vegas for 2009

Notable Expansion Plans in Las Vegas for 2009

  • The following is a partial list of notable expansion plans for hotel/resorts in Las Vegas that are expected to come online in 2009.

Slowdown in las vegas visitors and traffic

Slowdown in Las Vegas Visitors and Traffic

  • While construction and investment remains high in Las Vegas, the recent economic downturn has shown that Las Vegas is not immune from economic pressures. Visitor volume is down in 2008, as is occupancy, the average daily rate charged to consumers, and a number of other leading indicators.

    • Convention business, which has been a driver of growth, also appears to be flat, with both attendance and the overall number of conventions held in Vegas showing softness through the first four months of 2008.

Source: Las Vegas Convention and Visitors Authority

Las vegas hotel on premise business banquets and catering

Las Vegas Hotel On Premise Business – Banquets and Catering

  • According to the major properties on the Strip, conventions are a key driver for food and beverage revenues. For properties with major function space, such as Mandalay Bay and the Venetian (which also runs the Sands Convention Center), banquets and catering drive a majority of F&B revenue.

  • The complexities of running enormous function areas such as these are immense. These establishments can do over 3,500 events each year, and in some cases are doing up to 85 events each day. Logistics and planning are a critical component. Beyond logistics, banquet & catering directors talk about some of the key challenges they’re facing right now in this space:

  • Managing spiraling food costs – given that B&C is typically the most profitable foodservice area for these establishments and food cost targets are relatively low compared to broader foodservice (typically under 15%), maintaining profitability while meeting client’s needs has become difficult. In many cases, larger groups are looking to confirm prices up to one year out, and it is increasingly difficult to do in today’s environment.

  • Green initiatives – all major Las Vegas banquet and catering establishments have major “green” initiatives as clientele are increasingly demanding this. To date, this mostly involves having a “reuse and recycle” program, and many properties are also looking at composting as a green initiative. Sustainability is not quite on the radar yet, although most large hotel properties (particularly the Venetian) are LEED certified, and the entire property can be sold as a sustainable property.

  • Restaurant quality food (and non-foods) – given the competitive nature of the market, and the fact that so many upscale restaurants operate in Las Vegas, consumer expectations are higher than ever for upscale, high end foods in banquets and catering. Given the food cost constraints, operators have struggled to balance these competing demands.

  • More sophisticated “foodie” consumers – consumer expectations for food have changed, with higher quality demands. Interestingly, Las Vegas banquet directors have not noted a major increase in demand to date for organic foods. There have been some discussions about “local” sourcing, but this is a difficult thing for most Las Vegas operators to consider, given their location.

Las vegas hotel on premise business high end restaurants

Las Vegas Hotel On Premise Business – High End Restaurants

  • Beyond banquets and catering, the other major driver for food and beverage sales have been the high end restaurants, typically driven by a celebrity chef. (See table at right for a partial list). Each property handles these types of restaurants differently.

    • The Venetian, for example, leases out its space to these restaurants and is not involved in any of the operational details.

    • As another example, within the Harrah’s system, most of the restaurants are run by Harrah’s, although they do lease space to outfits such as Pure Nightclub, Mon Ami Gabi and several others.

  • Regardless of how the property is operated, these units tend to have broad autonomy and discretionary power to specify the food and beverage products necessary.

    • Most hotel F&B directors note that they have little input or authority over the purchase practices of higher end restaurants, particularly those run by the celebrity chefs.

Las vegas hotel on premise business purchase practices

Las Vegas Hotel On Premise Business – Purchase Practices

  • Despite the prevalence of several major corporations that dominate the Las Vegas hotel scene, the purchasing practices are remarkably de-centralized. While nearly every corporation has a purchasing department that ends up negotiating the final deal with the supplier community, each property retains a relatively high level of autonomy to choose products that best fit the needs of that property.

  • Many properties also have approved vendor lists, which function as a “hunting license” of sorts. Major suppliers looking to do business with MGM, for example, must be on the approved vendor list, and at least 2/3 of Harrah’s purchases are made through either mandated products or approved products.

    • For banquets and catering, the director will typically have say over the food items selected, but often the executive chef of that particular property provides the specifications and direction for the food products.

    • The executive chef also tends to specific foods for any restaurants, lounges, bars, food courts, etc. that are run on property. While there is generally at least one (and sometimes more) F&B directors, they will generally defer to the chef on food and items selection.

    • At the very senior level, the Vice President of F&B rarely is involved with product or vendor selections.

    • Equipment, depending on the size and type of equipment, may need to go through the capital expenditure budgeting process, which typically takes place once a year.

  • Each person interviewed for this study in Las Vegas reinforced the difficult nature of selling into their properties. There are multiple contacts within each property and, depending on the volume, suppliers may need to get a corporate approval as well. As noted on the following page, the best and most effective suppliers are those that are in-town and that have built relationships with the properties on an ongoing basis.

Best in class supplier attributes

Best In Class Supplier Attributes

  • The hotel F&B professionals interviewed in Las Vegas were asked to describe a “best in class” supplier to their organization. Responses varied somewhat but tended to focus on the following themes:

  • Understand the business – most respondents noted that they ask sales representatives whether they’ve stayed in the property or otherwise have experience with that operation. Understanding the overall food and beverage business, and how a company’s products fit in, are “table stakes” for any best in class supplier.

  • Bring products that make sense – part of knowing the business involves bring the correct products that fit the right service area. For example, many of the products in the Wynn property are still made from scratch, and pre-made items are generally not used. Within banquets and catering, on the other hand, they are looking for pre-made products that can be positioned or sold as “from scratch” product. Service-specific solutions also fall within this factor.

  • Local representation – as noted earlier, the most effective suppliers are those that have built relationships with the properties and are penetrated at multiple levels and within numerous service areas, purchasing, logistics, etc. Having dedicated local representation was noted often as a defining feature of those suppliers that did the best job. “Being visible” in the local on premise scene and supporting local industry initiatives was deemed critical.

  • Fast-paced/quick turnaround time – faced with major banquet events and large volume restaurants, most hotel F&B directors don’t have time to wait for responses from vendors. Particularly when a property is “in a bind,” they are looking for prompt response to issues – typically within the same day.

  • Be proactive – while most respondents did not have many unmet needs (“we can find just about anything”) because the properties are seen as trend-setters and “cutting edge”, they also want to be the first to see and know about new items and trends impacting the market.

X supplier sourcing and selection

X. Supplier Sourcing and Selection



  • One aspect of hotel food and beverage sourcing that is readily apparent is the wide disparity in the sophistication levels of purchasing departments. Some hotel chains operate a sourcing process that is of a “hunt and peck” nature. These operators are relying on individual suppliers to actively promote their brands and the operator engages these suppliers in a slow process of choosing products to evaluate.

  • Other hotel chains appear to be putting the channel to work for them through a heightened level of sophistication. These chains are leveraging their buying power as best they can. According to a purchasing executive for Fairmont Hotels,

    • “Some hotels and some suppliers are getting left behind quickly in this market. The nature of the business is changing rapidly. New sourcing methods using automation, group buying leverage and the optimization of Avendra have, and will continue to grow. An old school approach will be a real drag on growth.”

  • It is also important to note that there is a wide range of approaches to the selection of products. Corporate mandates, approval lists, recommended lists, and unit discretion all continue to be viable alternatives. Regarding the trend toward “recommended lists” , a foodservice director at Omni Hotels states,

    • “A lot of food and drinks are mandated from the corporate level, but we’re now seeing a new phenomenon. Companies like the mandated approach because it gives back control to corporate. Mandates can help make sure guests are getting an expected quality level, but they don’t take into account local or regional preferences. They don’t always address the issue of local sourcing. So we’re seeing more recommended lists. They aren’t mandatory because if a unit can justify a smarter local approach, then it will probably be approved.”

  • Suppliers need to be familiar with the purchasing parameters of each individual chain.

  • This section of the report reviews the decision making process, mandates, and key sourcing objectives of leading hotel food and beverage operations.

Purchase decision makers

Purchase Decision Makers

  • Within independent hotel operations, it is generally the owner making purchase decisions with the support of the executive chef.

  • Chain purchasing is a bit more complicated and involves multiple decision makers and influencers. General Managers, Purchasing Directors, and culinary staff are all involved in the process. A significant number of hotels indicate that the resolution of culinary versus corporate interests is often complex.

Q56: When it comes to adding a new food product to your operation, who is the KEY decision maker at your property? Who places orders to replenish inventory?

Decision makers by daypart

Decision Makers by Daypart

  • Most hotel operators allow a single, primary decision maker (with the input of their teams) to decide upon all dayparts and menu items.

  • But there is a slow shift toward using different decision makers depending on the daypart. One corporate purchasing executive explains,

    • “What Hyatt did – and got right – was an approach that we’re all trying to replicate, and even expand upon. Instead of being a cookie cutter brand, you have to be true to your market. You have to create your own identity. Everyone in an organization is going to have a philosophy that has to be melded into the overall company philosophy. But then you have to have the best person see out the vision. You need a vision for each daypart and the right person to pull it off. I think we’re all starting to move in the direction of that kind of specialization.”

Q57: Does your hotel have different decision makers for each meal?

Food and non alcoholic beverage mandates

Food and Non-Alcoholic Beverage Mandates

  • Four in 10 hotel chains are mandating the food and non-alcoholic beverage purchases of their properties.

  • Many of these chains are developing “mandated menu item lists” and each property is required to purchase a minimum number of the products. The goal is to guarantee quality and consistency, but maintain the impression of variability between units.

Unit Purchase Decisions

Q51: What percept of your food and non-alcohol purchases are ___________?

Alcoholic beverage mandates

Alcoholic Beverage Mandates

  • Alcohol purchases are typically left to the discretion of the individual properties more so than food and non-alcoholic beverage purchases. Often, units will be given “guidelines” without formal mandates or approved product lists. These guidelines are meant to ensure that alcohol brands match the image that the hotel brand is trying to convey to their customers.

Unit Purchase Decisions

Q52: What percent of your alcohol purchases are ___________?

Prevalence of gpo membership

Prevalence of GPO Membership

  • Three in 10 hotel operators are a member of a group purchasing organization (GPO) such as Avendra.

  • But there is an apparent lack of GPO information in the industry. A significant number of hotel chains express that they believe that their smaller size prohibits them from reaping any benefits from a GPO. And many culinary staff are unfamiliar with the benefits and practices of GPOs.

  • On the other hand, there is a large group of individuals that believes that GPOs are the most effective ways to control costs. A purchasing director for a very large upscale brand indicates,

    • “There are a lot of people in this business who don’t know how to take advantage of an Avendra. We’ve put a lot of time into that relationship so we can drive F&B as a profit center through our sourcing practices. For example, we changed our preferred customer level to a more superior grade just by reducing slightly our number of weekly drop-offs. We are incentivized for maximizing truckloads through real cost savings. There are still a lot of operators who don’t know the smart GPO practices, but I imagine the rest of the industry will start catching up.”

Group Purchasing Organization Membership

Q47: Is your property a member of a group purchasing organization (GPO) such as Avendra?

Avendra activities

Avendra Activities

  • Avendra is a supply chain, procurement, and operations specialist that is a partner of many hotel chains, across property tiers. The primary selling point that Avendra emphasizes with hotel customers is cost control and increased F&B profitability.

  • Avendra claims to provide customers with access to a $3 billion supply chain, and has supplier and distributor partnerships in the following categories:

    • Food and beverage (includes foodservice equipment)

    • Room operations (bedding, equipment, maid supplies)

    • Hotel property and infrastructure supplies

    • Cleaning supplies

    • Property-level facility support

    • Golf and spa supplies

  • The company reports having a customer base of over 4,500 hotels.

  • A high percentage of those hotels that participated in this study and who utilize a GPO were partnered with Avendra.

  • Point of Interest:

  • 51% of hotel operators believe that for the most part they adhere to their corporate management firm or buying group contracts

Sourcing practices among lodging operators

Sourcing Practices Among Lodging Operators

  • There is concern among hotel operators that there is not enough synergy between suppliers, distributors, GPOs, and individual operators. A common complaint is the duplicate (or wasted) efforts that are being performed by operators on a regular basis. One leading midscale purchasing manager states,

    • “Vendors and broadliners have to be on the same page. The vendor has to be supported by the major distributors. If you have a great product, but no way to get it to us, then what good is pitching it to me? Pitch it to Avendra, pitch it to Sysco, pitch it to US Foodservice. Then, make sure you meet the mandatory minimums so that we don’t experience issues. It is always surprising when the process doesn’t work like it should – when suppliers approach us and expect us to try to pull their product through distributors.”

  • The hotels experiencing solid F&B profitability are dedicated to optimizing (or even re-structuring) their processes. “Structure” is a word being used by many purchasing executives, including one from Starwood,

    • “Success and profitability in this business are going to come down to the structure of your procurement procedure from the very beginning. If it takes buying direct, then buy direct, but have practices and platforms that are sound. Our platform involves being set up with our major suppliers and distributors on everything from product mix to maximizing drop size. We also are aware of all mark-ups and landed costs. So if we know that frozen fruit mark-up is 8.5% and paper is 21%, regardless of distributor, then we’ll be managing out the variabilities in costs. Suppliers have to be prepared to be transparent and open to negotiation.”

  • Finally, perhaps the biggest issues confronting purchasing executives today is rising costs. Cost issues are being examined closely considering many operators are already struggling with the prices of “substitute” items. One executive from Omni Hotels states,

    • “We’re having issues in a number of categories. Seafood for example. The price of certain fish have become prohibitive, so our chefs shifted toward more shrimp as a substitute. But shrimp price variability is forcing us to shift again and it is an uphill battle trying to source more inexpensive items that are so in demand right now. Food costs are a huge issue for everyone right now.”

Xi distributor perspectives and outlook for the category

XI. Distributor Perspectives and Outlook for the Category

Introduction and industry developments from distributor perspective

Introduction and Industry Developments from Distributor Perspective

  • The vast majority of distributors report seeing a dramatic, renewed focus on lodging foodservice in the past three years. This renewed focus is on the part of hotel operators, broadline distributors, specialty distributors, and on premise suppliers. Distributors, however, believe that hotels need to be more strategic in their approach to foodservice, and need to evaluate all of their strategic alternatives. One US Foodservice Director of Sales comments,

    • “Hotels are coming to the realization that they are in a competitive posture with outside restaurants, whether they like it or not. And they really have to compensate for this position by evaluating all of the different strategy scenarios that are available to them. One is to outsource F&B and let the experts focus on operations and the competitive market. The other is play to win and do everything right – hire exceptional people, savvy managers, the best culinary staff. Doing it this way, you can be a destination. But if you take a middle approach – doing everything internally but with no clear plan or emphasis on quality – then you are at risk of being unprofitable. I’m not sure most chains understand that they have options. They just assume they need to become F&B experts.”

  • Distributors are also noting the streamlining of hotel F&B operations. Many hotels are attempting to align themselves with only one broadline distributor. The purpose of this re-alignment is to ensure quality, cost control, supply, and perceived value. Specialty distributors, regional distributors, and smaller broadliners are thought to have a more limited reach, sometimes making it difficult to consistently deliver on a brand’s programs.

  • An operator mistake being observed by the distribution community is the miscalculation of competition. Hotels have a tendency to have a narrow view of who the competition is for their F&B program. The reality is that they are competing against outside restaurants (FSRs and LSRs), outside banquet halls, golf course facilities, and even convenience stores. Hotels need to better position their service areas against all threats.

Leading lodging distributors

Leading Lodging Distributors

  • Not surprisingly, the two leading food and beverage distributors to the lodging industry are Sysco and US Foodservice. Only a handful of other super distributors have a meaningful presence in the lodging foodservice space (Reinhart, Ben E. Keith, and Gordon Foodservice (5%)). Specialty food and beverage distributors are rarely, if ever, considered the primary distributor for any hotel operator.

  • Warehouse clubs, such as Sam’s Club and Costco are considered emergency distributors for most hotel chains. They are being used only when there is an immediate need. But some small, independent and economy hotels do consider club stores to be their primary distributor as they are used frequently, in part to avoid broadliner minimums.

Q46: Who is your primary F&B distributor?

Food and non alcoholic beverage distribution sources

Food and Non-Alcoholic Beverage Distribution Sources

  • Broadline distributors, namely Sysco and US Foodservice, account for 64% of all lodging food and beverage distribution.

  • Specialty distributors are involved with 19% of purchases (primarily beverage specialists).

Q45: Of your annual food and non-alcohol purchases, what percent does _________ represent?

Distributor operator relationships

Distributor/Operator Relationships

  • From the perspective of distributors, operators are determined to have a unified purchasing program, regardless of the ultimate service area where the product will be sold. Separate purchasing practices by service area would likely result in more less than truckload deliveries, meaning greater surcharges and higher price points. Given the necessities of cost control, distributors and operators are collaborating to make sure that efficiencies across service areas can be achieved.

  • Hotel operators are also trying to consolidate purchases as they try to maximize inventory and improve product versatility performance. For example, by purchasing for all service areas, hotels can make better use of a product such as tortillas. Tortillas can be utilized for:

    • Sandwich wraps for lunchtime banquets

    • Tortilla chips for bar and lounge service

    • Soup service in full service restaurants

    • Quesadillas on the room service menu

  • The term ‘multi-use’ is as relevant as a product issue as it is from a foodservice space issue.

  • In the end, hotels are likely going to be reducing their number of distributors and suppliers. By reducing the number of partners, hotels can improve sourcing sophistication, reduce complexities, and reduce the opportunity for shortages and “sloppiness”.

  • Smaller distributor and specialty distributors believe the lodging industry is a solid opportunity for them because of the needs of regional hotel chains, independent hotels, and economy hotels. The properties have fewer product needs and often are not able to meet minimum requirements of major broadline distributors.

Requirements of suppliers

Requirements of Suppliers

  • Lack of detailed training is a common complaint about manufacturers coming from the distributor community. Most distributors contend that manufacturers often consider “taste testing” to be a training session. Distributors, on the other hand, are asking for product knowledge and insights into how a particular product or product line can be a viable solution for customers in a unique segment like lodging foodservice.

  • According to broadline distributors, the following are the most important needs they have of manufacturers:

    • High quality products

    • Consistency of product quality

    • Cost control measures

    • Order filling reliability

    • More benefit-driven training programs

    • Marketing spend – complaints of recent attempts to reduce spend

    • Brand awareness support

    • Promotional support

    • Logistical reach

Operator consumer relationship from distributor perspective

Operator/Consumer Relationship from Distributor Perspective

  • Clearly distributors have a different perspective on the needs of the end customer as compared to the hotel operator. One distributor representative comments,

    • “Operators sometimes talk in abstract ways about their guests’ needs. We see their relationship with their customer almost entirely based on what is selling. For instance, we see potential for organic goods and green goods in hotel foodservice, but not to the same degree as operators. Until we get past the fact that organic items are twice the cost of other items, we won’t be seeing widespread growth.”

  • Based on what has been a recently strong seller, many distributors expect that hotels will be making more of an effort to address the needs of their grab n’ go customer. Distributors are advising hotels to heavily push the internal marketing of food service/retail hybrid locations on-premise.

  • Distributors also do not believe that some hotels are as acutely aware of consumer economic difficulties as they should be. According to an executive at Reinhart,

    • “Everyone has got to look very closely at the impact of the economy. Fuel is continuing to impact almost all consumers. Our food costs that get passed on to the guest are impacting their ability to dine out. I think there is going to be a drop in leisure travel and corresponding F&B sales for that type of customer. Hotels need to see that happening and prepare to make up those losses with the potentially larger gains of the business traveler.”

Hot f b products

Hot F&B Products

  • According to distributors, a number of developments are occurring in today’s market, including:

    • One of the changes being seen in the marketplace is the demand for brand name products in a number of product categories. Beverage sales, including coffee, soft drinks, alcohol, and energy drinks, are brand driven in the lodging segment. Also, food products including bread and condiments, are more frequently being sought according to brand name.

    • Green products, local sourcing, and pronouncements of social responsibility are becoming the norm rather than a niche trend. Certain regions such as the Pacific Northwest and Rocky Mountain regions are further along than other regions. Keep in mind, cost will impact the overall degree of green growth.

  • Major broadline distributors are forecasting strength within the following product categories:

    • Breakfast sweet baked goods – particularly healthy grab n’ go items that have healthier properties such as zero trans-fat.

    • Breakfast meats – sausage and bacon are expected to be strong as most operators are likely to have at least some hot items on the breakfast menu in the future.

    • Breakfast to-go items – especially yogurt bars and granola bars are popular because of their portability.

    • Cold cereals – especially healthy choices.

Hot f b products continued

Hot F&B Products (continued)

  • Major broadline distributors are forecasting strength within the following product categories (continued):

    • Premium coffee – sustainable coffee and unique flavors are doing very well.

    • Ready to drink tea – consumers are increasing looking for light flavored alternatives to soft drinks.

    • Energy drinks – considered popular in the retail shops, not restaurants.

    • Flavored drinks – flavorings are generating interest across the board: flavored waters, flavored vodkas, flavored coffees.

    • Fruit juices – popular in both breakfast buffets and bar service.

    • Bottled water – expected to perform very well across service areas (banquets, grab n’ go, lobby shops); safety concerns are helping to propel water sales.

    • Wine – across quality levels, wine growth is surpassing beer sales growth.

    • Spirits – vodka and gin are doing very well in-premise; rum is performing well in outdoor lounges.

    • Chicken – versatility, availability, and price are all aligned in its favor.

    • “Fancy desserts” – customers do not want healthy desserts; they are looking for indulgent and “one of a kind” sweets.

    • Blenders – the expansion of foodservice into new space is good for small drink appliances (convenience, portable, no space limitations).

    • Emerging “convenience” equipment – items such as flash bake ovens are generating some interest; smaller size, quick heating, browning capability are possible advantages; some hotels are watching what cruise lines are doing with flash ovens.

Las vegas from distributor perspective

Las Vegas from Distributor Perspective

  • Distributors in Las Vegas recognize the critical importance of the lodging segment. Sysco Las Vegas, for instance, does over 60% of its business with hotel/casinos.

  • There is some concern about the soft conditions of the Las Vegas market. There is a consensus among the broadliners that Las Vegas will have some difficulty over the next 12 to 18 months because of certain recessionary conditions in the economy. Gas prices are being blamed, to a large extent, for the decline in vacation traffic over the first half of 2008.

  • If the economy rebounds in 2009, as these broadliners optimistically forecast, the unique aspects of the Las Vegas dining scene will continue. Healthy dining, for instance, is a national trend that does not seem to impact Las Vegas dining in the same way as the rest of the country. The perception is that Las Vegas is a “pig out”, buffet locale. Also, outside of the buffet facilities, Las Vegas is driven by dining extremes: low-cost restaurants and high-end, celebrity chef restaurants. Neither of these alternatives has been particularly health-oriented, to-date.

  • It is also imperative that manufacturers have a strong understanding of Las Vegas and its market conditions. Lodging foodservice is extremely cost competitive. Operators are demanding the lowest possible prices, even for established brands. One representative from Sysco Las Vegas states,

    • “Price is critical is Vegas. More critical than quality for most. Let me give you an example. I think most people would agree that the Heinz brand has a higher connotation for quality than Hunt’s. But in Vegas, operators don’t want to pay a dime more for Heinz. It’s all about the bottom line. Some of these places can purchase such high volumes that they can demand the quality brands at second-tier brand price levels. They are all about staying profitable and since foodservice is virtually free here, you have to cut food price to an extreme level.”

Xii appendices

XII. Appendices

Leading u s hotel operators

Leading U.S. Hotel Operators

  • Below is the list of Top 10 hotel brands, in order of number of hotels.

Top 10 Overall Hotel Brandsby Number of Hotels

Source: Meinrad LP

Leading u s hotel operators1

Leading U.S. Hotel Operators

  • Below is a list of Top 10 hotel brands, in order of number of rooms.

Top 10 Overall Hotel Brandsby Number of Rooms

Source: Meinrad LP

Top 10 luxury hotel brands

Top 10 Luxury Hotel Brands

  • Below to the left is a table listing the Top 10 luxury hotel brands by number of hotels. To the right is the Top 10 luxury brands by number of rooms.

Source: Meinrad LP

Top 10 upscale hotel brands

Top 10 Upscale Hotel Brands

  • Below to the left is a table listing the Top 10 first-class hotel brands by number of hotels. To the right is the Top 10 first-class brands by number of rooms.

Source: Meinrad LP

Top 10 midscale hotel brands

Top 10 Midscale Hotel Brands

  • Below to the left is a table listing the Top 10 mid-market hotel brands by number of hotels. To the right is the Top 10 mid-market brands by number of rooms.

Source: Meinrad LP

Top 10 economy hotel brands

Top 10 Economy Hotel Brands

  • Below to the left is a table listing the Top 10 economy hotel brands by number of hotels. To the right is the Top 10 first-economy brands by number of rooms.

Source: Meinrad LP

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