How important is F&B operation in the hotel industry? Empirical evidence in the U.S. market

Abstract

In full-service hotels, the increase in resource (i.e., salary in this study) of the F&B department relative to that of the rooms department had a positive effect on the rooms' operational performance indicators including ADR (average daily rate), RevPAR (revenue per available room), GOPPAR (gross operating profit per available room), and gross operating profit ratio of the rooms department. Although it did not increase the demands for rooms, the improved room price (i.e., ADR) had a positive impact on their room revenue, as a result. Among the three major categories of full-service hotels, the positive impact of F&B offering on operational performance was observed significantly in the upscale category such as increased occupancy, ADR, RevPAR, GOPPAR, and even gross operating profit ratio of the rooms department, but not in luxury and upper upscale categories. The findings indicate that there are substantial customers’ needs for F&B offering in upscale hotels.