• Higher Food Costs, Supply-Chain Disruption Turn Up Heat on Hotel Kitchens

    The combination of supply chain disruptions and overall inflation have hit the U.S. hotel industry hard, particularly in food and beverage operations, where profit margins have traditionally been thin.

    As more people return to travel and expect great dining experiences, hoteliers have once again had to adapt to growing demand while they work through higher prices on food and kitchen equipment as well as less availability and longer lead times.

    Pricy Ingredients

    Everyone is fighting inflation and trying to control rising costs, said Marcus Marshall, vice president of restaurants and bars at Hospitality Ventures Management Group. The company works through its distributors and suppliers, constantly reviewing price increases. The higher costs usually come from beef, poultry and dairy, but they’re also seeing higher costs for disposables, such as napkins and paper towels manufactured in China.

    The prices for alcohol have been less volatile given the regulations and state taxes at play, he said. It’s been a wine-buyer’s market for years now, as there’s no scarcity.

    The cost of food items has leveled off recently, and they’re more available now than they were this time last year, he said. It’s mainly been a matter of getting the product and responding to price increases to keep margins where they need to be in balance with guest demand.

    Many of the company’s hotels in the Southeast, particularly Florida, have achieved high occupancy rates thanks to spring break, Marshall said. They’ve had to raise prices on various dishes, up to 7% in some cases, and the guests haven’t hesitated to pay.

    Raw food prices have inched up, said Angela Harrington, president and CEO of Catalyst Project Management and owner of Hotel Grinnell in Grinnell, Iowa, and the Highlander Hotel in Iowa City. The fresher items, particularly fruits, have proven more problematic given droughts in California and the cost of gas to deliver them.

    “It takes a long way to get fruits, fresh fruits, to the middle of the United States,” she said.

    The increase in both costs and time for delivery has been an ongoing challenge, but Aimbridge Hospitality’s procurement program has a person dedicated to its food and beverage operations to prevent problems from arising, said Elie Khoury, executive vice president of operations at Aimbridge.

    “We have eyes on what is available to us, and we work with our food distribution companies to make sure we’re able to design and write recipes for menu items that have availability at, I don’t want to say attractive prices, but very reasonable prices,” he said.

    Having that dedicated person has been helpful in making sure Aimbridge’s hotels can either get what they need or adapt as necessary, he said. That may mean having to rethink how hotels line up their kitchens or their menus.

    Distribution itself has been a challenge over the last year and a half, he said. Although it’s getting better, the company has been paying between 7% to 10% more in goods today than ever before.

    Adapting Menus

    One of the ways HVMG’s hotels have managed these challenges is by no longer having a set menu, Marshall said. They are printing menus in-house to be flexible as certain types of food become more expensive or less available.

    When certain foods became harder to get, such as chicken wings for a while, they just took the dishes off the menus. Other times, when rib-eye steaks cost too much, they switched over to New York strip steaks.

    Some properties are having to make changes on a weekly basis while others are doing it less frequently, he said.

    For a smaller operator, changing menus frequently is a debacle, Harrington said. Beyond the printing up of new menus, it’s difficult to quickly retrain kitchen staff on new dishes.

    When a food item is too expensive or unavailable, they no longer offer it or improvise and make sure the guest understands what is going on, she said. For certain foods, such as pastries, it’s not something they can do on their own and it’s not cost effective to try to source that locally.

    Beyond Ingredients

    Marshall said he bought an oven for a hotel’s kitchen in 2019 for about $12,500. It’s similar to the kind used at Starbucks that makes food hot and crispy quickly, he said.

    Recently another owner wanted the same oven for another property, he said. In roughly three years, the oven jumped in price to more than $22,000 and has a 16-week lead time. Thinking there was a possible misunderstanding of the price with the distributor, he called the direct manufacturer.

    “They verified, actually, their list price was higher than what I was being offered,” he said. “They said they were backlogged for the same reasons that everybody is: the supply chain, labor shortage and wage increases.”

    With that information, Marshall said he had to go back to the hotel owner to talk about their options.

    “The math is different now,” he said.

    Aimbridge’s procurement team has also helped prevent problems when buying kitchen equipment, Khoury said. If they ran into trouble finding stoves, ovens or other items, they would know before committing to a hotel owner a certain level of equipment and delivery time.

    “Delivery time is the biggest issue right now for us, everything is taking longer,” he said.

    Harrington bought the Highlander Hotel 10 weeks before the coronavirus pandemic started, so while everything she ordered to update the hotel came in at pre-pandemic pricing, the wait took weeks to months for the most basic items. In some cases, it took as long as 18 months.

    What worries her most about inflation isn’t the cost of the food her hotels serve; it’s how inflation is affecting her employees. She’s already paying about 30% more than others in the market.

    “It is very important to me to make sure that every single team member is paid a living wage or more,” she said. “It's important to me that they don't just survive working for my hotels, that they thrive.”

    Inflation affects her ability to take care of her teams, and if they don’t have enough to make ends meet, that creates a problem at home and at the hotels, she said.

    Source: www.CoStar.com