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For China’s hotels, F&B sales never ancillary

Some eat to live; others live to eat. In China, food and beverage play a role far beyond sustaining life. It has cultural significance, familial significance, symbolic significance.

In an article titled “Food, eating behavior, and culture in Chinese society,” which appeared in the December 2015 “Journal of Ethnic Foods,” the author writes: “Food has many symbolic meanings; it not only expresses but also establishes the relationship between people and their environment as well as between people and what they believe. Therefore, food is an important component of a society.”

Contributed by David Eisen, HotStats

It’s also an important component of a hotel’s P&L, second only to the rooms department. Most hotel guests expect some semblance of F&B in a hotel, varying depending on the type of hotel. For hotel operators, F&B can be a revenue windfall or an expense noose. In China, food and beverage is held in particular reverence, an appreciation which carries over into the country’s hotels.

China’s pandemic story is one that precedes most. The first country to deal with the coronavirus, it was also the first country to come through it. Rooms RevPAR in China hit a low of US$7.48 in February 2020, according to HotStats data. By April 2021, RevPAR was up to US$72.48—a 233% increase over the same time a year ago—and only US$7 less than pre-pandemic April 2019. Rooms revenue as a percentage of total revenue hit 61.5% in April 2021, exactly the same percentage as April 2019, a sign of total hotel revenue stabilizing.

F&B revenue in China followed a similar trajectory as rooms revenue, hitting a low of US$2.47 in February 2020. Unlike rooms revenue, which took 12 months to get back to YOY positivity (albeit off fantastical lows), F&B revenue showed a positive increase eight months after its low mark, up 2% YOY in October 2020, as rooms revenue was still down 15.9% YOY.

In China, F&B’s march back to positivity was faster and higher than rooms. Between April 2021 and February 2020, rooms RevPAR increased 868%, while F&B RevPAR, over the same span, rose 1,544%.

Historically, food and beverage in China’s hotels has contributed markedly more to overall revenue compared to the United States, for instance, which relies more heavily on the sale of rooms than the sale of burgers and fries. In April 2021, F&B as a percentage of total revenue in China was 34.5%, while in the U.S., the percentage was 19.5%.

Pre-pandemic, the delta was similar. Consider January 2019: In that month, F&B as a percentage of total revenue in China was the exact same percentage as rooms contribution: 48.3%. In the U.S., the number was 31.8%.

The data point to the indomitable spirit and importance of food and beverage within Chinese culture that, by the numbers, extends to its hotels. A dinner or banquet is used to celebrate the important events in life, such as a wedding, a baptism or a religious belief.

Even international hotel brands recognize the significance of Chinese ritual and culture. In 2012, IHG launched Hualuxe, an upscale brand designed specifically for the Chinese traveler and their needs. The brand’s website features F&B prominently, with a large image of a Chinese family sitting around a large table filled with Chinese delicacies.

It’s clear that as China’s hotel industry continues to work its way back to profitability, F&B will play a pivotal role in the resurgence and path back to normalcy.

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