Rooms and Food & Beverage: Optimizing Revenues and Profits
By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | November 24, 2013
The Bread and Butter of Hotel Business
If you pick up the Income Statement (or Profit and Loss Statement, as it is more popularly called) of any hotel operation, one of the first things you will perhaps notice is that, between 80% and 90% of Total Revenues are contributed by Rooms and Food and Beverage departments. These two are the major revenue (and later in this article you will see) as well as profit contributors of a hotel operation.
However, between the two departments there are very little similarities other than that they tend to complement each other in a hotel operation.
The Rooms department is really the dominant revenue center in a hotel. By itself it can account for anything between 60% and 80% of hotel revenues. In comparison, the Food and Beverage department contributes between 10% and 20% of Total Revenues. Of course, this is a generic observation, actual percentages will depend on the size and type of hotel, room types and rates, number of restaurant outlets, whether a city hotel or a resort and so forth.
Two Major Operations
The best way to understand features of the Rooms and Food & Beverage department operations from a financial perspective would be to compare them.