Refurbishment of a hotel restaurant to improve the profitability.
The restaurant opened its doors in 2009 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 has been 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 145K 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 €9M 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. In 2018 the departmental profit was 32% of the one in 2010:
As an experienced Asset Manager and after so many years in the industry, it was not difficult for us 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 organised to familiarise 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. 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 with 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 organised 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 help 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.
As we see from the above table, 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 spent increased by 12% in a year. The higher profitability not only increased the Owner’s earnings but also increased the Operators fees. This is the result of professional asset management.
