How independent hotels can make food and beverage more profitable
Food and beverage (F&B) can be one of an independent hotel’s most valuable revenue streams. However, managed poorly, it can erode margins generated elsewhere in the business.
Factors like food inflation, higher employment costs and changing guest habits have put pressure on restaurant and bar margins across the sector. Employers have paid more in National Insurance contributions (NICs) since April 2025, and the National Living Wage has continued to rise. The Budget on 28 October 2026 left employer NICs unchanged, but confirmed a further 3.9% rise in the National Living Wage to £13.21 an hour from April 2027, so hotel owners still face rising wage costs.
Despite all this, some hotels continue make consistent profits from their restaurants and bars. So, what is their secret ingredient?
In our experience, the difference is rarely a signature dish or celebrity chef. It comes from owners and managers taking a disciplined commercial approach and understanding which parts of their F&B operation are profitable, and which are not.
This article breaks that approach down into practical, manageable steps.
A busy restaurant is not always a profitable one
A full dining room on a Saturday night does not guarantee a profitable month. Many hotel owners track occupancy and covers closely but have far less visibility of what sits behind their F&B revenue. Five questions help to close that gap:
- Which dishes and drinks earn the highest margin?
- How much food is wasted, and at which stage?
- Do rotas match actual demand by day and by service?
- Have supplier price rises been passed through to menu prices?
- Which services, such as breakfast, room service or afternoon tea, earn the best return?
Without clear metrics to measure success, teams can end up over working while still generating the exact same profit.
Menu engineer to price and position every dish
Menu engineering compares each dish’s popularity with its gross profit contribution. After plotting these two figures against each other, menu items are categorised into four distinct groups, prompting where they should go next:
- Dishes that sell well and earn a strong margin are the ones to protect and promote.
- High-margin dishes that sell poorly may need a better position on the menu or a clearer description.
- Popular dishes with thin margins are candidates for a price rise, a smaller portion or a cheaper recipe.
- Dishes that are neither popular nor profitable can usually go.
Running this analysis every quarter, and again after any significant supplier price change, keeps the menu in line with costs. The purpose is to steer guests towards the dishes and drinks that create the most value for the hotel, rather than to sell more food for its own sake.
Match staffing to demand
Staffing is one of the largest overheads for most hospitality businesses, so the challenge is to maintain service quality while keeping labour costs proportionate to revenue.
Workforce planning tools use booking data and past trading patterns to build rotas, so there are enough staff for busy services without paying for idle hours in quiet ones. Automating bookings, reporting and stock counts also free up time that staff can spend with guests.
Payroll planning should also cover tips and service charges. Since 1 October 2024, employers have had to pass all tips to workers without deductions and keep a written policy on how they are shared. The VAT treatment of a service charge depends on whether it is genuinely optional, so it is worth checking how yours appears on menus and bills.
Forecast demand to reduce waste
Food waste is a direct cost which chips away out margins if not managed correctly. Better forecasting reduces it at source, and some operators now use tools that combine historical sales, booking data and weather to predict covers and order stock to match. Kitchen controls are of equal importance. Consistent portion sizes, tighter purchasing, regular stock counts and recording waste by category show where losses occur, so managers can act before costs build up.
Increase average spend per guest
Owners should focus less on driving more covers, and more on raising average spend per guest as a way of boosting profit. The latter often delivers a better return, because it adds revenue without the same increase in staffing or overheads.
Premium drinks, tasting menus, seasonal specials and well-trained upselling all help, provided they improve the guest’s experience rather than inflate the bill. Competing on value rather than price also gives a hotel more room to pass on cost increases.
Track the right F&B KPIs every month
Timely management information ties these measures together. The key performance indicators (KPIs) most hotels should review at least monthly include:
- Gross profit percentage, by outlet where possible
- Food and beverage cost percentages
- Labour cost as a percentage of F&B revenue
- Average spend per cover
- Stock variances
- Revenue per available seat hour (RevPASH)
Monthly figures produced soon after month end, mean owners can identify a slipping margin within weeks, rather than at the year end, and management accounts that report F&B and rooms separately make this much easier.
“The trick is not to get lost in the detail and spend unnecessary time considering KPIs and metrics that don’t provide meaningful information. Sometimes, the most appropriate course of action is the simple one and a basic cost/benefit analysis can determine the success of the future.”
The secret ingredient to profitable F&B
No single change guarantees a profitable F&B operation. The hotels that perform best combine good hospitality with disciplined financial management. They know their numbers, use technology where it saves time or money, control waste and review their menus regularly.
The true secret ingredient is disciplined decision-making, supported by management accounts that show what is driving profit.
The Price Bailey Hospitality team works with independent hotels on management accounts, KPI reporting and VAT. To talk through your F&B numbers, contact one of our experts using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.
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