Case Studies

Inconsistency of pouring was evident in both bar operations, but understandable when it became clear there were different opinions amongst the bar teams on what standards were and should be. The key opportunity however turned out to be missed up charges and unaccounted for pours.

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What happens when you go from 22% property beverage costs down to 16% in a $2.5M beverage operation. For the owner the corresponding valuation impact is staggering. Depending upon what P/E ratio you choose, the valuation impact could be over $3M. For a property team and management company, you become heroes and earn the corresponding rewards of that status. That’s what was achieved at the Revere Hotel since their SBS partnership began in 2015.

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For years LaPlaya Resort, a luxury beach resort in Naples Florida, had run 21% beverage costs and 17% liquor costs. Those are normal numbers in a lot of destination resort situations. So what happened when an SBS Assessment suggested there might be a significant cost reduction opportunity? A decision was made to go for it. Major performance improvement leaps don’t happen because everyone just tries harder. Tools have to be deployed and a trusted partner has to step in to help lead the charge. SBS was that partner and over the last three years 17% beverage costs and 13% liquor costs have become the new norm.

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The perfect hotel bar strategy in the minds of those who look at results, often turns out to be an Extended Hangout concept. The focus shifts from trying to be a destination restaurant to trying to be a destination bar. The menu, the cocktail offering, the way the venue is setup, the service strategy, all are tuned to deliver a great place to hangout. Tucked inside the Monaco DC across from the Capital One arena, Dirty Habit DC has achieved that perfection. And its not just $4+M in beverage revenues that are feeding the top line. Excellence in beverage inventory and revenue control is yielding 18% beverage costs / 15% liquor cost results which are part of a huge gross profit result coming from the venue.

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Caribbean hotel/resorts have always been challenging from a beverage cost control perspective. And Hilton Aruba was well aware of the profit improvement opportunity in their primary bar venues serving guests across the day. Each market situation is different, but labor costs and inventory costs are often dramatically different then peer resort properties in the United States. Longer stay rates and high cocktail product mix factors also create a higher probability for pouring control issues to be happening in the bars.

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A 5 point beverage cost drop is significant in a $3M dollar beverage operation. Lower pour averages drive the result when bartenders pour consistently and in accordance with standards. Beverage costs are also driven lower by recovered revenue from missed up charges and lost drinks. Finally margin data based profitability initiatives increase revenues and shift product mix to higher margin items.

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Anyone sitting in the Tiki Hut bar on a high volume night, watching drinks flying across the bar to what seemed like an endless lineup of customers, would sense there was a need to know, not just hope everything was getting sold and poured correctly.

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When PebbleBrook Hotel Trust, a major Real Estate Investment Trust (REIT) specializing in hospitality, suggested a beverage monitoring system for Liberte at the Sofitel Philadelphia, the initial reaction was sincere skepticism.

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“In a bar operation like ours”, said Jason Deville Director of F&B InterContinental Buckhead Atlanta, “you cannot just know what was poured. We have to know what was sold to know whether or not 2.7oz’s of Jack Daniels was an over pour of a Jack & Coke or on target with standards if it was a Jack Daniels Manhattan.”

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An SBS Assessment in Jan 2016 – yielded a long list of action items projected to dramatically improve both the top and bottom line results in the bar operation. One of those action items – a beverage monitoring tool supplied by SBS was immediately set in motion. Today property beverage costs are running 3 points lower than historical numbers at the time the project started. That’s a $75K per year bottom line improvement. Liquor costs have dropped from 18% down to 14%, driving the overall beverage cost improvement.

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