How PM Hotel Group Convinces Owners to Invest in F&B
For this management company, selling hotels on F&B's importance is an inside job.
When its landscape of properties dramatically transformed, hotel management firm PM Hotel Group needed to put F&B on the front burner in serious fashion.
In the three years before 2017, PM’s portfolio changed from predominantly select-service to predominantly full-service, expanding its portfolio to include Sheraton, Hilton, Westin, Renaissance, and Crowne Plaza properties. The company is now also holding the reigns of the first generation of Canopy, one of Hilton’s newest brands, including what will be the second one in the U.S., the Canopy Bethesda North. PM also recently took over management of the AAA, Four Diamond, preferred Hotel du Pont in Wilmington, Delaware, and the Franklin Hotel in Philadelphia, which sends PM into the independent hotel space.
Previously, development of F&B concepts and management of the F&B operations was handled by a combination of hotel operators and PM’s corporate senior leadership. PM saw a need for a more structured and strategic F&B approach across the portfolio, says the company’s Corporate Director of Food + Drink Katherine Kies.
Innovation for the Future
At the beginning of 2017, PM launched an internal brand called the Food + Drink Innovation Group to create an identity and brand for its F&B leadership across the portfolio and for future projects, explains Kies, who says the internal group was born of four reasons.
“First, we had decelerating RevPAR, and F&B revenue is a critical component to driving revenue growth year-over-year,” she says. “Second, we wanted to make a statement about our dedication to F&B within a hotel company to attract and develop talent. Third, we believe F&B will become a key differentiator for guests in their hotel experience. And fourth, we want to develop an F&B culture at PM Hotel Group to inspire bringing performance to the next level.”
PM finds more value in RevPOR metrics than in RevPAR, Kies says. In all, the company looks at seven key metrics regarding F&B success: food cost (%), beverage cost (%), labor cost (%), RevPOR ($), GSS scores compared to brand average, catering revenue per square foot ($), and banquet revenue per group room ($).
“We are cognizant of the impact occupancy has on the outlet revenue, and group rooms on the banquet revenue, which is why we factor in occupied rooms and group rooms into our metrics,” Kies says. “Some of our outlets in downtown locations draw significantly from outside the hotel and are less impacted by occupancy, but ultimately these are the metrics we have decided provide the greatest benchmark for performance across the portfolio.”
The F&B Value Proposition
PM made a pitch recently to a hotel ownership group to handle preopening as well as management services for a hotel project. The new focus came in handy.
“We were able to talk about F&B concepting, the execution of it once they are open, and the design side and everything else,” Kies says. “It’s been great for that purpose. And we also are able to use it when we expand our career recruiting efforts. We can show that there is a career path and we are expanding as an organization, specifically within F&B.”
Kies says there is “no question” the new focus has won PM management contracts. “This week, I was in Austin and then Greensboro,” she says. “Last week I was working on a project for Dallas. The F&B focus has been a differentiator. Every single owner has said it was an important component to their decision in choosing a management company. ‘Rooms are rooms,’ is what people are starting to say. They need someone to focus on this incremental revenue stream for them.”
Most of the owners PM works with know they need to get F&B right to maximize their returns but don’t always know what that means, Kies says. “They look to us for everything from a market study, to programming, to concept development, to execution. A lot of their questions tend to be around the back-of-house needs for supporting an F&B space, knowing what will do well in a market, and how to drive people into the concept. There is also a lot of conversation about the balance between hotel space and bar/restaurant space and how much interaction there should be between the two spaces. This really varies based on the project and it is always a delicate balance to ensure the concept can achieve optimal performance.”
Eighty property and management leaders are part of the Food + Drink Innovation Group. The two team members above the property level are Kies and Steve Kaiser, director of Food + Drink Operations. “I focus on the strategy and structure of Food + Drink initiatives, as well as new concept development, while Steve is focused on optimization of daily operations,” Kies says. “We direct our resources at the highest opportunity properties as needed to support success.” Then there is every F&B leader at PM’s properties, which number 78 and growing. “And, lastly, we have every F&B line-level team member at our properties, who are also a part of the Food + Drink Innovation Group,” Kies says.
A Changing Market
Dave Pollin is chairman of PM Hotel Group and president of Buccini Pollin Group, owner of many of the hotels PM Hotel Group manages. He says PM manages hotels for BPG, but BPG also has a half dozen institutional third-party owners. In his view, the new Food + Drink Innovation Group comes with perfect timing.
“Like many companies of PM’s size—we consider ourselves in the middle, with 40 to 50 hotels—we previously had a very competent and reliable F&B group whose goal was to facilitate the brand-required program,” Pollin says. “If that was a complimentary breakfast in a select-service hotel or a 40,000-foot conference facility, they would do a good job. The rules have changed. Travelers today are exposed to so many great restaurants in the communities where we operate, we had to rethink what we were doing.”
No longer, Pollin says, would offering “just a hotel restaurant” carry the day. “It had to be a very specific, relevant, indigenous experience for our guests. The concepts became incredibly more focused—from the menu design, to the food. The second part is that now that people are wanting an experience, you have to not only come up with a concept, you have to execute it, and service is the most important part of that. It went to the next step of making sure we have people in place to be successful.”
Pollin points out other factors disruptive to the market share of his company’s mostly full-service portfolio, not the least of which is travelers opting for Airbnb and home-sharing stays. Then there’s competition from new select-service, extended-stay, and other full-service brands for PM’s hotels to contend with, he notes.
“So, the differentiator for our hotel portfolio is that incredible F&B experience,” he says. “It’s as personal as you can get. You’re eating our food, in our home, being served by our people. It’s multi-sensory. We have to get that right. When we do, select-service and home sharing can’t compete with that. And people in the full-service space who don’t focus energy on F&B can’t compete with that.”
At press time, PM has opened three new concepts since the official launch of the Food + Drink Innovation Group banner and is actively working on another 13 projects, two of which are slated to open by the end of the year. Previously created concepts are lumped under the umbrella of the group, along with the newer venues. So far, PM has some powerful case studies to share when pitching new business.
BPG acquired the Hilton Meadowlands in East Rutherford, New Jersey, in 2005, installing a restaurant called the Chairman’s Grill. “It was adequate and competent,” says Pollin, “but it was not inspirational. We had 427 rooms with 30,000 feet of function space, so we had a lot of people coming in and out of the building every day—a lot of opportunity to capture. But our capture rate at dinner, for example, was in the single digits.”
With PM, BPG reimagined the venue and reopened in July 2016 as Bergen Social. “The Hilton Meadowlands does not have a large external market, so the focus with this project was to make a visible difference in a tired space and relaunch the concept with the renovation to capture as much of the internal market as possible,” Kies says. As of July 2017, Bergen Social saw a year-to-date increase of 73% in revenue and a 49% increase in revenue per occupied room.
“We took out about 40% of our restaurant seats and made them lounge seats,” Pollin says. “People really prefer to eat in a place that feels like a bar or a beverage-centric experience than to drink in a restaurant that’s just there to serve you a ‘hotel burger.’ We added four or five additional communal tables, so groups of five to 10 people can stand around it, sharing appetizers. The new vibe is capturing people who otherwise would have left the hotel. “And, we’re encouraging people in an adjacent office building to come dine with us, who otherwise may have eaten at their desks.”
Pollin also points to the heightened energy now put into outdoor space activation at hotels, such as at Top of the Yard, a rooftop bar at the Hampton Inn & Suites Washington Navy Yard that overlooks the Washington Nationals’ baseball stadium. “It has a limited food menu focused on ballpark fare and highlights a selection of local D.C. products from Greenhat Gin to a local ice cream sandwich maker,” Kies says. “It surpassed budgeted revenue in the first year by 105% and has increased YOY by 58%. The revenue per occupied room has increased YOY by 51%.”
The Marble City Kitchen & The Firefly project, a Tennessee whiskey-themed bar and beer garden at the Hilton Knoxville in Tennessee (see our September/October 2016 issue for our feature), is the result of a conversion of part of the restaurant into meeting space, pushing the majority of the restaurant into the former bar area, and activating a dead smoking patio as a vibrant beer garden (the outdoor area is The Firefly). “It concentrated the F&B spaces to create a more energetic F&B area and give visibility to the F&B operation on a key outdoor corner in downtown Knoxville,” Kies explains. “There was a 5% in YOY in CPOR with the renovation, and we are on track in 2017 to surpass that increase YOY.”
Pollin says a big reason Top of the Yard and Marble City Kitchen & The Firefly have been “incredibly successful, far exceeding their budgets,” is because people who live in cities often move into smaller and smaller residences, because of the high cost of real estate and rents. “They have less opportunity to interact with the outdoors, so, the outdoors really resonate with folks,” he says. “We’ve found if we can provide that with a high-quality setting, with a view, not just hotel guests but our local community really responds, and it becomes a clear point of differentiation for our sales team. We’ll have lots of folks in meetings either reserve the entire space or a large communal table as a place to unwind after a meeting. That’s all been pioneered by our Food + Drink Innovation Group. They’ve done their homework. They’ve gotten best practices for outdoor spaces, because it is different and more difficult to execute, but they’ve done a great job.”
This feature originally appeared in the September 2017 issue of Hotel F&B and is one of our Reader Favorites. It is updated regularly.