It's F&B that keeps cash register ringing at luxury hotels, not room tariff

Most premium properties earn at least half their revenues from food and beverage sales

A hotel business is not just about rooms. 

The fast-growing food & beverage (F&B) division contributes 50 per cent or more to luxury hotels' revenues.

The segment had come under pressure following the Supreme Court order in December 2016, which banned the sale of liquor at outlets within 500 metres of a highway. The court, however, clarified eight months later that the order did not apply to cities and municipal areas.

Hotels, including Taj, Oberoi, Novotel and Radisson, earn a significant share of revenues from the food and beverage business. Leading hospitality company EIH, which runs hotels under the Oberoi and Trident brands, earns more revenue from the F&B segment than renting its rooms. In 2016-17, the company earned Rs 5.25 billion in revenue from the F&B business against Rs 5.05 billion from rooms. 

Most luxury hotels are seeing double-digit growth in F&B revenue. The segment is thriving on the growing banquet business — weddings, social events and conferences — as well as in-house guests and walk-in customers.

French hotel company Accor's 670-room Pullman-Novotel hotel complex in Delhi's Aerocity earns 50 per cent of its revenue from F&B. The complex has a total of six F&B outlets. Besides residents and walk-in guests, the F&B division also earns a sizeable chunk of its revenue from banquets. Of the 800 staff in the complex, around 250 are employed in the F&B segment.

“F&B is not an addition to the room. In many cases, the room is an addition to F&B,” said Tristan Beau De Lomenie, director of operations at Accor’s luxury hotels in India. “F&B is now one of the most important elements when you develop a hotel. This business provides a good margin of 50-60 per cent,” he added.

On average, the group’s hotels in India earn 60 per cent revenue from rooms and the rest from F&B. The capital’s iconic Taj Mansingh Hotel, currently undergoing auction, earns around 55 per cent of its Rs 2.2 billion annual revenue from its F&B division and the rest from rooms. The hotel has seven F&B outlets.  According to Raj Rana, CEO (South Asia), Radisson Hotel Group, the group’s hotels in India earn around 50 per cent of their revenue from F&B. “In international markets, rooms have a bigger revenue share, which goes up to 70 per cent. It is also because room tariffs are higher outside India. In India, the rising trend of conventions, social events and weddings contributes significantly to the F&B business,” he added.