Hotels Seek Restaurant Developers for Partners
A new trend in hotel and restaurant management is taking afoot in America and beginning to spread to international hospitality companies, and therefore restaurant operators: Hoteliers are divesting themselves of their properties, seeking to bring in companies that can manage the entire food and beverage package, opening the door for third-party operators.
Restaurant groups that already take part in this trend include Ruth’s Chris Steak House, whose largest franchisee typically runs a hotel’s food and beverage program if it opens a location there, and Sage Restaurant Group. Sage’s strategy involves operating hotels with its own restaurants on-site, and can also include taking care of the hotel’s food and beverage package, which can even mean operating an outside brand such as Starbucks.
Two elements are driving this trend, says Jonathan Segal, CEO of The ONE Group, a global hospitality company whose restaurant brands include STK. First, hotels realize they don’t get credit for doing food and beverage, and they are seeing they can make more money by bringing in an outside provider. Secondly, by allowing a third-party operator to step in and take over the food and beverage, the hotel becomes a destination for consumers beyond just hotel guests.
“Historically, hotels have never done food and beverage very well, and they’re prepared to admit it today,” Segal explains. “If you ask them, they don’t really want to have to do food and beverage. They’re very good at selling rooms, cleaning rooms, marketing their hotels, and providing the ambiance, the amenities, the facilities. They don’t really want to do the down and dirty food and beverage provision.”
This opens the door for hospitality companies to take over the entire food and beverage operation, working under the general operating procedures and meeting a certain service-level standard set by the flag itself.
Hotel developers, meanwhile, are learning that they can profit off of a differentiated restaurant brand that operates within their walls. Sometimes, Segal says, he is approached by a hotelier that wants STK on-premise. “Brand appeal will often get you in the door,” he says. “Sometimes, we’re just not able to do [STK at that hotel], but it starts a conversation.”
Often, these conversations lead to The ONE Group creating a completely different brand for the hotel that fits with its needs but is equally valuable, Segal says.
“The hotels also like the fact that they become cool and sexy by virtue of the brands that they put in their hotels,” he adds. On May 11, The ONE Group opened a second European STK location at the new ME Milan Il Duca hotel in Italy. Along with operating STK, The ONE Group also brought Radio Rooftop Restaurant and Bar to ME, a second location to the Radio rooftop bar already opened at ME London.
“So, we bring in these two internationally recognized brands now (Radio Milan based off Radio London), and it absolutely adds to the caché and notoriety of the hotel,” Segal says. “We elevated our presence by virtue of a relationship with the hotel company, and they increase their presence of their property by having the internationally recognized brands operating within their hotels under their guidelines.”
Segal adds that it’s not just independent or boutique restaurants that are getting in on this trend, but also chains and developers interested in exploring this new avenue of potential income.
“Instead of having to go out at the weekend and do discounted shopping tickets or theater tickets or promotions, if you can keep your occupancy and your average daily rate high, because you’ve got these cool, sexy venues, it’s better for the bottom line,” he says. “It’s better for the flag and for the developer not to have to worry about getting an extra hundred thousand on his food and beverage if he can drop $900,000 to his bottom line. So there’s a fundamental economic reason for it, as well.”
By Sonya Chudgar