The combination of supply chain disruptions and headline inflation has hit the U.S. hospitality industry hard, especially in restaurant operations, where profit margins have traditionally been thin.
As more and more people return to travel and expect superb dining experiences, hoteliers have once again had to adapt to growing demand while coping with higher prices on food and hospitality. kitchen equipment, as well as lower availability and longer delivery times.
Everyone is battling inflation and trying to control rising costs, said Marcus Marshall, vice president of restaurants and bars at Hospitality Ventures Management Group. The company works through its distributors and suppliers, constantly reviewing price increases. The highest costs typically come from beef, poultry and dairy, but they also see higher costs for disposable products, such as napkins and paper towels made in China.
Alcohol prices have been less volatile given state regulations and taxes at play, he said. It has been a wine buyers’ market for years, as there is no shortage.
The cost of groceries has leveled off recently, and they are more available now than they were this time last year, he said. It was mainly about getting the product and responding to price increases to keep margins where they need to be in balance with customer demand.
Many of the company’s hotels in the Southeast, particularly in Florida, achieved high occupancy rates thanks to spring break, Marshall said. They had to increase the prices of various dishes, up to 7% in some cases, and the diners did not hesitate to pay.
Raw food prices have risen slightly, said Angela Harrington, president and CEO of Catalyst Project Management and owner of the Grinnell Hotel in Grinnell, Iowa, and the Highlander Hotel in Iowa City. The cooler items, especially fruit, have proven more problematic given California’s droughts and the cost of gas to deliver them.
“It takes a long way to get fruit, fresh fruit, to the middle of the United States,” she said.
Rising costs and delivery times have been an ongoing challenge, but Aimbridge Hospitality’s supply program has a dedicated person in its catering operations to prevent issues from arising, said Elie Khoury, vice- Executive Chairman of Operations at Aimbridge.
“We have an eye on what’s available to us, and we’re working with our food distribution companies to make sure we’re able to design and write recipes for the menu items available at, I don’t want say attractive prices, but very reasonable prices,” he said.
Having this dedicated person has been helpful in ensuring that hotels in Aimbridge can either get what they need or adapt if necessary, he said. This may mean having to rethink how hotels align their kitchens or menus.
The cast itself has been a challenge over the past year and a half, he said. Although the situation is improving, the company is now paying between 7% and 10% more in goods than ever before.
One of the ways HVMG hotels have dealt with these challenges is to no longer have a set menu, Marshall said. They print menus in-house to be flexible as certain types of food become more expensive or less available.
When certain foods became more difficult to obtain, such as chicken wings for a while, they simply took the dishes off the menus. Other times, when the rib eye steaks were too expensive, they switched to New York steaks.
Some properties have to make changes weekly while others do so less frequently, he said.
For a small operator, changing menus frequently is a debacle, Harrington said. Beyond printing new menus, it’s difficult to quickly retrain kitchen staff on new dishes.
When a food item is overpriced or unavailable, they stop offering it or improvise and make sure the customer understands what’s going on, she said. For some foods, like pastries, it’s not something they can make themselves and it’s not cost effective to try to source locally.
Marshall said he bought an oven for a hotel kitchen in 2019 for around $12,500. It’s similar to the type used at Starbucks that makes food hot and crispy quickly, he said.
Recently, another owner wanted the same oven for another property, he said. In about three years, the price of the oven has jumped to over $22,000 and has a delivery time of 16 weeks. Thinking there was a possible price misunderstanding with the distributor, he called the manufacturer direct.
“They checked, in fact, that their list price was higher than what I was being offered,” he said. “They said they were behind for the same reasons as everyone else: the supply chain, the labor shortage and the salary increases.”
With that information, Marshall said he needed to go back to the hotel owner to discuss his options.
“The math is different now,” he said.
Aimbridge’s sourcing team has also helped prevent problems when purchasing kitchen equipment, Khoury said. If they were having difficulty finding stoves, ovens or other items, they would know before committing to a hotel owner a certain level of equipment and a certain delivery time.
“Delivery time is the biggest problem for us right now, everything takes longer,” he said.
Harrington bought the Highlander Hotel 10 weeks before the coronavirus pandemic began, so although everything she ordered to update the hotel arrived at pre-pandemic prices, the wait took weeks to months for the most basic items. In some cases, it took up to 18 months.
What worries him most about inflation isn’t the cost of the food his hotels serve; this is how inflation affects its employees. It already pays about 30% more than others on the market.
“Making sure that every member of the team receives a living wage or more is very important to me,” she said. “It’s important to me that they don’t just survive working for my hotels, that they thrive.”
Inflation affects her ability to take care of her teams, and if they don’t have enough to make ends meet, it creates a problem at home and in hotels, she said.
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