With hotels looking to develop distinctive food and beverage (F&B) offerings that compete directly with restaurants, some are turning to chefs with profile to draw guests in. Raffles London at The OWO in London, for example, has launched three culinary concepts designed by Mauro Colagreco, of the three-Michelin-starred Mirazur in France, while recent years have seen the Savoy take its number of Gordon Ramsay-run restaurants up to three. But how can owners and investors nurture a profitable partnership that’s going to bring value for both sides?
According to HotStats data, across Europe, food and beverage revenues have not improved as much as other revenue streams post-pandemic. While rooms revenue per available room (revpar) in February was up 17% compared to January 2020, F&B was just 5%, not enough to balance steep cost increases which are due to increase further in the UK with a National Minimum Wage hike from April. Running a profitable F&B operation in hotels can be a challenge – and the past few years have hardly been ideal circumstances.
“The reality is it has become very challenging to operate a 70-seater restaurant in the English provinces with high payroll cost that continue to escalate, with fuel costs that have more than doubled in the last year. That’s not to mention the cost of goods that are 30% more than prior to Covid,” says Grace Leo, director and co-owner of Relais Retreats, which has two UK hotels she co-owns including the Relais Henley.
She continues: “The commercial success of a restaurant or food and beverage operation will obviously have a financial impact on the feasibility study when it is being assessed for financing during the development phase. The value of the F&B operation and its profitability will have a bearing on the evaluation in the case of a sale of the asset or the business.”
Euan McGlashan, global co-founder and chief executive of hotel management group Valor Hospitality, adds that if F&B revenues are high, “the investment community looking to underwrite the asset naturally become cautious and discount their pricing analysis”.
He adds: “The profitability from F&B is lower than rooms so if that changes/fluctuates for any reason and revenues drop, the drop in value is significant. F&B is hard. It’s nuanced and labour intensive and relies heavily on highly skilled operators and culinary heads. A change, wobble, misstep etc. and the impact to asset value can be significant.”
But despite market challenges, owners still very much see the value in strong, chef-led hotel F&B concepts, and there are ways to lay the groundwork for a positive, profitable partnership.
“When you can get it right, it can be a fantastic relationship, but when it isn’t right, it really can cost owners, hoteliers, and operators quite a bit of cash in fees and reputation,” says Scot Turner, founder and managing director of hotel and restaurant consultancy Auden Hospitality.
“Great F&B can bring people to your hotel; it can help room sales. It’s indirect, there’s not always a clear ROI on what that means, but people will go and stay at hotels because they’ve got a great F&B offering. A great hotel F&B proposition can be the final seal on the deal, and a great chef can help with that, but it has to be totally aligned.”
Aligning values
For starters, that means understanding what both sides want to achieve from the partnership and be crystal clear from the outset exactly what that means in terms of investment.
“It’s truly understanding what it means to invest in that chef, and that’s not always just the licence fee or the salary,” explains Turner. “It’s the brand that goes with it, the design, the produce and food cost, the staffing element.”
And that external element – the chef, their brand – should also align with the values of the hotel. “Make sure that what is there doesn’t look out of place when a guest comes to your property,” he adds.
“As with any business relationship, it’s really important that collective values are aligned, not just in terms of quality but also culturally,” agrees Leo.
“The hospitality sector in the UK has had some pretty challenging times, but solid partnerships and commitment to quality will always help businesses become a success.”
Since taking on the 40-bedroom Relais Henley in Oxfordshire, the objective has been to create a hotel with F&B outlets “that the area could be proud of” and re-establishing the property as “a hub for the community”, she says. The plan was always to bring in a well-known chef or restaurateur to develop the hotel’s presence and profile.
“It can bring guests to the restaurant and act as a hook to develop our marketing around,” she explains.
Initially, the hotel restaurant was a collaboration with London establishment Mosimann’s, a partnership that worked well but became the victim of a surge in openings on the town’s high street which saw footfall wane slightly. After running the restaurant themselves for two years, a chef with profile and a proven track record was identified to operate it and develop a concept that would reflect the locality. At the end of 2023, it was relaunched under the leadership of chef Dominic Chapman.
“We wanted somebody who understood the local market and could work with local suppliers to get the best of what we have available to us in the area,” says Leo.
“It’s still early days. However, we have been blown away by how the community has welcomed it. People locally do know Dominic, so it has definitely seen a boost.”
Local knowledge
Understanding the local market also played a role in securing the upcoming opening of chef Roy Brett’s Ondine outpost at Seaton House in St Andrews, Scotland. The former Scores hotel overlooks the first tee on the Old Course, the oldest golf course in the world, as well as West Sands Beach, famous from the 1981 film Chariots of Fire. It is being redeveloped by the US-based Links Collection and will be operated by Valor Hospitality – which also owns a substantial stake in Ondine Edinburgh.
“There has never been a second Ondine, so Seaton House made perfect sense given many of our guests who frequent Ondine live in St Andrews,” explains McGlashan.
He says that, if F&B is a critical component to a property, operating partners should understand the needs and demands of the local market and develop a concept that targets that, which will in turn drive in-house guest capture – something that is particularly key if owners plan to lease out to an operator.
“Pick one that understands breakfast, room service and banquets/meeting and events catering. It’s a huge blind spot for many who largely focus on dinner and bar. And often it’s hard to split the two disciplines with one kitchen. You can’t ignore core business. Alignment is key and the difference between profit and loss is a very fine line indeed,” advises McGlashan.
“We concept, theme and design restaurants that are aimed at the local community and therefore by targeting locals, we create a buzzing restaurant and bar scene that the inhouse guests then want to enjoy themselves! It’s a win-win. In that scenario, our F&B is profitable and drives strong margin to the bottom line.”