Hotel Owners Advised to Leave the Cooking to Us

Chef David Machado and Hotelier Bashar Wali presented “Proven Strategies for Hotel Foodservice Excellence: Hotel Owner and Restaurateur Perspectives” at “Food Times at Restaurant High”. The conference, held March 1st in Seattle and sponsored by law firm Davis Wright Tremaine, was attended by over 300 restaurant and hotel thought leaders, including celebrity chef Terry Simon, local hero Tom Douglas and even an actor, Judge Rienhold (who starred in the film which gave the conference its name).

Major branded hotels have long combined hotel and food and beverage operations with little gastronomic distinction. The phrase “rubber chicken” comes to mind. In contrast, boutique hotel pioneer Bill Kimpton’s properties were known for superlative restaurants, starting with the modest Hotel Vintage Court which housed culinary masterpiece Masa’s. Messrs. Machado and Wali discussed the evolving industry thinking regarding the two paradigms.

Mr. Machado came up through the Kimpton system and remembers that hotel and F&B were separate divisions with separate financial statements, and a more than friendly competition was encouraged. This forced the restaurant general manager and hotel general manager to think before taking a charge that more appropriately belonged on the other side of the ledger. Mr. Wali noted that it’s easy for hotels who provide their own food service to be fooled into thinking the restaurants are profitable, or at least break even, because many of the services and charges that should be allocated to the restaurant, such as trash removal, security, accounting, and overhead, are easily left on the hotel’s books.

Mr. Wali, President of Provenance Hotels, acknowledged that the food is always better when left to the “specialists”. And you wouldn’t want a chef readying your guest room for occupancy. The hotel guest wants service to be prompt, expert and invisible. He assumes that the linens will be fine, the beds well appointed, and the plush robe at the ready – he wants to be left alone. The restaurant guest assumes the recipes will be inventive, the food local and fresh, and the martini dry – she wants to be entertained.

For Provenance, the majority of whose restaurants are owned and managed by restaurateurs, the problem with company owned restaurants is the “80-20” rule. Mr. Wali describes how invariably the general manager spends 80% of the time in the restaurant, which at best generates only 20% of the profits. As chef d’enterprise, Mr. Machado has seen hotel GM’s step in with poor results, for the kitchen as well as the financials. The allure of food blinds the GM, and often the company, from the bottom line.

If cleaving restaurant service from hotel service is generally preferred, how is that being accomplished in today’s rebounding hospitality market? Because the hotel has such a vested interest in making sure the restaurant serves the guests’ needs, from breakfast to room service, an hotelier is unwise to simply lease the space, take the rent and hope for the best. It’s all about choosing the right partner, says Mr. Wali, because once the ink is dry the fun only begins. It’s like a marriage, he says, “communication, patience, cooperation and a shared goal – profitability, of course, but personality also. I’m not inclined to do this with some starry-eyed newbie fresh from Iron Chef.”

Take Portland’s hotel Modera, which opened in 2008 with sleek lines, compelling art, and no restaurant. Portland’s chefs were loath to step into a space which required millions to make right. Mr. Machado, a road tested veteran, convinced ownership that they needed to pony up. “The relationship between restaurant owner and hotel owner is not evenly matched,” he said. “The hotel owner has access to capital and resources that most chefs do not. And they stand to gain the most, in terms of profile, capital appreciation and resale value, if the restaurant is a success.” The owners have not looked back; the Modera was in a tight spot before Mr. Machado’s Genoese themed Nel Centro opened, but the restaurant brought a vitality and sparkle to the hotel, to the mutual benefit of both.

If there is an emerging consensus that today’s hotel restaurant should be chef driven and independent, and a belief that, especially in today’s capital strained markets, the hotel owner should pay for the build out, how are these transactions being structured? Whether structured as a lease or management agreement, they must address sticky wickets like operating hours, holidays, room service, operating capital and runway in addition to price. “If I’m paying,” says Mr. Wali, “then the restaurant needs to be open when my guests need it and excel with the non-glamorous services, like rooms service and breakfast”. Mr. Machado agrees, but not at the expense of his bottom line. “Of course I’d love to be open at 6:00 am,” he says, “but to serve two covers and be short staffed?” (Restaurant staffers not being known as early risers.) At Nel Centro, we wanted 7:00 am but compromised at 6:30.

Finally, concluded Mr. Wali, “I want some skin in the game. If things get tough, I want to know that my chef is motivated to show up, and not simply hand over the keys”. Showing up in tough times, says Machado, “is in our DNA, it’s what chefs do”.

Mr. Ledoux moderated the panel discussed in this article, and is a hotel and restaurant lawyer in Davis Wright Tremaine’s hospitality industry practice.