Traditionally, hotels have viewed their restaurants as necessary services instead of potential profit makers. The markup on room and board is more forgiving than the narrow margins of the restaurant industry, and as long as a restaurant provided a full menu, fed the guests and didn’t lose too much money, property owners were content.

Still to this day, you’re more likely to find plenty of staff in a hotel restaurant, no matter its size or the operating hours. This overstaffing is to accommodate guests not only as servers, but also as hotel and city guides. 

Whereas hotel restaurants typically allow 40 percent of an operating budget on labor. For self-sufficient restaurants, the threshold for labor costs is around 30 percent. That’s roughly a 10 percent difference, and in most cases, that’s the margin between profitability and closure.

Things began to change in the early 2010s, when hotels embraced high-end restaurants as a draw during the peak of TV-chef celebrity. These partnerships were a big and often successful trend, but the audience couldn’t sustain all these concepts and some were never appropriate for mid-size or smaller markets.

In mixed-use downtowns, restaurants often occupy the street level, and are more accessible to the general public. More hotels are using a unique and seemingly independent space to attract surrounding residents as well as to serve their guests. After all, the guests want to get a feel for the locals, right?

To a lesser extent, rooftop restaurants can also become local attractions for locals looking for a unique experience. The play for larger audiences is a gateway to profits. The first step is to treat the restaurant as if it were separate and give it a concept.

An in-house restaurant that isn’t beholden to a parent company’s set menu can offer guests local dishes as well as locally crafted beers, spirits or wines. Sampling local fare can elevate the dining experience into a form of entertainment that is likely to encourage more spending. The staff is more likely to be familiar with, and enthusiastic about, local products and spark conversations that include attractions around the hotel and city. By differentiating the dining experience, guests are likely to carry over their impression to the hotel as well.

With a set concept that will attract more than just guests, it should be marketed just like any other restaurant that happens to be located below or adjacent to a hotel.

Internal marketing aimed at guests should be a part of the plan as well. This could include vertical stands on the bedside stand or coupons in the welcome packet. The website and brochures should include the restaurant as a main attraction, perhaps for the “guest who want to go out but stay close to home” or position the restaurant as a gateway to the city.

Through social media, downtown restaurants can target large meetings and conferences that the hotel side is already privy. There’s even an opportunity to entice groups that booked a conference room into the restaurant and bar experience. Blocking off a section for a post-meeting buffet and happy hour is a potential add-on (and upsell) that will get guests out of the same room and break up their day.

Beyond sit-down options, hotels have found success by outsourcing a healthy quick-service restaurant geared toward guests that need lunches on-the-go and don’t want to spend as much during the day. Some travelers prefer a “known” meal and the relatively lower cost a chain can provide for an alternative meal and beverages for guests without competing directly with the hotel’s own food options. Framed another way, why not have a popular coffee or quick-service chain on the premises as yet another of the hotel’s offering rather than watch those same customers walk down the block.

For hotel restaurants to tap into profits without sacrificing service, they need to work together and use its business model to its fullest advantage. Not only can they cross-market one another, they can improve recognition and relations with other businesses in the surrounding area by using the restaurant as a gathering place.

The restaurant and hotel sides of the company also need to aggregate the overlapping data on their guests to gain a better picture of behavior, experience and spending. Point of sale (POS) devices give hotels access to a wealth of data that could provide insight into paring down food waste, scheduling staff more efficiently, but it’s up to management to coordinate it and integrate it into both sides of the business.

The transition into a more open and profitable restaurant isn’t right for every property. The local market may not provide a year-round draw, the kitchen’s size may prohibit adding more customers, etc. Owners still need to crunch those numbers. Yet consumer behavior is moving toward expecting something beyond a restaurant with the same carpet as the lobby, and the mindset within hotels need to catch up.