Weddings - the Cash Cow of the Banquet Operation
Are you leveraging the marketing muscle of this profitability machine?
By S. Lakshmi Narasimhan Founder, Ignite Insight LLC | December 01, 2019
The Most Profitable of Food and Beverage Operations
The food and beverage operation in a hotel is diverse. It provides a degree of variety seldom found in a source of revenue in the hospitality industry. It has a multitude of outlets each boasting a bewildering variety of permutations, combinations of food and beverage fares. A restaurant outlet can be an All-Day dining outlet, a bar, a fine dining outlet, a snack outlet, a lounge, a deli or gourmet shop, a patisserie, to name some types.
It is thus apparent that diversity is indeed the strong suit of the food and beverage operation. The types of outlets listed above are diverse not just in their nature but right from the kind of fare they serve, through to being food or beverage oriented or both, right down to customer profile and price points. They differ in virtually every facet of their respective operations.
However, these are purely from the dining outlet operation category. A major part of the food and beverage division is the catering or banquet operation, quite different from the dining outlet types. The banquet (as we will call it going forward) operation in a hotel is dependent on the number and type of function rooms that are available. It can range all the way from a pillar less ballroom accommodating more than a couple of thousand guests down to a small meeting room accommodating less than ten participants. A little-known fact is that the banquet operation is the most profitable among all food and beverage offerings in a hotel. What is the secret of this phenomenon?
High Volume Revenue Game
The business model of a banquet operation is based on a high-volume driven revenue strategy. You may well ask how volume can drive profitability. In the hotel business, fixed and variable costs and their behavior are at play as much as in any other industry. So how does that work?
Before I lay out how this phenomenon works, let me draw a familiar parallel in the food processing industry. Take the case of McDonald's. What is their combo strategy based on? A combo strategy bundles multiple menu items into a package deal which is discounted from the original prices of the individual items forming the combo. For example, a burger is bundled with fries and a soda. What is the purpose?
Despite being discounted in their price, the sheer number of items served tend to cover any fixed costs of the operation. Once fixed costs of operation are covered, all additional sales will only bring in variable costs thereby boosting bottom line significantly.
Banquet operations are similar. The more the participants in a banquet event, the faster the fixed costs of operation are covered leaving the additional numbers to only accrue variable costs and boosting bottom line. This is the volume phenomenon. Simply stated, the higher volume you operate at, the more the contribution to profitability.
What is at the heart of the volume strategy of the banquet operation? Well, the strategy has one sole purpose - to drive traffic to the hotel. A banquet event produces foot traffic to the hotel function rooms and never fails to attract the guests to other facilities of the hotel. For example, a well thought out pricing strategy for the Spa operation and a an attractively placed poster in the elevator apart from digital kiosks in the lobby and other parts of the hotel to mention just a few marketing methods to spread the word about the wellness facility.
Boutique hotels in the past decade have used retail facilities to do the same thing - drive traffic to the hotel. So, the banquet operation does not merely produce foot traffic to the hotel. It achieves supplementary revenue for the hotel. Nothing drives traffic better to a hotel than one of banquet operations' best kept secrets - the wedding event.
The Wedding Niche
A wedding event is a star among the many offerings of a banquet operation. It not only drives traffic in great numbers to the event but also opens up the possibility of guests using other hotel services. A wedding event creates a buzz in the hotel. Considering that a wedding is the single most prominent event in any individual's life, the desire to make it a knock out event attended by as high numbers of family and friends is paramount. This is where a brilliantly thought out wedding event with attractively priced ancillary offerings drawing event attendees to various services of the hotel cannot be over emphasized.
The wedding event is a remarkable niche in the hotel banquet operation. It is different from all other kinds of banquet events. It's potential for spreading the word about hotel facilities is unparalleled. If you consider that a wedding event often gets splashed in social media abundantly, it is free publicity and marketing of the hotel facilities. The effort of the hotel must be to produce once in a lifetime memory for the event and yet differentiated from other cookie cutter wedding events of the competition.
Volume Yet Often High End
What is so unique about the wedding niche event? To begin with, wedding events are high volume but often high end. No single event in any individual's life has the potential of high spend as a wedding. On top of it, as a target market, the close family members and the bridesmaids and groom's best man create opportunities to market unique hotel services. To keep these key persons in the wedding event happy means to have the ear of the two most important individuals in the wedding event - the bride and the groom.
A bride and groom in most situations are in their twenties (i have nothing against a wedding in later years by the way). Particularly millennials and Gen Z have different visions of how their most important day in life should be enjoyed. This psychographic category of the wedding target market are willing to pay handsomely for value added, memory making premium services. It also means that generally they will not spare any expense to make their wedding events that much more memorable. That is a mother lode of opportunity for the hotel to tap into.
Repeat Business / Loyalty
Wedding niches have another ace up their sleeve. This is something often under estimated. An amazing wedding event at a hotel will most certainly make similar age friends and family to consider the hotel for their own wedding event. And they have testimonials from their best friends and family. It is a referral like no other.
So, loyalty is a strong offshoot of a wedding event and often triggers repeat business. The other repeat element of weddings - not quite as strong but still there - is anniversaries. A well-pitched anniversary event can bring the bride and groom back to the hotel where they first tied the knot and carry a treasure chest of memories and the stage set for more repeat business. In particular, a value added price drop for wedding parties who had their event at the hotel is an offer which is difficult to refuse. This is what makes a wedding event a cash cow.
By tapping into the powerful phenomenon of volume yet high end, a wedding event can not only turn out into a stellar revenue earner but more importantly it can enhance the banquet operation's profitability significantly. In fact, a banquet operation with a strong wedding segment will mean high profitability too.
Word of Mouth
Weddings are personal to each individual. They are sacred to the bride and groom. A small aberration can leave a bad taste in the mouth for an event which is central in any one's life. On the other hand, a wedding event which went flawlessly with a huge wow factor for the wedding party means the word will spread. Members of the wedding party will talk about the entire process including the crucial ceremonies which were arranged seamlessly. They will share photographs, experiences and talk about it in social media. It is the power of word of mouth.
Social media has spawned in the recent times the concept of social proof. Social proof is a branch of marketing which is all about how we would all like our experiences to be similar to someone who has had a great one. It is like never buying anything on Amazon without reading the reviews. You want to make sure that you have the same wonderful experience that the reviewer had. On the other hand, if they did have a horrid experience, you would rather avoid that. Social proof is powerful and effective as we go about satisfying our wants.
The Way Forward
So, what does the future hold in store for the wedding event as well as business. The news is mostly good. The hospitality industry is currently going through what can be termed as the guest experience customization craze. No one wants a cookie cutter stay for example in a hotel. They want their stay to be a memorable experience.
Well, if that is the requirement, wedding events have a lot going for them. To begin with, they are already clear, important events in any one's life. Thus the motivation to make it something to remember is already there. All that is required is to devise fresh ways to make it nostalgic. Exotic locations, cultural activities, gourmet menus are merely a few ways to make a wedding spectacular.
One of my erstwhile company's most beautiful resorts in the Fiji Islands had a beautiful all white chapel built right on the creamy sands of the gorgeous beach, a few feet away from the lap of the ocean waves. And what a money spinner just that location and aura turned out to be. What new initiatives would you bring to your target market's wedding or anniversary events?
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