Hotel dining often has the reputation of being expensive and not as good as the restaurant around the corner. Is this impression justified, or are twelve euros for a 0.75-liter bottle of water just an exception? Guests also discuss in forums that 6.50 euros for a 0.5-liter beer sounds more like "Oktoberfest prices" and outright profiteering.
It fits in with the image many guests in Germany have had of gastronomy since Covid: the 21.1% price increase is real, as is the 19% increase in food prices since 2019. The withdrawal of the reduced VAT rate has further driven up prices in the hospitality industry. Strictly speaking, one could argue that passing on a 12% increase is not okay if you didn’t lower your prices by 12% before. However, wages in the hospitality sector have also risen by 13.6%.
Tim Plasse: Sees the future of hotel gastronomy as a balance between exclusivity and affordability.Josie Farquharson
It’s a difficult situation. The fact is that hotels and restaurants have not been able to compensate for cost increases through efficiency measures, so they have often been passed on to the guests unfiltered. Perhaps our industry did overshoot after Covid; at least it seems that way.
Image, Design, Cuisine, and Service
Prices are relative, after all. The guiding principle is Value for Money. If you ask successful german hotel restaurateurs about cutbacks, they just grin and shake their heads—because 2024 was the best year ever for many. Guests compete for restaurant seats and celebrate the consumption. When image, design, cuisine, and service are on point, price is more an expression of "treating oneself" and provides satisfaction. The actual value is not the product alone but what it represents – namely, how guests feel, what they experience, and the company they keep. Thus, price also becomes a selective factor.
On the other hand, affordability is the new trend. Many guests are more price-conscious than ever and oscillate between "treating themselves" and "being able to afford it." Or it might simply be an expression of a new sense of proportionality. A 4-to-5 factor on the purchase price might still be justifiable for a five-euro product, but for higher-cost goods, you quickly reach significant levels. Compared to the 9,800 euros for a bottle of Dom Pérignon at the Nikki Beach Club in Saint-Tropez, there’s definitely room for more—since that corresponds to a factor of 42.
Nevertheless, 36% of Germans intend to reduce their spending on dining out. 54% want to stay home more often and eat there rather than going out.
What does that mean for hotel dining, which typically uses full-cost accounting? A straightforward approach for a business owner is to roll all costs into the price – but that only works in the theoretical case of 100% occupancy. Or you rely on the convenience of hotel guests to justify accordingly high prices. The hotel industry certainly understands the concept of dynamic pricing—at least when it comes to rooms. So why not apply the same to F&B?
Anyone who isn’t in the top 1% and therefore able to charge any price they want must consider their competitors’ prices and stay competitive. In addition to the concept, offerings, quality, and service, a market-based pricing strategy is essential.
Here’s the F&B Heroes proposal for hoteliers seeking a successful pricing approach in their F&B operations:
Structure
Dynamic pricing requires a solid foundation. A clear structure of product categories –not just on the menu but especially in the POS system – enables precise calculation of the contribution margin per item. From these figures, you can derive an average contribution margin per category, which then serves as a compass: by continuously increasing and optimizing that margin, you maximize profitability. Granted, it’s a lot of work, but it’s essential for an effective pricing strategy. Percentages may be simpler for the controller to track, but you don’t deposit percentages at the bank – you deposit euros. Hence, the entire organization must be aligned with a consistent structure.
Strategy
Price is psychology – the price needs context. Only in relation to other prices can its value be assessed. A clever arrangement of "entry-level" and "premium" pricing on the menu automatically makes the middle range more appealing. People often choose the middle. At the same time, you influence guests' mental accounting. Unique niches or special designations also create prices that are less directly comparable.
Learning from E-Commerce
Many lessons can be learned from e-commerce, such as traffic generation, conversion, activation, upselling, and retention. Applied to hotel dining, the following approaches emerge:
1. Scarcity and Urgency
- "Only a few left!" creates a sense of urgency.
- "Limited offer!" conveys exclusivity.
- Countdown timers (for deals or promotions) increase pressure.
2. Social Proof
- "Bestseller" indicates popularity and builds trust.
- Customer ratings and reviews are credible recommendations.
- Live display of recent purchases creates dynamism and desirability.
3. Personalisation
- "Recommendations for you" are based on previous orders or preferences.
- "Recently viewed" reminds guests of items they’ve shown interest in.
- Wish lists increase the likelihood of a later purchase.
4. Gamification
- Discount codes reward loyalty.
- Loyalty points programs keep guests engaged in a playful manner.
- Contests or sweepstakes add extra incentive.
Not all of these can be transferred one-to-one to hotel dining, but many tactics and techniques are worth adopting. After all, it’s about helping guests make a purchasing decision rather than merely displaying an offer. This way, the price recedes into the background.
In a digitalized world, a "dynamic menu" could even operate more like a webshop rather than being static. This flexibility allows short-term adjustments while collecting data that reveals guests' preferences and buying behaviors – a benefit that online retailers have long exploited.
The happy medium for ringing tills: on menus, the offer with the highest contribution margin should be placed in the middle.Nathan Anderson, Unsplash
Perception
The visual design of food and beverage menus is often underestimated but absolutely crucial. It's not just about typography and layout but also how items are arranged. The reading flow determines how often each item is noticed. The eye is typically drawn first to the "golden middle." That’s where you should place the dish or drink with the highest contribution margin. The primacy and recency effect additionally states that content at the beginning and end is remembered better. Many pages might be impressive, but they don’t necessarily help with making a decision. Here, too, the goal is to guide the guest’s buying decision – essentially steering what they see.
Cost Reduction Instead of Price Increases
A valid objection might be: "How can we cut costs, so our prices become more attractive again?" No pricing strategy helps if the costs can’t be covered. Are there alternatives to raising prices?
The saying goes: when you’ve reached the limit, you need a process shift. "Carrying on as before" isn’t an option. We need to look deeply into the "engine room" and rethink our processes. How can we put the core of hospitality – friendliness – at the center while using resources more efficiently?
One approach is to automate as many processes as possible and eliminate tasks that aren’t core activities. These may be self-ordering solutions that automatically handle upselling, digital tools for inventory and ordering, smart reservation tools to increase occupancy, or even kitchen robots to standardize cooking tasks. Human interaction is valuable and should be freed from monotonous, frustrating tasks. Fortunately, we live in a time when AI and automation open many possibilities.
Conclusion
Hotel dining is at a crossroads: on the one hand, guests question high prices; on the other hand, the industry grapples with rising costs and declining demand. How can it survive in this tension?
It’s time for a paradigm shift – away from rigid full-cost accounting and toward contribution margin accounting that factor in guest psychology while safeguarding profitability.
The key lies in combining established strategies with new technologies. Learn from online retailers, harness the power of visual representation, and invest in automation to optimize processes and use resources more efficiently.
The future of hotel dining belongs to those who position themselves clearly, somewhere between exclusivity and affordability. Give your guests an unforgettable experience that’s worth the price or create so much added value and image that the price becomes irrelevant. Because in the end, the price is always relative. / kn
