How F&B is improving margins at some hotels

BEVERLY, Massachusetts — With RevPAR gains muted at many hotels, owners’ eyes turn to controlling costs and increasing GOP, which is something that is always top of mind for asset managers.

Sean Kreiman, senior vice president of Beverly, Massachusetts-based asset manager/advisor CHMWarnick, sees some optimism on that front.

“Where revenues might be a little bit lower on the room side, there’s been a little bit of improvement in food and beverage because of banquets and catering,” he said. “From an overall expense performance, we have seen labor costs remaining flat and we’ve seen some areas where we’ve been able to improve food costs (because of tariff concerns). I don’t think it has been as bad as people were thinking it would be. There’s been a little bit of savings there.”

CHMWarnick has 50 hotels, 22,000 rooms and $12 billion in assets under management. Kreiman said they are seeing improved group performance in the first half of this year, which could be what’s fueling F&B gains.

He also said they have seen some growth on the rate side with clients who skew towards independent and lifestyle hotels, which is also helping to improve profitability. However, Kreiman said that mitigating labor costs is also a big factor.

“It’s labor that you’re focusing on in the controllables,” he said.  

Like other properties, Kreiman said CHMWarnick client hotels have been seeing much shorter booking windows for customers, but ultimately, those guests are still coming.

“If you look at pace, the story isn’t there,” he said. “It’s not clearly saying we’re going to do well over the summer. A lot of it is hoping for that last-minute travel and you’re seeing that reflected in those short booking variations.”

While he doesn’t project, Kreiman said he’s cautiously optimistic for the summer, but that could also be due to their client hotels outperforming pessimistic forecasts for the hotel industry.

“It’s in our nature to be close to the vest for some of these forecasts. But what we’ve been seeing in performance is that it’s been outperforming [industry forecasts],” he said. “[We’re] managing the book on the expense side and outperforming on the revenue side and we’re seeing a little better flow-through.”

Improving F&B

Kreiman’s said his clients do well in F&B, and he noted that while the beverage side is profitable (often called B&F for hotels), owners often require the food for better profitability.

“You certainly can run a better margin on [the beverage side],” he said.  “But we still need food to be able to get a higher check than just all beverages.”

We’ve got to understand what’s in the market and what the opportunities are, and understand with your hotel what your competitive advantage is? What’s going to bring guests into your spaces versus not entering the hotel?

Sean Kreiman

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What Kreiman can say, from a B&F perspective, is that rooftops bars are doing great. “I can tell you from a trends [standpoint] that rooftops can always do well,” he said. “So, from a B&F perspective, we see more performance coming through the rooftop outlets than we do the more standard three-meal [outlets].”

What can be more important, Kreiman said, is having the right food and beverage options for the hotel. “We have to understand what’s in the market and what the opportunities are, and understand with your hotel what your competitive advantage is. What’s going to bring guests into your spaces?” he said.

A big area Kreiman focuses on with his owners is how to keep guests inside the hotel restaurant. “You have to have a concept that speaks to them. You have to make sure that you have the right team to be able to do it and to execute on it,” he said. “You have to have spaces that are intriguing. You don’t just eat with your mouth and nose, you have to have a space that’s conducive to the right lighting, the right sound and then the right menu and the right team.”

Renovations to reposition?

Kreiman said many of CHMWarnick properties he personally asset manages are new builds. So, renovations or PIP requirements are not top of mind right now. However, he has one hotel that is considering whether to accelerate renovations on the F&B side as a way to reposition the hotel.

When we look at that as we break it down into what we’re looking at by meal period, what this space could be like, and how big is the [required] renovation… and how are we going to attract the locals?

Sean Kreiman

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He said making that decision requires a forensic analysis of what your F&B is doing now and what it could be doing.

“When we look at it, we break it down into what we’re looking at by meal period, what this space could be like, and how big is the [required] renovation… and how are we going to attract the locals?” he said.

There’s a lot of residential near the hotel Kreiman is speaking of, and he said drawing those customers in is a big factor as well.

“What concept is going to speak to them? What does this space need to look like? How does this improve the overall hotel experience? For this project, we’re looking to open up the lobby and create a completely new feel for the hotel,” he said. “Ownership is seeing an opportunity to go a little bit above [the required PIPs] and do it sooner because they see some opportunities to do better with the asset.”

Sitting in the middle of 2025, Kreiman said owners’ biggest concerns haven’t dramatically changed. “It depends on what stage of the life cycle their asset is,” he said. “With new openings, that’s always about ramping up and getting there quicker…  We’ve been fortunate that we’re doing well from a flow-through perspective, but there’s always going to be these cost pressures.”

He said the discussion focuses on how to perform or exceed industry projections and how to continually improve margins, especially with all the economic headwinds facing owners right now.

“That’s always going to be something that owners are thinking about with 1% revenue growth: how are we going to continue to improve margin?”