Hotel Food & Beverage Forecasting – There’s a Better Way

Guest room forecasting has come a long way in recent years. Today, it’s a discipline that hotels depend on to anticipate fluctuations in rooms revenue and optimize profits. Now it’s time for food and beverage (F&B) to catch up.

For many hotels, F&B comprises a significant portion of total revenue, yet F&B forecasting remains a basic and imprecise process. As a result, hotels are missing out on opportunities to improve labor planning, save costs and drive incremental revenue. 

In this day and age of sophisticated technology, there are no more excuses. Hoteliers now have the data, expertise and tools they need to produce accurate and consistent F&B forecasts. But this requires a change in mindset and habits. Let’s look at the obstacles holding hotels back.

Why Is F&B Forecasting So Difficult?

Actually, F&B forecasting isn’t that difficult, but it can be daunting for a number of reasons.

• Multiple Outlets – The F&B department comprises restaurants and bars, catering, room service, minibar and other outlets. Methods of calculation may vary among outlets, and some services may be outsourced.
• So Much Data – With so many moving parts, F&B can generate up to ten times more data than rooms.
• Allocation – For outlets open to the public, it’s not always easy to distinguish residential (guest) from non-residential (non-guest) revenue. Further, F&B services such as breakfast are often packaged with rooms or meetings services, making it challenging to allocate revenue. The same goes for costs, which are often shared among departments.
• Variable Costs – F&B services tend to be heavy on labor and other variable costs, which are harder to forecast than fixed costs.
• Performance Measurement – Key performance metrics (KPIs) in F&B are more varied and complex than in rooms. For example, a popular KPI is REVPASH, or Revenue per Available Seat Hour, which accounts for revenue, time and capacity but not costs.
• Accountability – Responsibilities for F&B forecasting tend to be either scattered among departments and positions or hoarded by one individual with little input from other stakeholders. This can result in incomplete or inaccurate data and lack of accountability.  

Why Hotels Must Overcome the Challenges

At IDeaS, we’ve found current methods of F&B forecasting can be off by up to 10 percent or more. This leads to poor planning, increased costs and lower profitability.

In some properties, F&B accounts for 50 percent or more of total revenue, and the risks are especially high. Even if the proportion is much smaller, in today’s economic climate hotels need to capture all the cost savings and incremental revenues they can.

The good news is many hotels already possess the knowledge and skills they need to surmount the obstacles. In recent years, rooms revenue management has evolved from tactical to strategic, from static pricing to dynamic pricing, and from rooms revenue to total revenue and profitability.

At the same time, revenue management has become a science, with decisions driven by data, technology and proven methods rather than by gut feelings and guesstimates.

The next frontier for revenue science is in F&B, where similar strategies can be applied to streamline the forecasting process, improve planning and menu engineering, optimize pricing and revenue, and reduce food wastage and be more efficient with labor costs.

Moreover, hotels can leverage rich guest profile data to create targeted, personalized F&B offers, packages and pricing, driving higher conversion rates and incremental revenue.

Three Key Steps to Improved F&B Forecasting

To overcome the challenges and reap the benefits, hotels must commit to producing more accurate, comprehensive and timely F&B forecasts. This involves three key steps:

1. Align the Team

Like guest rooms, forecasting F&B is not all about tools and technology. Automated, smart systems will certainly help drive the necessary changes that can result in the winning synergy between people and technology. However, such a transformation must start with a change in mindset, and that change must start at the top. Buy-in from ownership, asset managers and corporate executives are mission critical since they are the ultimate recipients and beneficiaries of forecast reports.

With multiple outlets involved, collaboration is essential. Depending on the property, the F&B forecasting team may include the F&B director, director of catering, chef, outlet managers, general manager, revenue manager, financial controller and director of sales and marketing.

Each individual brings different expertise to the table, whether it’s revenue management, revenue generation, operations or cost control. To ensure accountability, responsibilities and expectations must be clearly delineated, with one individual leading the process.

2. Implement the Processes

Decide how often forecasts will be generated, who is responsible for providing which numbers and when, and how reports will be distributed, reviewed and acted upon. Ensure these individuals have the technology, training and support in place to deliver on commitments.

3. Harness the Data

Accurate forecasting requires sound data management strategy and reliable data.

• Set up a system to route all point-of-sales data back to the property management system or central database.
• Implement protocols for reporting and sharing data across systems and for tracking and allocating revenue and costs across departments.
• Establish key metrics to track profitability such as PROPASH (Profit per Available Seat Hour).
• Track residential and non-residential revenue separately so you know where it’s coming from (and where it isn’t but should be).
• Analyze variances to budget, historical numbers and previous forecasts closely, watching for cost creep and dips in revenue that need attention.

Now Is the Time

Changing habits takes time, but the sooner you commit, the quicker F&B will catch up. Who knows, maybe one day F&B will have a few things to teach the rooms division about revenue management.