This is a sponsored article by Damiano Zennaro, director, Global Advisory Services, IDeaS Revenue Solutions
Revenue management for guest rooms, and the forecasting it provides, continues to grow and expand. Although it has been around for many years, it has been increasingly embraced by a number of hotels looking to increase rooms revenue and optimize profits. Now it's time for food and beverage (F&B) to catch up.
Until now, F&B forecasting has been an imprecise process, yet it's well known F&B can comprise a significant portion of total hotel revenue. As a result, hotels are missing out on opportunities to improve labor planning, save costs and drive incremental profit.
With today's advancements in technology, there is no reason hoteliers can't have the best of both worlds—a strong hotel revenue management program as well as the data, expertise and tools needed to produce accurate and consistent F&B forecasts. This will require a change in mindset and habits as detailed below:
What makes F&B forecasting so problematic?
While F&B forecasting isn't that difficult, it can be intimidating for many reasons.
So many channels – F&B departments can encompass a range of outlets including, but not limited to catering, room service and mini-bars, restaurants and bars. Methods of calculation may vary among these channels, and some services may be outsourced.
Distribution – Those outlets that are open to the public must deal with the challenges of distinguishing residential (guest) from non-residential (non-guest) revenue. In addition, some F&B services, such as breakfast, are often packaged with rooms or meetings services, making it more challenging to allocate revenue. The same goes for costs, which are often shared among departments.
An excess of data – The culmination of these channels in F&B can generate up to ten times more data than rooms. That's a lot to account for, process, and understand!
Variable vs. fixed costs – F&B services tend to be heavy on variable costs such as labor and others, making it harder to forecast than fixed costs.
Who's responsible? – Accountabilities for F&B forecasting are often either dispersed among departments and positions or stockpiled by one individual with little input from other stakeholders. This has the potential to produce incomplete or inaccurate data and lack of accountability.
KPIs – Key performance indicators (KPIs) in F&B are more varied and complex than room KPIs. For example, a popular KPI is RevPASH, or revenue per available seat hour, which accounts for revenue, time and capacity but not costs. It's a complicated set of factors.
Overcoming the challenges
IDeaS Revenue Solutions believes current methods of F&B forecasting can vary results by up to 10 percent or more. This leads to increased costs and lower profitability as a result of poor planning.
For some properties, F&B can account for up to 50 percent or more of total revenue—making the risk of imprecision and inadequate planning especially high. Even if this figure is smaller, in today's uncertain economic climate, and certainly in times of disruption such as the recent COVID-19 outbreak in China, hotels need to capture all the cost savings and incremental revenues available to them.
The good news is many hotels already possess the knowledge and skills they need to surmount the obstacles. In recent years, rooms revenue management has evolved from tactical to strategic, from static pricing to dynamic pricing, and from rooms revenue to total revenue and profitability. F&B forecasting is the next frontier, and IDeaS is innovating novel solutions that will transform the industry.
We believe the science of revenue management can help with decisions driven by data, technology and proven methods rather than by guesstimates. By applying revenue science to F&B forecasting, hotels can improve planning and menu engineering, optimize pricing and revenue, streamline the forecasting process and reduce food waste, while also becoming more efficient with labor costs.
Moreover, hotels can leverage rich guest profile data to create targeted, personalized F&B offers, packages and pricing, driving higher conversion rates and incremental revenue.
Improving F&B Forecasting
The key, as always, lies in accurate, inclusive and timely data—and a teamwide effort to make the best use of it.
Here are some guidelines for practitioners:
Obtain buy-in from your teams
Like guest rooms, forecasting F&B is not all about tools and technology. Automated, smart systems will certainly help inspire the necessary changes needed to create a winning synergy between people and technology. However, it must start with a change in mindset at the top. Buy-in from ownership, asset managers and corporate executives is imperative since they are the eventual recipients and beneficiaries of forecast reports.
Every on-property actor brings different expertise to the table, whether it's revenue management, revenue generation, operations or cost control. To ensure accountability, responsibilities and expectations must be clearly delineated, with one individual leading the process.
When multiple outlets are involved, collaboration is essential. Depending on the property, the F&B forecasting team may include the F&B director, director of catering, chef, outlet managers, general manager, revenue manager, financial controller and director of sales and marketing.
Apply the processes
Hotels must decide how often forecasts will be generated, who is responsible for providing which numbers and when, and how reports will be distributed, reviewed and acted upon. Each responsible actor must have the technology, training and support in place to deliver on commitments.
Use the data accordingly
Accurate forecasting demands a sound data management strategy and dependable data. That means:
- Setting up a system to route all point-of-sales data back to the property management system or central database.
- Establishing key metrics to track profitability such as ProPASH (Profit per Available Seat Hour).
- Applying protocols for sharing data across systems and for tracking and allocating revenue and costs across departments.
- Tracking residential and non-residential revenue separately so you know where it's coming from (and where it isn't but should be).
- Analyzing variances to budget, historical numbers and previous forecasts closely, watching for cost creep and dips in revenue that need attention.
Embrace a new way of doing things
Changing habits takes time, but the sooner hotels commit to these basic principles, the quicker F&B will catch up to the great strides already made in rooms revenue management.
You never know, maybe one day F&B will teach the rooms division some new tricks about revenue management.
About Damiano Zennaro
As IDeaS' head of Advisory Services in the EMEA region, Damiano Zennaro is a firm advocate for the power of positive, meaningful and strategic transformations.
Before joining IDeaS in 2019, Zennaro spent 16 years with InterContinental Hotels, most recently as director of revenue leading a large team of revenue managers across Europe where he oversaw initiatives that achieved significant RevPAR uplift. Born in Venice, he has lived in several European countries such as The Netherlands and Spain and is fluent in five languages. He is currently based out of IDeaS' Italian office in Milan and serves as a driving force across the entire EMEA region. Ever the adventurer, Damiano is an avid reader, swimmer, hiker and mushroom forager.