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Hotels Reinvent Room Service to Stay Relevant

Hotels Reinvent Room Service to Stay Relevant

The New York Hilton Midtown stirred up some controversy in June when it announced plans to do away with traditional room service. Like many full-service hotels, the nearly 2,000-room property had experienced a decline in room service requests over the last several years as customer preferences and expectations evolved. According to a PKF Hospitality Research trend report, U.S. hotel room service revenue accounted for only 1.22 percent of total hotel revenue in 2012, down from 1.52 percent in 2007.

Historically, room service has functioned as a brand standard and differentiator rather than a moneymaker for hotels. “It’s not a big source of revenue and it has a lot of high costs associated with it,” says Robert Mandelbaum, director of research information services for PKF. “I think it’s more of an image and market positioning characteristic—an amenity that sets you apart.”

Joe Smith, executive vice president of Chesapeake Hospitality, says operating expenses associated with room service are high, from the labor costs down to printing charges for in-room menus. And to meet brand standards, hotels have to offer room service during set hours that may not make financial sense when analyzed from a cost perspective. Chesapeake manages more than 20 hotels, the majority of which are branded, full-service properties with room service. “Our food and beverage departments are profitable,” Smith says. “It’s not like we’re running away from F&B. Our restaurants, lounges, catering, and banquets will make money. Room service is typically not an area where we will make a large amount of revenue because there is a lot of overhead.”

From the guest perspective, room service has earned a bad rap for being slow, mediocre, and overpriced. Choice Hotels CEO Steve Joyce says he has been eating room service while on the road for 30 years. “I never liked it in the ‘80s, and it hasn’t gotten any better now,” Joyce says. “Nobody wants to wait 45 minutes for a dish that comes up relatively congealed and isn’t that good to begin with and pay $60 for breakfast.”

Contemporary room service needs to provide a value-driven experience, says Beth Scott, vice president of global products, food and beverage, and wellness for Hilton Worldwide. “Increasingly, guests are looking for more relevant delivery options that provide greater value by being fast, convenient, and portable,” Scott says.

Much like technology dried up profits from in-room phone calls and on-demand movie rentals, the proliferation of fast-casual restaurants and grab-and-go markets has impacted the in-room dining experience. “How many people really sit down to two eggs, bacon, and toast with jelly?” Smith asks. “Most people are so much more comfortable grabbing a yogurt, some fruit, maybe a glass of orange juice, and boom they’re on their way.” A recent Mintel survey revealed that sales at quick-service restaurants have increased to nearly $30 billion in the last five years. To make up for lost revenue, many hotels are finding ways to reinvent room service.

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