Will Hotel Food and Beverage Services Fundamentally Change Post-Pandemic?
Local and state mandates regarding the operation of restaurants during the pandemic hit the hotel industry hard. Was the hit hard enough to force permanent changes to how hotels deliver food and beverage service? Could such changes fundamentally alter the hotel industry as currently segmented? How will hotel guests react to these changes?
This year, J.D. Power's Hotel Guest Satisfaction Index Study turned 25. During that time, hotel food and beverage (F&B) operations adapted relatively quickly to changing consumer expectations. Competition accelerated in what is now the Upscale segment due to the emergence of lifestyle brands and the bar/bistro model. In Upper Midscale, complimentary breakfast became a differentiator in the value equation for consumers.
Extended stay hotels-with Residence Inn beginning to serve complimentary hot breakfast in 2000-became an appealing concept for travelers and hotel owners alike. Full-service hotels began to eliminate 24-hour F&B operations due to the labor required and declining consumer perceptions of value for money. Hotels across all segments elevated pantry areas beyond for-purchase snacks with ready-to-eat meals and alcoholic beverages. New limited-service brands began to incorporate breakfast and pantry areas into common area design and decor.
New hotel builds and renovations began to reflect general food trends such as farm-to-table, market-style kitchen decor, and mixology. Travelers reacted positively as these new concepts helped elevate the stay experience across beach resorts, downtown convention hotels and limited-service suburban hotels. As global franchisors introduced new brands-many centered on these on-trend F&B concepts-F&B brand standards became more rigid. Consistency was enforced to maintain quality while ensuring hotels delivered F&B experiences guests wanted. Year after year, the J.D. Power Study shows that brands delivering a highly consistent experience have guests with higher overall satisfaction. The same is true for guest satisfaction with F&B, driven by breakfast in limited-service hotel segments.
As the industry emerges from an unprecedented shock caused by COVID-19, we need to examine what has learned and how to move into the post-pandemic era. Given the effect of the pandemic on restaurants and hotel F&B operations, does hotel F&B matter to guests anymore? How much does F&B influence hotel stay satisfaction? Should the large hotel franchisors provide hotel owners more flexible F&B standards or no standards at all? In our view, the best way to answer these questions is a scientific one, meaning an analysis of data at hand from which conclusions can be drawn.
Pre-pandemic, our research showed 4 in 5 guests had an F&B experience during their stay, and over half of Upper Midscale and Midscale guests viewed complimentary breakfast as a "need-to-have" part of the stay. Additionally, there were no major differences in F&B satisfaction when comparing those that paid for breakfast and those having complimentary breakfast in limited-service segments. In the full-service segments, four in ten guests visited the hotel bar and six in ten used the hotel restaurant for at least one meal. Among full-service guests, satisfaction with food and beverage costs was on the rise.
How much did the pandemic affect the hotel F&B experience when franchisors could no longer enforce consistent standards amidst differing and ever-changing state and local guidelines? For guests who stayed at a hotel during the past year, they likely had no idea what to expect. As full-service hotel restaurants closed, suddenly room service was fast and fee-free. With self-serve breakfast areas closed, hotels did what they could to offer guests grab-and-go bags, the contents of which were often inadequate. Franchisees and operators did their best to manage expectations, however, guests were generally not satisfied with the lack of F&B options during their stay.
Our just-released 2021 Guest Satisfaction Study results showed declines in F&B satisfaction vs. 2020 across all segments except the Economy segment. These declines are driven by lower guest satisfaction with food quality and variety, for breakfast in particular. These declines were especially steep in Upper Midscale. In fact, Upper Midscale F&B satisfaction saw the largest year-over-year decline in recent memory.
Indeed, the J.D. Power Study showed fewer guests experienced F&B as expected due to the closures of breakfast areas and restaurants. Those that did experience modified breakfast in limited-service hotels generally were not happy with the grab-and-go solution. Lower breakfast satisfaction ratings are particularly due to a decline in guest perceptions of quality and variety. As more guests used the pantry for their meals, satisfaction with the pantry declined year over year also due to lower ratings for variety. Guest comments indicate that many hotels had difficulty keeping pantries well-stocked. F&B satisfaction also declined in the full-service hotel segments, but only slightly because more guests were pleased with enhanced room service.
No debate about hotel food and beverage would be complete without a discussion about the importance of health and wellness today. While this was a trend prior to the pandemic, health and wellness has taken on new meaning to consumers. Our recent data shows that the proportion of guests citing healthy living/wellness amenities as "need to have" increases in all hotel segments during the past year. Yet many hotel brands are still behind the curve in terms of sourcing healthier food items, healthier food preparation, and providing guests with nutritional information.
As the pandemic severely depressed hotel revenue, franchisors quickly revised breakfast standards allowing owners to reduce operating costs. Then, late in 2020, a group of hotel owners penned an open letter to the major brand franchisors with a request to modify or eliminate complimentary breakfast standards post-pandemic. Whether franchisors will take this step remains to be seen, but caution is warranted. While reducing operating costs is a worthy goal, no one wants to operate the only hotel in the comp set without complimentary breakfast. Additionally, there is risk of segment blurring, particularly across upper midscale, midscale, and economy where the quality and variety of breakfast (rather than room rate) demarcates the segments from a product perspective.
In the limited-service segments, breakfast maintains its role as a brand differentiator. Brands winning the 2021 J.D. Power Award for guest satisfaction all have unique, well-executed breakfast concepts (think Tru by Hilton's build-your-own breakfast and toppings bar). These brands benefited from very strong breakfast satisfaction, despite pandemic-related adjustments to breakfast standards. As hotels return to pre-pandemic breakfast standards, owners and operators need to be aware of higher guest expectations for quality and taste. Consistency, delivered in the form of adherence to brand standards, is still extremely important. The fundamentals of hotel F&B-quality, variety, and taste-remain critical to the guest experience.
Now is the time to view the F&B operation less as a cost to be cut and more as an opportunity to be seized. Two decades of measuring guest satisfaction has taught us that guests seek value for money, not necessarily the lowest price. F&B plays a big role in that value equation, especially in limited service, and will continue factor into brand choice for at least half of hotel guests. Given the current state of consumers and their eagerness to spend on travel, we anticipate most would accept a few extra dollars of room rate in exchange for a high-quality complimentary breakfast.
Additionally, our data shows Upper Midscale and Midscale guests experiencing complimentary breakfast have much stronger brand loyalty compared to those who do not. We predict breakfast will continue to be a brand differentiator in the limited-service segments. Brands that innovate through unique F&B concepts, refreshed menus and modernized equipment will stand out-and will have the ability to push room rates more than enough to cover F&B costs. Availability of on-site F&B also distinguishes hotels from the home sharing and home rental industry, which grew even faster during the pandemic.
Our current "re-opening" environment offers the major brand franchisors a unique opportunity to refresh F&B standards with both guests' needs and operational efficiencies in mind. Owners and operators also have an opportunity to test higher room rates while delivering more value in the form of higher-quality F&B. As the post-pandemic economy continues to improve, and with more than 1500 new-construction hotels expected to open by the end of 2022, competition for guests will be fierce. Continuing the F&B status quo particularly in higher rate limited-service segments is not an option.
