4 Fences Influencing Dynamic Pricing Changes at your Hotel F&B Outlet

4 Fences Influencing Dynamic Pricing Changes at your Hotel F&B Outlet

As a large majority of hotels have adopted some sort of dynamic pricing for their rooms, the next evolution of revenue management is moving beyond rooms, and many leaders have adopted total revenue management strategies for a more holistic approach.

One area that is ripe for innovation is F&B Revenue Management, and hotels are adopting the same principles and techniques that apply to room revenue management in their various F&B outlets, including full-service restaurants, bars, coffee shops and grab-and-go marketplaces.

F&B revenue management techniques largely focus on dynamic pricing, or adjusting the prices of menu items based on customer demand; and menu engineering, or adjusting the menu offerings to maximise profits.

Consumers are fine with variable pricing when done in a consumer-friendly way

To unpack F&B dynamic pricing, let’s identify four different “fences” that could influence dynamic price changes at your hotel F&B outlet:

1. Time of day. Prices may vary depending on the time of day or meal period, such as breakfast, lunch, dinner or happy hour.

2. Day of the week. Prices could potentially be higher on weekends or during peak times.

3. Portion sizes. Prices may also vary depending on the portion sizes offered, with larger portions typically costing more.

4. Location in the restaurant. Items may be priced differently depending on where they are located on the menu or where they are served within the restaurant, such as at the bar or in a private dining room.

A recent National Restaurant Association report on the State of the Restaurant Industry 2023 addressed

dynamic pricing in restaurants. It found that 79% of consumers are favorable or somewhat favorable towards variable pricing. Just over 70% of consumers reported they would order smaller-sized portions if the price was lower, and nearly 80% of consumers would be favorable towards discounts on lower demand days and times.

“Consumers are fine with variable pricing when done in a consumer-friendly way,” writes Cornell University Professor Emeritus Sherri Kimes. “This means offering value to the consumer. It doesn’t mean discounting all the time. If restaurants offer lower prices during low demand times, it also means that restaurants can charge higher prices during other periods.”

The key to F&B revenue management is using data to analyse guest demand and purchase behaviour. Data can also help you identify which items contribute to the highest average checks, which employees are skilled at tasks like upselling, and which menu items (or bottles of wine, for example) drive the most to the bottom line.

With some basic practices, you can improve performance in several areas, including traffic (covers), sales (average check), and service (improved reputation and guest satisfaction). Access to structured data and intuitive visualisation across these outlets will allow you to make more profitable decisions.

For more information on how you can elevate your F&B revenue management practices, please visit www.intouchdata.com

RM Magazine by The Australian Revenue Management Association