The Caterer and Hotelkeeper Business Summit – Make the most of tough times

06 July 2012 by
The Caterer and Hotelkeeper Business Summit – Make the most of tough times

The inaugural Caterer and Hotelkeeper Business Summit sought to explore new ways to attract custom and control cost, with speakers covering commercial creativity, operational efficiency and adapting your operation for success. James Stagg reports

Through creativity with marketing and cost control, it is still possible to thrive even under the current economic conditions. That was the message delegates at last week's Caterer and Hotelkeeper Business Summit, sponsored by American Express, Nespresso and the Carbon Trust, heard.

The challenges to the industry were faced head on, with practical explanations as to how to tackle them and build a stronger business.

There were warnings that economically the worst is yet to come, with further pressure on consumer spending and costs, including utilities and beverages. But speakers also shared their tips for minimising costs and attracting guests.

Keynote speaker Robert Cook, chief executive of De Vere Village Urban Resorts hotels, pointed out that when the credit crunch began in 2007 there were still good levels of spending and the industry benefited from the staycation, but that belts have now been tightened.

"The Jubilee was a fantastic spectacle that we should all be proud of but it's distorting this month's, last month's and next month's performance in terms of consumer habits and spending," he added.

Lloyds director of sector economics, Carl Paraskevas, said that public spending was a concern since the UK was yet to see the hard cuts as they weren't due to begin until this year. "What we've seen is mostly tax rises, with 75% to 80% of the tax implications we expected, but the real bite for fiscal cuts of £69b hasn't kicked in yet," he explained.

However, there were chinks of light for hospitality, with the sector expected to perform well in comparison to the rest of the economy. "We expect accommodation spend to be 40% foreign and 60% domestic," Paraskevas said. "In particular, visits from BRIC nations [Brasil, Russia, India and China] are well up, as is spend per visit."

Once the scene was set, delegates then heard how to entice and exceed the expectations of consumers, as well as being savvy in cost cutting and addressing utility and food price rises.

How to be savvy with cost cutting

Will Smith
Will Smith
Having struggled to turn a profit at his first solo venture, Putney Bridge restaurant, Will Smith (left) left no financial stone unturned to ensure his restaurants succeeded. The owner of Arbutus, Wild Honey and Les Deux Salons said that operators must tailor everything they do to the market and to watch every single expenditure while maintaining menu quality.

"We built into our business ethos cost cutting, or savvy business commercial sense," Smith said. "Cost cutting sounds negative and implies you're going to lose staff or stop spending on development and the future. But I think it needs to be a positive and sold to your team and ingrained in them. It's not a short-term proposal. We should see it as part of our business in good times and difficult times."

Combating rising utility costs
There are a number of ways the restaurateur is tackling costs, not least by taking a close look at utilities. The group farms out utilities to a broker who analyses its usage, fixes prices and streamlines bills for all three restaurants. It also uses an energy management system to control ventilation, air conditioning, heating and lighting.

"It uses wireless technology that does things like turning bottle coolers off at 10pm - there is still residual cold until midnight and the coolers come back on at 10am the next morning. This means we're not wasting power," Smith explained. "We expect payback on the £10,000 cost to be 12 to 14 months, and to be able to save £7,000 per year in the future."

Maintaining margins on food
Smith said that he wanted to be clever with his menus to offer great prices that still make a good margin. "Our lunch menu is £15.50 and pre-theatre menu is £15.95 for three courses," he said. "They're great value but we still have to make a margin on that price."

There are three ways he does that - seasonality, using cheaper cuts and working hard with suppliers. "Products taste better in season, they're in plentiful supply and the price plummets at the market," he added. "We actively avoid items out of season."

Meanwhile, by allowing chefs to be creative with cheaper cuts, the restaurants can make more from their produce. "We buy top-quality beef bavette and believe it means less waste," Smith said. "So it is used for an à la carte dish and the trimmings are hand-chopped and go into a starter of beef tartare. Having made our margin on the main product, it's almost like getting a dish for nothing."

The restaurant group talks daily with suppliers to find out what's good, what's cheap, and what needs to be sold out. "Just like us, our suppliers don't want to throw anything away, so we will take produce off them that may only have a couple of days left," Smith said. "They would rather ditch the price than the product."

He also pays suppliers efficiently to build good will, which goes some way to helping during price negotiations.

Adapting your business to the economic climate

Robert Cook
Robert Cook
"The trick is to look at the negatives and turn them into positives," said Robert Cook (left), chief executive of De Vere Village Urban Resorts hotels.

He suggested that rather than fight against the offer culture the public had become used to, hoteliers should embrace it and use it to their advantage by making previously quiet times popular. "As well as cost cutting, the big thing that's come to the fore is revenue management," he explained. "The revenue manager of today is the general manager or business leader of the future."

Cook said that the level of tactical promotions had never been higher and that consumers were always on the lookout for deals. "In this technologically savvy world, people are looking for deals that are bespoke to them. We've applied revenue management principles to golf. So we have a points system. If you have 100 points it can be used for five rounds of golf or 20 rounds of golf depending on the day of the week and the time of the day. You can apply this to your restaurant, Christmas events, or spa."

Cook added that operators need to leverage whatever they have, be it a restaurant, meeting space, gym, leisure space, or spa. "For example, a successful F&B business can be leveraged to sell bedrooms", he explained.

"At Malmaison and Hotel du Vin, we were selling provincial Sunday night rooms at £10 provided the guest spent £75 on food and beverage. This increased occupancy by 14%.

"At Village, we saw a 21% growth in the spa last year, so we're investing in it. But it's not just what goes on there, it's what it can do for your business. Spa users tend to spend more on room and incremental revenue opportunities."

What makes guests choose a hotel?
According to Cook, a hotel has to be a better experience than a guest would expect at home. They're buying a good night's sleep," he said.

"So invest in bed products, bathroom products - great shower, generous toiletries, fluffy towels - and make the entertainment better. Sky movies are almost like Wi-Fi now, they're a given," he added.

Tips for building an independent business

1 Nurture local suppliers. You may get better discounts on bulk elsewhere but the local supplier will be the one that delivers on a Sunday or bank holiday when you're desperate. Earn their loyalty. Mention them on menus and in the press.

2 Encourage journalist visits. It is often a last-minute request and the outcome is unknown but it will often pay dividends. I call it "kissing frogs", any journalist that wants to come, can, as you never know what it might bring.

3 Know your business and have a clear idea of who customers are and what they want. Ensure you and your staff talk to them - it's amazing what you learn. It builds loyalty and makes them feel special. That personal attention is the new luxury.

4 Trust your managers. Let them manage and give them freedom. If you don't trust them they shouldn't be there.

5 There are lots of savings to be made by picking up the phone and negotiating. Haggling will get you discounts.

6 Barter. Our local game supplier gives us game and we give him discounts on shooting parties and the odd free meal.

7 Keep your banks informed. Don't hide things from them, be upfront. Have a personal relationship with them.

8 Always pay tradesmen on time. Things always go wrong on a Friday night and bank holidays, and operators need tradesmen they can rely on.

9 Talk to staff. They may have ideas how to help boost business. Our staff came up with an idea of going out into the community to promote lunch by hand-delivering letters. By the end of that year, our lunch and afternoon tea trade went up 200%. Getting the team out locally breaks down barriers.

Joan Reen, proprietor, Ynyshir Hall hotel

Cashing in on wine

Wine opener
Wine opener
According to Will Smith, owner of Arbutus, Wild Honey and Les Deux Salons, with beverages it's all about management control.

"We run short lists and have to think carefully about the balance of styles and regions on those lists," he explained. "We also feel a small amount of stock discourages shrinkage or theft."

He uses four main suppliers who provide 80% of the restaurants' wine, while ensuring they're getting the best possible deal. "We agree volumes in advance if necessary to get a percentage off and ask them to go back to producers to see if they're willing to do offers to us of stock or a baker's dozen," Smith said. "We squeeze them for as many offers as possible."

But as well as using suppliers he also buys direct from France. It requires some storage space but can pay off. "We can take about 2,000 bottles at a time and the advantage is that none of my guests know the wine, they don't know what it costs or what our markup is, so I can make a great margin," Smith added.

Realising the financial benefits of carbon reduction

Myles McCarthy
Myles McCarthy
There is a vast opportunity for a short payback project that will cut energy costs, according to Myles McCarthy (left), managing director at the Carbon Trust.

With energy costs rising way above inflation, he said it was frustrating for organisations such as the Carbon Trust that some initiatives were not being employed due to a halt on investment, despite operators being aware of their benefits.

"Saving energy has a direct impact on the bottom line," McCarthy added. "Typically we see savings of 20% achievable fairly easily in most businesses - that can be up to 5% of additional revenue"

On average, 6% of savings can be found for projects in less than one year, with a further 12% to 15% in projects of two years.

McCarthy said that in the hospitality industry savings could easily be made using control systems for heating and cooling, adopting LED lighting and changing working practices in the kitchen so that burners and lights were not left on needlessly.

Delegates were also urged to consider spending more on energy-efficient equipment and consider whole-life costs, rather than short-term cost control.

Ben Brakes, environment manager at Whitbread, said the company had looked carefully at what was possible in terms of retrofitting technologies and building sustainably.

"We basically took a sustainability book and threw it at a hotel in Tamworth in 2008 and hoped that the technologies worked," he explained. "We used solar thermal hot water, ground-source heat pumps, sheeps' wool insulation and really put as much as we could into the building. In terms of carbon reduction and water reduction it worked, but unfortunately for the finance director it will never pay back."

Unexpected findings
But Whitbread was able to take many of the technologies and adapt them for use in its estate. Furthermore, it made some unexpected findings.

"Interestingly the biggest saving we made was through working with our cleaning staff," Brakes added. "We found they were flushing the toilets in hotels rooms up to six times per clean. Across 600 hotels and 40,000 rooms that's a lot of water. So a simple change in the process saved an awful lot of water."

The learning from Tamworth was taken to Burgess Hill, where a sustainable timber frame was used with a high level of insulation. "The key for us is to use heat in a sensible way," Brakes said. "We take the heat out of the bedrooms and kitchens and use it to pre-heat the hot water that goes into guests' showers. It seems simple but using heat as many times as possible reduces energy costs."

Tips for attracting new customers
Be different
Be different, be creative, be known for something, whether it's home-made curtains in the bedrooms or a particular dish. Be better than the competition. List three things that make you different from your competition and ensure your team knows who you are up against.

Be creative
Take every opportunity to communicate differentiators to your customers. Highlight your USPs and use them to attract customers rather than relying on price. Turn them into straplines. They are your brand, your personality.

Customer relationship management

Be consistent
Be consistent with your message across all media and with your pricing. Regularly communicate with your customers - there is no point doing a one-off eâ€'mail.

Delight your customers with your product and they will do the marketing for you.

Dust down your database
Invest in your database. Use the data or lose your customers. Create a new database of those that open your eâ€'mails, or Sunday night visitors, or those for whom money is no object. Personalise your eâ€'mail messages and use a question in the subject box.

Catherine Whittle, director, spa partners

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