Chefs, F&B Managers Rejoice! Revenue Share of F&B Rises Steadily as Room Revenues Show A Slide: Survey

THE BITE GETS BIGGER:
F&B revenues become more
important as hotels battle
competition to repay debts.
Picture: Courtesy of Monkey Bar

By Sourish Bhattacharyya

THERE'S a quote attributed to one of the venerable hoteliers of the country -- I think it was Rai Bahadur M.S. Oberoi -- who is believed to have said that hotels are in the business of selling rooms and little else. Well, it doesn't seem so any longer.

The FHRAI Indian Hotels Survey 2012-13, released in New Delhi on Monday, January 20, reveals that the contribution of rooms to the average total kitty of hotels has steadily dropped from 60.5 per cent to 52.2 per cent in the five years between 2008-09 and 2012-13. In the same period, the share of food and beverages (F&B) has risen from 25.6 per cent to 29 per cent, and if you add banqueting (mainly marriages) and conferences, the contribution of F&B goes up from 34.4 per cent to 41.2 per cent.

The report also says that the net average income from rooms has seen a 4 per cent decline in these five years, which was not unexpected in view of the steady increase in the supply of rooms.

The India office of the world's most respected hospitality industry consultancy, HVS, conducted the questionnaire-based survey for the Federation of Hotel & Restaurant Associations of India (FHRAI). In December 2013, HVS sent out questionnaires to 2,505 hotels in the country's seven primary and 13 secondary hospitality industry markets; 1,450 responded.

The report, explaining why this shift is taking place, is emphatic about the growth in the share of F&B revenue to continue. "Going forward, as the competition further increases in the market with the entry of new supply, we expect F&B revenues to continue to contribute a large portion of gross revenues as they are not solely driven by occupancies," the report states.

"Additionally," it continues, "the burgeoning middle class and its propensity to spend will continue to augment demand for F&B across cities in India. With hotels focusing on the banquets and conferences segment in off-season months to beat seasonality, this department is also anticipated to increase its contribution to the total revenue pie." F&B, incidentally, is a major part of the banqueting and conference offering of any hotel.

The good news coming out of the survey is that demand has kept pace with supply, but the bad news is that the average rate is slipping. The supply of rooms has been growing at a compounded annual growth rate (CAGR) of 17.8 per cent and the demand at 17.3 per cent from 2008-09 to 2012-13.

Clearly, the growth in demand has been healthy, but the other side of the story is that "hotels are dropping average rates to attract customers in the face of increased supply". Basing itself on this data, HVS points to the emergence of a new customer mindset, which is more sensitive to the price than loyal to a hotel or brand. "As operators battle increasing departmental costs and owners struggle with debt service payments," the report says, "hotel companies need to reconsider their rate strategies."

Delhi appears to be the exception, though. Though the average occupancy has dropped from 64.8 per cent (2008-9) to 57.1 per cent (2012-13), which is below the national average of 60.4 per cent, the average room rate (ARR) has been mounting bulging from Rs 6,087 to Rs 7,455. Mumbai, on the contrary, has seen the ARR slide from Rs 6,822 to Rs 5,791. The only market with an ARR higher than Delhi's is Gurgaon, but its average of Rs 7,776 (2012-13) is lower than Rs 8,122, which it reported in the previous year.

Gurgaon, clearly, is feeling the heat of competition, so will Delhi's party be over once the Aerocity hotels open one after another this year? Mumbai, incidentally, recorded an average occupancy of 71.5 per cent in 2012-13, the highest in the country along with Kochi. Is the city's low ARR responsible for its high occupancy figure? We will crunch the numbers a little harder and talk to senior executives and analysts to answer these questions. We will also extract more information from the survey and beef up our reports with analyses, so look out for our series on the 'State of the Hospitality Industry'.

Dusit Devarana Opens Softly in Delhi, But Its Michelin-Star Restaurant Will Come Later

By Sourish Bhattacharyya

INDIA’S first Dusit Devarana, the Thai luxury hotel label brought to the country by the Bird Group, has opened its doors for early birds to come and enjoy the pleasures it has to offer in this retreat guarded by 1,000 ancient trees.

Delhi, though, will have to wait for the much-awaited opening of Kai, the Mayfair Chinese restaurant with one Michelin star owned by Bernard Yeoh, who was in Malaysia’s trap shooting team for the 2004 Athens Olympics. Kai will be Delhi’s first Michelin-star restaurant.

Dusit Devarana New Delhi’s all-day restaurant, Kiyan, will be the first to offer only fixed menus to address the diffidence of diners when they’re handed weighty menu cards. Executive Sous Chef Nishant Chaubey has promised to be around to take care of any special request that a particular diner may have outside the menu. The restaurant uses only organic vegetables and free-range meats sourced from farmers it has been working with for the last couple of years.

You may miss the hotel in the rush of traffic racing towards Gurgaon, unless you notice its aquamarine boundary wall peering out of a slip road. Once in it, you can unwind at its bar named Iah with an al fresco verandah, where you can have single malts, New World wines and boutique beers with nouvelle nibbles. The bar, according to the hotel’s marketing pitch, is targeted at young and contemporary Indians.

Interestingly, the mini bar in each of Dusit Devarana’s expansive rooms will stock unusual items such as Spanish olives and truffle-flavour biscuits sourced by the Barcelona-based Indian importer of high-end food products, Juberfam Mittal. That will be another first for the Dusit.

A promotional picture of Kiyan, Dusit Devarana New Delhi's
all-day restaurant, which will serve only set menus

But all eyes are on Kai (www.kaimayfair.co.uk), the first Indian foray of the Michelin-star restaurant at 65 Audley Street, Mayfair, near Park Lane, a part of London frequented by the Indian A-List. Around since 1993, Kai got its Michelin star in 2009 and was voted London’s Best Chinese restaurant by Zagat’s Survey in 2003-5. Kai’s style of food, according to information I have gleaned from Wikipedia, is renowned for its balance between the traditional, comfort recipes and the more modern interpretations of Chinese food, utilising ingredients from other cuisines. This is one restaurant Delhi badly needs to raise the bar for its favourite Chinese cuisine.

Dusit Devarana New Delhi, the top brand of Thailand’s Dusit Thani Group (www.dusit.com), which has been in the business since 1949, will be the Bird Group’s flagship hotel in the country. The Indian travel industry’s largest technology provider, the Bird Group (www.bird.in) will also roll out Dusit D2 at the Aerocity coming up in the neighbourhood of New Delhi’s Indira Gandhi International Airport, the Dusit Devarana hotels in Jaipur and Rishikesh, and the Dusit Thani in Goa, which are under various stages of development. All eyes will be on Dusit Devarana New Delhi once its opens its doors formally to a city that has been wondering why it’s taking so long to get operational.