Partnering with Properties

While Coronavirus has been devastating to the foodservice industry, independent caterers are among the best-positioned to survive during the pandemic and afterward, due to their nimble operations. That is, most are not tied to a physical structure where food is prepared and served in the same location, like a restaurant or hotel, and also have a solid idea re: how many people they will be serving. Thus, caterers have fewer fixed costs and more options to pivot and secure new business.

Hotel partnerships have been trending for caterers in 2020 due to the deep drop in demand for large events, coinciding with drastically reduced business travel. Many hotels booking smaller groups or social business, like weddings, cannot afford to bring back their F&B staff to cater for those groups because they do not have sufficient guestroom revenues to justify the labor costs. This is where an outside caterer can help a hotel.

“Hotel partnerships have become more relevant in our market this year with a number of properties needing service since they don’t have the revenue or the budgets to bring back F&B staff for the foreseeable future,” says Brian Ingalls, Director of Sales and Business Development at Brancato’s Catering in Kansas City, Kansas. “We’ve established temporary relationships that we hope will turn into longer-lasting relationships once hotels see the benefits of working with a company like ours.”

Boutique is best

Hotels are categorized in tiers based on the number of rooms, amenities, and size of their facilities, but for catering purposes, they can be broken down into two categories: large, full-service properties with a ballroom and multiple event spaces (and sizable staff to service those spaces) and smaller, boutique properties, that may have one or a handful of smaller venues for gatherings. Both options are viable for caterers who hope to partner with hotels, but boutique properties currently offer the most opportunity for a long-term relationship, according to Ingalls.

“We’re finding boutique hotels are looking to gain a competitive advantage in a dwindling market. As hotels close and are unable to survive the pandemic many boutique properties are looking to enhance their offerings similar to large hotels with in-house catering. We’ve even seen boutique hotels open semi-permanent tent structures to add potential event revenue to their facilities,” Ingalls said. “Our strategy for approaching hotel clients has been to present our options and offerings as a supplement to the hotel bringing back their entire F&B team. We’re here to bridge the gap for groups that do not have the ‘heads in beds’ to support full-time F&B personnel. We’re looking to secure these properties long-term by providing exceptional service and food at comparatively little cost to the hotel, providing a better profit margin for them further down the road,” he says.

Cost vs. profit

Francisco Christian, Managing Partner at Taylored Hospitality Solutions, says caterers should realize that many hotels view in-house catering as a cost and not necessarily a profit center, so “the main reason a hotel would bring in a catering partner is to improve their bottom line. If the hotel can add profit from the catering cost center, then the hotel will look better on monthly financial reports,” Christian says. “Currently with hotel occupancy well under 50%, some hotels are not going to open their banquet facilities until they restaff with 100% occupancy. Hotels that can still offer F&B and discounted hotel rooms will be more sought after by smaller event groups.”

Ingalls says Brancato’s has helped hotels in their area fill that small event niche this year. “One example was a medium-sized hotel with large meeting space for rent. They needed a caterer to supply staff and provide food as they did not bring back any of their staff. We built a menu that was simply presented with multiple service options for the hotel to sell,” he explains.

“We had entrées, sides, and salads that fit into the price point requested. The menu was priced in tiers with food only; food and buffet staff only; and full-service staff from Brancato’s using the hotel’s china. The additional selling point to that client was our COVID-19 protocol and our staff having been trained and executing many events to that point, which mitigated their need to train hotel staff coming back.”

Partners & profits

Christian says caterers need to do their homework ahead of partnering with a hotel to ensure the agreement is aligned with the business goals of both parties, since the property is possibly looking at the partnership only as a short-term solution and a cost-cutting measure, while caterers might be looking to parlay the same agreement into a long-term relationship.

“Hopefully, the partnership opportunity is not a short-term agreement. Most agreements are a minimum of three years or more since hotel bookings can be made years in advance to block hotel rooms. Also, depending on the initial capital investment that may have been required, the caterer will need time to recoup that investment unless there is a buyout clause. After the 2008 recession, one of our hotel partnerships included the option to rehire some of the hotel staff before we hired new staff off the street. When the catering company business starts to ramp back up, there will be a need to bring back your seasoned staff, so adding experienced hotel staff helps because they already know how you operate,” he says.

Overall, hotel partnerships may appear alluring in a time when any new business is a positive, but Christian cautions that hotels may have more leverage in negotiations due to their size and resources.

“Caterers have to remember that not all new revenue is good revenue. If there is a hotel partnership opportunity, take your time to review out-clauses and early termination so it is fair to both parties. The hotels might have more time and attorneys to leverage the agreement in their favor. Caterers should always cover their profit margins first when working with a hotel that is focused on cutting costs.”

Lead photo courtesy The Confidante Miami