The The New Era of F&B Revenue Management

f&b revenue management fernando vives hospitality labs blog revenue management Apr 30, 2024
Fernando Vives blog
Are you ready to whet your appetite for innovation and digest the latest strategies in F&B Revenue Management? Last edition, I served you up insights on pricing automation and its vital role in keeping your business lucrative and competitive. This time, let’s season our discussion with a dash of strategic foresight and a pinch of operational excellence impacting F&B Revenue Management. One of the elements of the 3rd Wave of Revenue Management ™

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The Art of Menu Engineering

Menu engineering is not just about creating a list of dishes; it's a strategic exercise that combines psychology, data analytics, and culinary creativity to boost a restaurant's profitability. By understanding the profitability and popularity of each menu item, restaurateurs can strategically highlight or redesign offerings to enhance their appeal and influence customer choices.

It's all about the visual flow of your menu and the placement of items. High-profit dishes should be prominently featured in 'sweet spots' that customers naturally focus on first. Meanwhile, lower-margin dishes can be reimagined or paired with complementary items to increase their value perception.

Crucially, menu engineering is an ongoing process. It requires regular review and adjustment based on customer feedback, sales data, and seasonal ingredients availability. 

The ultimate goal? A menu that not only tempts the taste buds but also steers diners towards choices that are both satisfying for them and financially beneficial for the establishment.

Smart Menus: Powering Up Dining with Data

Today’s smart menus are far from mere lists of dishes; they are dynamic sales tools, engaging storytellers, and silent sellers that cater to your customer's appetite and your business's bottom line. 

These intelligent menus adapt in real-time, changing offerings based on the day, time, stock levels, and profit margins. They bring the finesse of Amazon’s scroll-and-discover technique to the dining table, enticing diners with visually appealing, strategic menu displays that are engineered to boost the average check size. 

Welcome to the era where menus not only communicate your culinary story but also drive your revenue strategy in the most deliciously data-driven way.

Data Analytics: The Main Course for F&B Success

In the F&B world, each order is more than just a dish served—it’s a treasure trove of data ready for analysis. 

Smart use of this data can revolutionize your operations. From fine-tuning your menu selections to honing in on the most profitable pricing, data analytics is your secret ingredient. It helps you understand customer preferences, forecast trends, and tailor your marketing to hit the sweet spot of your patrons’ preferences. This isn’t just running numbers; it’s gathering the flavors of success to create a recipe that keeps diners coming back for more.

Dynamic Pricing for F&B: Unlocking Incremental Profitability

In the Food & Beverage sector, dynamic pricing represents a great opportunity. It is a strategic lever capable of significantly enhancing profitability. 

By making slight adjustments to pricing based on anticipated demand, even small increases can translate into substantial gains. Each euro of price increase carries a high marginal flow through, meaning that the additional revenue generated largely contributes directly to the bottom line without corresponding increases in cost.

For instance, during peak dining times or special events, slightly elevating menu prices can capitalize on increased customer willingness to spend, thereby maximizing revenue without deterring patronage. This approach not only optimizes earnings during high-demand periods but also supports overall financial health by contributing to more robust profit margins.

Effectively implementing dynamic pricing in F&B requires a deep understanding of customer behavior, market trends and using the right technology. Ideally supported by Digital Smart Menus and QR codes. 

It allows establishments to adjust prices in real-time to reflect the changing value of their offerings. The result is a more agile, responsive business model that aligns pricing strategies with consumer demand and market conditions, driving incremental profitability in a highly competitive environment.

Reservations and Inventory – A Recipe for Full Houses

It's not just about the number of tables; it’s how you set them. Implementing robust reservation management to elevate occupancy and avoid the pitfalls of overbooking or empty tables at peak times.

Seamlessly continuing from the subtle nuances of menu engineering and the smart adjustments of dynamic pricing, we find that managing reservations and inventory is much like conducting an orchestra where every seat and table plays a crucial note in the symphony of service. Masterful reservation management is the key to achieving a consistent flow of patrons, ensuring each table is an opportunity for maximum profitability.

It's an intricate dance between anticipating demand, understanding guest behavior, and aligning it with table availability. Tools that predict peak times and facilitate real-time table management become indispensable in this mix. They enable restaurants to make data-informed decisions, turning the potential chaos of overbooking and empty tables into a well-orchestrated dining experience that leaves both guests and management in perfect harmony.

This strategic approach ensures your restaurant doesn’t just serve meals, but also serves the business objectives with a full house, especially during those peak hours that matter most.

Cancelation Policies: Securing Commitment, Reducing No-Shows

As we've seen in the travel and hospitality sectors, well-defined cancellation policies are pivotal in mitigating the impact of no-shows. This principle holds equally true in the restaurant industry, where an unclaimed reservation represents not just lost revenue, but also squandered resources and missed opportunities for other patrons.

Enforcing a cancellation policy that requires confirmation or a deposit incentivizes guests to honor their commitments or cancel in advance, providing the restaurant the chance to reallocate the space.

Moreover, utilizing waiting lists can be a strategic move; it not only creates a safety net for potential no-shows but also capitalizes on high demand, ensuring that every seat contributes to the evening's success.

By implementing clear policies and waiting lists, restaurants can turn the tables on no-shows, ensuring operational efficiency and revenue optimization. This is the art of guaranteeing a full and vibrant dining room, night after night.

Channel Management – The Secret Sauce

Channel management is the backbone of modern reservation systems, particularly when seamlessly integrated with power players like Google.

This integration isn't just about visibility; it’s about tapping into a stream of potential guests actively seeking what you offer.

Real-time connectivity with reservation platforms streamlines the booking process, significantly reducing the operational drag and costs associated with manual telephone transactions.

In the fast-paced culinary scene, such efficiency isn't just desirable – it's the secret sauce to staying relevant and responsive in a market where immediacy wins the race.

Behavioural Pricing: The Savvy Chef's Strategy

When it comes to pricing, it's not just about the cost—it's about understanding the behavior behind the spend. 

Behavioural pricing is a nuanced approach that accounts for how different customers perceive value and make purchase decisions.

For F&B, this means creating pricing strategies that appeal to emotions, capitalize on dining habits, and encourage spending. It's about crafting an experience that feels personalized and worth every penny. 

Conclusion and final thoughts: Taking Revenue Management to the Next Level

The era of comprehensive Revenue Management is upon us, beckoning hotel directors and revenue managers to extend their expertise beyond the boundaries of room sales. 

It's time to embrace the 'Revenue Management beyond rooms' philosophy, a crucial facet of the '3rd Wave of Revenue Management'. This approach isn't just a trend; it's a call to action for industry leaders to harness their acumen and steer F&B services toward untapped potential and profitability.

As custodians of innovation, it’s imperative that we break traditional silos and apply Revenue Management principles across the full spectrum of hotel operations. 

This includes fine-tuning the art of F&B service to the rhythm of data and demand, ensuring every aspect of hospitality contributes to the crescendo of customer satisfaction and revenue success. 

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Until next time, keep exploring the endless possibilities of hospitality.


Fernando Vives

About Fernando Vives

Fernando Vives stands at the forefront of hospitality expertise, guiding NH Hotel Group as the Chief Commercial Officer. His dynamic leadership oversees a vast portfolio, including sales, revenue management and digital growth, steering a team of over 2,000 across 30 countries and managing a turnover of over $3 billion USD. Awarded as one of the Top 20 Extraordinary Minds in the industry for Commercial & Revenue Optimization Leadership, Fernando's extensive background includes senior roles at renowned hotel chains and ventures into entrepreneurship. He is an academic pioneer, and an esteemed speaker and a passionate industry advocate, Fernando's educational prowess is matched by his commitment to shaping the future of hospitality as an Ambassador for Hospitality Labs.

The views and opinions expressed in this newsletter are solely those of Fernando Vives and do not necessarily reflect those of any company or organization I work for or I am affiliated with, nor those of their partners or suppliers. The data sources used are mostly public, ChatGPT may have been used for research assistance, copywriting or editing. If you find any discrepancies or errors in the data or insights shared, please reach out to me via LinkedIn for necessary adjustments. Thank you for following and being a part of this community.

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