With a stubborn property owner, these steps need to be taken to prove potential ROI and move a project forward.
A restaurant opened its doors with an Art-Deco style in
the heart of Brussels. It had 120 seats and a bar in the middle of the
restaurant with 20 more seats and direct access from the street.
From the beginning, it was the place to be in the city,
thanks to the hotel’s location. Both lunch and dinner were fully booked, and
availability was found following a reservation. It must be mentioned that not
only was the product good, but the operator was doing a good job promoting the
property very well in the media. As a result, the restaurant served 145,000
covers in the second operating year, as there were two shifts per meal. The
average check was €62 net. In other words, an annual revenue of €9 million was
obtained. Thanks to the high volume, the payroll represented only 29% of the
outlet’s income, and other expenses were only 6.4%.
Nevertheless, after the sixth anniversary, the volume was
dropping year after year. A lot of other restaurants opened in the area, with
new furniture, and the hotel’s outlet was not that attractive anymore. The operator
was trying hard with their marketing team to promote their product, but the
market saw that the product was tired. On top of that, more maintenance was
necessary for the old furniture. Within nine years of the grand opening, the
departmental profit was 32% of what it once was.
As an experienced asset manager and after so many years in
the industry, it was not difficult to identify the problem. We sat with the operator
and heard his view on this topic. The status of the hotel furniture and the
ambience were leading the negative comments on the guests’ surveys on the web
and on the operators.
To exclude any possible service or quality issues, we conducted
some mystery guest checks. Additionally, some competition checks were organized
to familiarize ourselves with the competition. Despite having a lower quality
than our restaurant, we were quite surprised by their volume. Once we were
convinced about the need for refurbishment, we spoke to the owner.
We added that nothing would be approved without a good ROI. This was already a relief for him as he knew that we were there to protect his interests.
Dimitriis Mittas
The operator was trying for two years to convince him but in
vain. We suggested to let us find a designer who could give us some renders and
calculate the cost of such a refurbishment. We added that nothing would be
approved without a good ROI. This was already a relief for him as he knew that we
were there to protect his interests.
The next step was to ask for the renders and request the
hotel’s purchasing department to find quotations for the new furniture. At the
same time, we asked the local management to prepare a P&L of the outlet
after the new design. The said P&L had been challenged several times by our
F&B experts to avoid any bad surprises for the owner.
Once we had all the information, we calculated the very low
ROI (0.6 years). With all the above information, a detailed report was prepared
for the owner, which was presented some days later with all the revenue
assumptions. It was so well prepared and so obvious to the owner that he
approved it immediately.
As soon as the project was approved, we organized the
execution part. The first step was ensuring the furniture would be delivered on
time. And that the minor works needed would be executed as per the project.
Once this was secured and we had the dates, we asked the
marketing department to prepare a marketing plan where the target customers
were defined, a SWOT analysis was prepared, and the outlet’s identity was
established. Some life events have been added to diversify the product.
And those events helped the outlet to get awareness. We also
believed that where the plan should focus was communication. Nowadays, with all
the applications, social media greatly impacts business. An external and known
company has been hired to help towards this goal. The result was amazing from the
beginning.
Weeks before the opening, the hotel was receiving
reservations. Furthermore, once the hotel was opened, some important
influencers were invited to make further noise in the media.
What was critical to achieving all of the above was the
methodology. We work with a lot of structure to avoid any pitfalls. As
explained before, it is easy to obtain the expected results by using the right arguments
(a good ROI). Good preparation is essential to ensure that your figures are
correct. On top of that, choosing the right experts (like in the case of the
designer and the communication company) is crucial.
The outlet a year later triplicated its profit, although it
didn’t achieve the same amount of covers. This was normal as there were more
offers in the city. Nevertheless, the average spend increased by 12% in a year.
The higher profitability not only increased the owner’s earnings but also
increased the operators fees.
Contributed by Dimitris Mittas, chief operating officer, Global
Asset Solutions, Barcelona