USA Today reports ‘Hard Times Send Hotel Industry into Survival Mode’

A really good article from USA Today about hotel’s struggling to survive.  Check out the full article on USA Today’s website. 

The article features some high profile hotel closures such as the W Hotel in San Diego and the Ritz-Carlton in Las Vegas.  The article also mentions how 76 California hotels have already fallen into foreclosure and that 330 out of the states 10,000 hotels have defaulted on their mortgage payments in the last year. 

As far as the cuts, the article really only mentions that Concierges are being replaced by lower cost employees and some hotels are changing their approach to food and beverage.

We have noticed quite a few changes at hotels over the last year or so to cut costs or drive revenues.  A few of the changes we see:

  • Many hotels have closed restaurants and bars.  Instead of having 2 or 3, many have closed all but one restaurant and one bar.
  • Hotels have cut costs and gone green by eliminating newspapers and printed folios.
  • Parking rates are on the rise.  Many hotels have increased the parking fees for both self parking and valet parking.
  • Breakfast buffets have really been changing.  The prices have increased and the quality and selection of food has decreased.
  • Overall staffing has really decreased.  Many hotels have eliminated positions like bellmen or concierges.  Also, we see longer lines at check in because the hotels have less GSAs with similar occupancy as in the past.

What are you doing to survive?  Please post in our comment section!

Ask TrueGuest: Bartender Selling Techniques

Dear TrueGuest,

I am a food and beverage manager at a hotel with two bars.  Can you tell me some ways that we can increase our revenues?  We are obviously a little bit slower lately, but is there anything that we can do to help?

mixed-drink1The selling area of a bartender’s service is always overlooked. These selling standards are extremely important to generating higher revenues. Bartenders can come across as uncaring and unfriendly if they just approach and ask guests, “What can I get for you?” They also will not sell much more than the minimum guest order. Most hotel bars are not like the bars or nightclubs that stand alone.People usually expect more from a hotel bar.The service of a bartender should be similar to that provided by servers to a table of guests that are eating.There are many selling standards that should be in place for each time a guest arrives at the bar.This includes practices such as offering your drink menu to guests whether they know what they want or not, providing a food menu, suggesting any specialty drinks, offering more beverages, and offering bar snacks.Each of these practices has its own effect and benefit on your bartender’s guest service as well as revenues.Here is a breakdown.

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Are Rising Food Costs Killing Your Restaurant’s Profits?

Are rising food costs decreasing your restaurant’s profits?  You better act now!  We anticipate the cost of food, especially the staples, to continue to rise.  Food and Beverage Departments for hotels are typically low profit areas and can easily turn into no profit areas if you do not react quickly.  Here are some things that you can do: 

Know Your Food Costs – It is surprising how little hotels actually know about their food costs.  Most hotels have a breakfast buffet, however, few hotels have any idea what their food cost is on the buffet.  Most just assume they are making a high profit because they were taught that buffets were always high profit.  Not true.  Spend the time to calculate your buffet cost.  You may be surprised to find out that your buffet food cost is 40 or 50 percent!

Here is a simple way to find out the food cost for your buffet:  Have the kitchen log every single item that is used on the buffet during a 7 day period (10 cases of bacon, 22 cases of eggs, etc).  At the end of the week, add up the total food expense and divide it by the amount of revenue you posted for those days.  Be sure to do it for a whole week because you will find that your weekend food cost is very different than your weekday food cost.  Also, be sure to add in all items included with the buffet such as juice and coffee.

Re-engineer Your Menu – Hopefully, you are using a spreadsheet or computer program to monitor your menu engineering.  Be sure to re-evaluate your menu every single month.  For additional menu engineering help, check out this article.

Evaluate your menu prices – Now that you know your food cost and your menu engineering, be sure to evaluate your menu prices.  You will most likely have to raise prices.  However, don’t just raise all of the prices across the board, be very strategic.  Raise only the prices of the items that are the best sellers but do not have the best profit.  Keep the prices the same on the items that do not sell well but have a high profit.  Replace the items that do not sell well and do not have a high profit.

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How to Calculate Beverage Cost

calculatorSurprisingly, many people that are in food and beverage management positions and even general management positions do not know how to calculate beverage costs, one of the most important costs in every hotel’s budget.  Don’t worry, we won’t tell!  We will help you keep that secret by showing you how beverage cost is calculated.  It is really quite simple.

Here is the way that most actual costs are calculated.  This is the cost that you usually try to get as low as possible in order to beat your budget.

First, you will need your bar’s total purchases (in dollars) for the period.  Remember, these should be liquor purchases only.  Second, you will need to know your change in liquor inventory (in dollars) for the period.  You will then subtract the total change in inventory from the total purchases (if total change in inventory is negative, keep it that way but still subtract it from total purchases).  We must take into account the inventory change because if you do not, purchasing more liquor to stock up would drive your liquor cost up, while lowering your inventory by purchasing less would lower your liquor cost.  If the liquor inventory is not considered, your liquor usage will not be properly seen in your cost calculation.  Lastly, you will need your bar’s total liquor revenues for the period.  Divide the first (purchases – inventory) number by the revenues.  That final number will be the cost percentage for the period.  A formula for those of you that need to see it visually is below.

 Actual Cost Formula

Check back soon for more useful tips that just might make your job easier.

Restaurant Menu Engineering

menuTake a break from working on your budget to catch up on a new law that will have a huge impact on your gross operating profit . As you may have already read, on September 12th, 2006 Governor Schwarzenegger approved a bill to increase the minimum wage. The bill calls for two raises to the minimum wage over the next year and a half as follows:

-On January 1, 2007, the minimum wage for California will increase from $6.75 per hour to $7.50 per hour.

-On January 1, 2008, the minimum wage for California will increase an additional 50 cents to $8.00 per hour.

To read the bill, click on the following link: http://www.dir.ca.gov/IWC/iwc.html

The biggest area the new law will impact is in the hotel’s food and beverage departments. Most restaurants only make a profit of about 10 percent. With server and bartender labor to increase 11 percent to $7.50, it could easily squeeze out the entire profit. Hotels with high benefits (especially high workers comp rates) will be hit the hardest. Now is the time to examine your menus and consider any price increases. There is a great article on menu engineering available at http://www.restaurantowner.com/public/330.cfm . There is also a menu engineering worksheet available for download to help you out. It is also a great time to examine your labor productivity. Make sure that you have a productivity number for each position and those numbers are used to forecast, schedule and report each week.

The earlier that you can prepare for the increase, the easier it will be to absorb the expense. It is critical to examine what positions that it will affect and have a plan for them. Typically any position under $10.00 per hour will be affected by this minimum wage increase. You may want to consider raising the wages on those positions immediately rather than waiting until January 1st. As the word about the minimum wage increase gets around, employees will start looking around to see what other hotels are paying. The hotels who wait until January 1st could risk losing some good employees to their competitors. Also, a large increase before the government requires could be a great boost for moral, especially in December when hotels are slow and work is scarce.

Link provided with permission from RestaurantOwner.com. For more information, visit http://www.restaurantowner.com/.