THE NON HOTEL GUEST OPPORTUNITY IN HOTEL BARS By: Scott Martiny
The primary customer for a Hotel F&B outlet is hotel guests, but the bar/restaurant experience is also becoming a preferred choice for a growing non hotel guest market segment. Whether it be an end of business day crowd or transient visitor crowd, or even an end of day local residence crowd, a lot of these potential customers don’t want to go to a destination restaurant, or to a party bar – they want the same experience as your hotel guest.
EDGEWATER HOTEL AND SBS PARTNER TO INCREASE REVENUES AND PROFITS IN THEIR BAR OPERATION
Would someone be impressed if you posted a $500K growth in beverage revenues in the coming year, or dropped your beverage costs by 3 points? Most hotel F&B operations are “hold position” budgeted, which means the numbers goals for next year are often the same as the numbers achieved for last year. The Edgewater Hotel in Seattle, WA found a way to break out of that status quo cycle. It started with an Assessment in January 2016. One year later they were looking back at a $400K beverage business growth, and a 6 point drop in liquor costs. Here is their story…
In the spring of 2015, Noble House Hotels & Resorts decided to move forward with a partnership with Strategic Beverage Solutions (SBS). The goal was to explore bar performance improvement opportunities at all Noble House properties with managed F&B operations. The consultant team at SBS fanned out in a plan to do the initial assessments. In January 2016 an assessment was completed at the Edgewater Hotel, an iconic centerpiece of the Noble House portfolio tucked on the edge of Elliott bay in Seattle, WA. Six | Seven was a major Seattle destination restaurant with a reputation for fantastic dinners while soaking in gorgeous waterfront views. But the bar side of the business was also rapidly evolving into a popular end of business day and transient visitor hangout spot for great cocktails and small bites.
The goal of the Assessment project was delivering feedback on opportunities and ideas to both grow the business and improve profitability. The process involved looking at all aspects of the product; venue setup, menus, service strategy and execution along with marketing strategy. Dozens of ideas were developed including implementation of an SBS Beverage Watch Plus solution to help the business improve beverage profitability.
Hotels & Resorts have always faced the challenge of targeting the needs of a hotel guest for a place to relax at the end of a long business or travel day – and yet still be able to pull non-hotel guests into their bar/restaurant venues.
It’s Not a Restaurant/Bar Strategy Any Longer – Its Bar/Restaurant?
There are plenty of success stories in the Hotel/Resort F&B world where world class destination restaurants and or high volume active lounge venues are pulling the majority of their customers out of local nonhotel guest markets. There are operators who execute those business venues/models very effectively – such as Sbe, Noble House, Kimpton, Sage and others. But the vast majority of hotels and resorts are missing the business wave which comes when your bar is a living room bar.
- Its tough to compete against all of the bar options in your local market, but Living Room concept bars are proving to not only be preferred by your hotel guests, they are a unique and preferred choice of a lot of potential local and transient customers.
- Hotel marketing programs are often world class, but the bar in the end is just an amenity. When you have a bar and a market situation which can pull in nonhotel guests, the lack of inbound marketing limits the connect potential with a customer constituency that could double your F&B revenues.
“What would you pay to have an experienced bar operations person you can trust, analyze your numbers, visit with and interview your team, observe your operation in high volume mode and then share with you any and all potential beverage performance improvement opportunities and ideas on how to go after those opportunities? How about $0? The SBS Assessment Program – a perfect first step if you are looking to improve beverage performance results in your bar and banquet operations.”
Beverage cost is an industry performance metric owners, asset managers and general managers look to in assessing bar performance. A budget target is set and tracked against in P&L reporting. Whether automated inventory tools or simple excel spreadsheets are utilized, the resulting numbers are generated and woe the beverage operation that is tracking over its budget target.
But a funny thing happens along the way. Numbers jump up and down from one month to the next, often in ways that could not possibly reflect actual improvement in or degradation of performance in the operation. “It must be the accounting, or the inventory process, or an event we had” are some of the usual explanations. An operation with a major improvement opportunity can get celebrated for its success because the numbers are fine or a good operation comes under pressure because the numbers are not. There is no opportunity in the budget process to define what the numbers should be and they often just end up being the same as last year. No process occurs to reflect on what the number should be given all the givens and how changing business mix and purchase costs factors could affect the numbers positively or negatively.
Some things never change, so the story goes. You can put banquets bars on that list. For decades now it’s been 8 bottles of liquor, and a couple of bottled beer and wine choices. It was boring then and it’s still boring. But most times we drink for free, so what should we expect anyway? For the event sponsor, however, they still get the invoice, and they still erupt, absolutely certain there was no way we all drank that much.
30 years ago there was no way to approach a banquet beverage bar setup differently. It’s challenging to setup a bar, take a starting and ending inventory, manually calculate consumption, then the invoice all in the course of one evening. Add to that the competitive pressure to win events which makes price a big decision factor, and it’s no wonder banquet bar programs are a race to the lowest common denominator.
But some things have changed. Technology is now providing new options which, if embraced, can dramatically change the way you approach your banquet beverage service offering. In so doing you can improve your overall competitiveness in securing event business while improving your beverage revenue yield per event. Beverage monitoring technology allows everything about banquet beverage service to be reconsidered. Now you can know exactly what and how much is poured, when it’s poured. That capability unleashes the chains which have traditionally bound banquet bar operations to status quo.
Five years ago Beverage Monitoring Technology began to get traction in the hospitality industry. Early products were expensive, clunky looking and had survival issues; yet proven business impact was possible even with these early products. In the end ROI Results scorecards on these systems were inconsistent. Great successes and unfortunately just as many “no results” stories have been told. The key then and today is having a solid integration with POS, and surrounding the technology deployment with the right consulting services package that insures success.
We’ve all sat there sipping a drink we know had extra liquor value in it, or looked at the check when the time came to pay a bill and noticed drinks we did not get charged for. Did you think someone decided to have this happen or perhaps it was just a mistake? What choices do you make as a customer when these gratuitous events come along? An interesting study recently uncovered facts about what really happens when the customer gets a heavy pour or free drink.