Revenue Optimization in Your Restaurants

By Juli Jones, CAE, Vice President, Hospitality Sales & Marketing Association International (HSMAI)

Revenue optimization in hotel restaurants is specialized enough that it deserves its own case study. Thankfully, there is one — produced by Dr. Sheryl E. Kimes, professor of operations management at Cornell University School of Hotel Administration, and Jeannette Ho, vice president of Raffles global brand strategy and strategic relationships for AccorHotels. On a recent call with HSMAI’s Revenue Optimization Advisory Board (ROAB), Kimes presented an overview of the case study, “Implementing Revenue Management in Your Restaurants: A Case Study With Fairmont Raffles Hotels International.”

For the study, Kimes and Ho looked at POS data for restaurants at several Fairmont hotels around the world, including meal duration, menu items sold, and average check per person, and identified strategies to increase and optimize restaurant revenue.

Here are three takeaways from Kimes’ ROAB discussion:

1. Make “hot” and “cold” plans, but also deploy some strategies at all times. When a restaurant is hot, or busy, and when it’s cold, or not very busy, it needs to do different things in order to maximize profit. But there are also strategies that they always need to implement. “We had this toolbox with three different ‘shelves’,” Kimes said. “So, you open it up and you have all-purpose tools, things like menu engineering and venue design and server upselling. Those work no matter what, and are great tools to deploy. Beyond that, it is important to select tools carefully depending on whether you are hot or cold. Are you busy and turning people away? Or are you not as busy as you should be? It’s important to know what tools to leverage in those unique situations.”

Each restaurant that Kimes and Ho worked with had a customized toolkit designed to improve revenue optimization. For example, when the director at a buffet in Canada saw how popular his restaurant was on Sundays, he realized that he could raise his prices and not see a reduction in covers. On the other hand, a restaurant in Japan decreased the price of its lunch deal, which in turn increased its counter-seat occupancy by 25 percent.

2. Make sure servers are well-trained. Kimes cited the example of a server who didn’t know much about wine and therefore his wine sales were lower than other servers’. Once he was trained to know more about the wines the restaurant sold, his sales went up accordingly. Another example Kimes gave was a server encouraging customers to only buy an appetizer instead of an entrée to save money, which cut into the restaurant’s bottom line. Some of it is product knowledge,” Kimes said, “but lot of it is coaching and providing managers with very easy things that they can tell the servers that are going to be successful.”

3. The biggest challenges were resistance and unclean data. “Anytime you have an employee enter data, you run into that problem,” said Kimes, who noted that one issue she and Ho encountered was that when restaurants were very busy, employees didn’t have time to enter orders and payments in real time. They also dealt with a fair amount of resistance when it came to getting information from the restaurant operators, which they overcame by giving the operators credit for their ideas and working with them to come up more ideas, instead of bombarding them with new ones. “You’re celebrating success,” Kimes said.

Categories: Revenue Management
Insight Type: Articles