Strategic Allianices between Hotels and Restaurants

Abstract

This article reports on why hotel and restaurant companies form strategic alliances and offers a framework for doing so. In many cases it is not financially feasible for a hotel restaurant to be operated as just a support function to the hotel's lodging operations. In fact, the example presented in this article shows how a hotel owner increased overall hotel profits by buying and operating a restaurant franchise. The hotel restaurant must be managed as its own profit center where the goal is to maximize overall property profits. Two ways to accomplish this are to operate a franchised restaurant brand on the premises or lease F&B space to a restaurant company. Among the critical elements to consider when assessing which restaurant-brand concepts will best match a particular hotel property are: the hotel's desired market position and its competition; the feasibility of running the hotel company's own restaurant concept versus buying and operating a franchised brand versus leasing space to a restaurant company; the compatibility of the hotel's corporate culture and goals with those of the restaurant company; the practical aspects of converting existing space into the desired restaurant concept (e.g., physical layout of the facility, site location and characteristics, local labor market); the ongoing value-added support available through the restaurant company (e.g., franchise-fee structure, menu development and new recipes on a regular basis, cooking specifications, training and management support, ability to handle room service and banquets); and the potential for the restaurant to be a selling point that can enhance rooms sales in addition to being a profit center that can be held accountable for achieving established profit goals.