Hotels in the UK are under more pressure than ever. 2016/17 is set to be an incredibly challenging year with pressures on both revenues and costs. As operators across the country look for ways to increase efficiencies and reduce costs (find tips on how to control kithen's cost), putting in place tools to strategically and profitably reduce food waste should be top of the agenda for three key reasons:1. Average RevPAR has dropped for the first time in four years
According to the latest Hotel Bulletin RevPAR grew by just 1% in the first quarter of this year, the lowest increase since 2012. This is indicative of a market which has reached ‘peak demand’, and growth we see now is rate rather than occupancy driven.
Amongst the worst affected cities were London, Newcastle and Belfast where RevPAR rates fell by 2-9%. With a softening of prices likely to stimulate demand, this is a big concern for hoteliers. In particular London is likely to be adversely affected with the large number of bedrooms due to open in the next 12 months.2. Labour costs are already rising with the living wage
In July 2015 the government announced the new National Living Wage which means all over 25’s must be paid £7.20/ hour (previously £6.20/hour), rising to £9.20/hour by 2020. Although the right thing to do in the eyes of most hoteliers, the impact on a hotel’s cost base will be significant. In addition to increased wages at the lower end of the pay scale, operators may also have to increase supervisor pay as well as pay to suppliers.
In a survey of 50 leading chief executives and managing directors from the eating and drinking out market, 73.5% believed the Living Wage would have a slightly or significantly negative impact. Most said that it would be unlikely that additional costs would be passed on to customers leading to a net cost increase.
3. F&B consumes a disproportionate amount of costs compared to revenue
Depending on the customer segment, F&B typically accounts for around 25% of hotel revenue. However this is only part of the story; cost associated with accommodation range from 15%-25% compared to 50%-60% for F&B. The consequence being that running an efficient F&B operation can mean the difference between profit and loss.
Food waste is a significant cost to all hospitality businesses and hotels are no different. Our data shows that up to 20% of all food purchased is wasted, but that this can be quickly addressed using technology to measure and manage food waste.
Working with over 200 kitchens we have consistently seen food waste cut in half, decreasing total food costs by up to 5%. For larger hotels with a significant buffet offer the savings can be as much as £40,000 - £50,000. Typical gross margin increases reported by kitchens using Winnow range from 2-6 whole percentage points.
As hoteliers are pressured from both sides with increasing competition pushing prices down and new legislation increasing labour costs, margins are under more strain than ever. Operators will need to run increasingly efficient operations from the front desk through to the kitchen to remain profitable.
Reducing food waste in this context can be seen as a quick win with little risk to the operator and should be prioritised accordingly.
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Photo credit: Mohammad Saifullah via Unsplash