So You Want to Open a Hotel Restaurant?

Some of the industry's biggest names have done it. But like anything else in this business, there are pros and cons to consider.

June 2017 Amanda Baltazar

What do Danny Meyer, Tom Colicchio, and Mario Batali all have in common? They have opened restaurants inside hotels.

More and more established restaurateurs are doing this, and there are pros and cons.

Scott Gerber is the principal and CEO of Gerber Group in New York City. All but one of his restaurants operate out of hotels—in New York, Atlanta, and Santiago, Chile, but over his years in the business, he’s opened many freestanding restaurants, too.

There’s a huge initial advantage to launching a restaurant in a hotel, Gerber says: The hotel takes care of everything. This typically covers all pre-opening costs, including buildout, utilities, interior design, and initial inventory, meaning an operator with no capital investment can open a restaurant. However, once the restaurant is operational, the hotel takes “a very big percentage of the business,” Gerber explains.

Given this, Gerber says he can usually get hotel restaurants off the ground faster than freestanding locations. Under his purview, when opening in a hotel, is marketing, working with contractors, hiring, training, uniforms, and music.

Gerber considers himself a partner with the hotels he works with, and says they usually give him free rein to create the restaurants as he wishes. “Because we have long-term relationships with a lot of these hotels, they have to trust us and they trust we’ll be complementary to their brand.”

Because of this, he designs the restaurants to his company’s style. “They should have the feel of a Gerber restaurant, with great design, food, drink, and music. There should be something about it you can feel.”

However, each restaurant is tailored in design and feel to the city it’s in. He works with the management in each hotel for input into the venues and the food and beverages they offer, even though, he says, “our beverage program is 90 percent the same across the board.”

Also important to Gerber is that the menus he offers consist of 50 percent basics, with comfort foods guests recognize, such as a chicken Caesar salad. Even for breakfast, he says, “We might have an interesting granola or muffin, but it’s important we also have comfort foods because people come to us tired and have been traveling and don’t want to have to think about food.”

Also important to Gerber is pricing. Operators have the options to charge a lot more in hotels, but he doesn’t. “It’s important to attract locals and the only way to get locals is to have street pricing.”

Another very important tenet for him is that all of his restaurants look and feel like a completely integrated part of the hotel. For example, he says, if a customer comes to the bar complaining about the hotel, the bartender will apologize, rather than agreeing that service in the hotel needs some work.

The Diplomat Hotel

The Diplomat Beach Resort in Hollywood, Florida, showcases restaurants from a poolside bar to a fine-dining steakhouse.

Managing hotel restaurants

Howard Wein, CEO of Howard Wein Hospitality, also works with hotels but in a very different way to the Gerber Group. He is paid by hotels to manage food and beverage operations but the restaurants and their staff belong to the hotel.

For the last two and a half years, Wein’s been working with The Diplomat Beach Resort in Hollywood, Florida, a Hilton property, to open what’s now the Diplomat Restaurant Group, which comprises 10 restaurants that range from a poolside bar to a fine-dining steakhouse. The first of these opened a year ago and the most recent in the spring.

The Diplomat Hotel

The goal was to bring a diversity of concepts to The Diplomat, says Howard Wein, CEO of Howard Wein Hospitality.

When you work with a hotel, Wein says, there are many more people involved. “There are lenders, owners, corporate hotel management personnel, and property level executive management. And at most, if not all, of these levels, there are folks involved in HR, PR, marketing and so on. All major decisions must be considered from many different vantage points and their relationship to the ultimate goal of ROI and guest loyalty.”

The goal was to bring a diversity of concepts to the hotel, “and these are things hotels can’t achieve on their own,” Wein says.

At the Diplomat, the hotel owns everything, but Wein is tied to the success of the restaurants. Not only does his reputation depend on them, but he also makes money based on the success of the restaurant—on top of his management fee.

Wein’s involved, soup to nuts, in everything from the interior design of the concepts to the menus. The staff are all hotel employees though the restaurant group manages them operationally. How much the restaurant is involved always varies, he says. At the Diplomat, “I had the authority to make many decisions but I did get pre-opening budgets approved and anything related to interior design—the big decisions.”

The rules

There are a few rules of thumb for opening restaurants in a hotel, Wein says. They must have a strong brand “that doesn’t try to please everyone at all hours of the day.” This way, he says, the restaurant makes a statement and this particularly helps attract locals.

Hotel restaurants also have to have great bars. “If you don’t have a great bar you’re not going to have a great restaurant,” Wein says, “because from an energy standpoint, this is entertainment. People are no longer wanting to go have a dinner and then go somewhere else for entertainment. The bar has become that now.”

And, hotel concepts need to be designed to appeal to a broader mix of people than a traditional restaurant—the hotel’s guests, both vacationers and business travelers; guests from nearby hotels; and locals. Scott Gerber likes to see 30 to 40 percent of business from the hotel; another 20 to 30 percent from other hotels and the remainder locals; Wein’s goal is that 70 percent of his guests be locals.

Arroz

Mike Isabella's Arroz in the Marriott Marquis hotel in Washington D.C. is featured on TVs in guest rooms.

In March, Mike Isabella, chef/owner of Mike Isabella Concepts, opened Arroz in the Marriott Marquis hotel in Washington D.C.

The biggest downside of opening in a hotel is staff training, he says, “because you have to train hotel staff as well as your own. We work with the management team, concierge, events people and the bellhops and valets. We talk to them about our restaurant, have them taste and come in and eat, and tell them about our concept.” This, he says, doubles the training, both in terms of time and costs. And, it’s ongoing because of turnover and seasonal menu changes.

An international flavor

It also took a little longer to open Arroz than a freestanding restaurant. “There are a few more challenges because everything has to be approved, such as marketing materials or designs, such as for a patio,” he says. “So there are a few more steps and it’s a little more work.”

On the plus side, the hotel often helps out with marketing to hotel guests. In the case of Arroz, for example, he says, the restaurant is featured on TVs is guest rooms, although he takes care of other marketing.

This summer, Isabella will open a third location of his brand Kapnos Taverna, inside The Hotel at the University of Maryland. He opted for this location—the only Kapnos Taverna to be in a hotel—because of the location, he says. “I probably wouldn’t have done it in that area without the hotel.”

Setting up in a hotel costs about the same as setting up independently, but there are some other advantages, says Dede Gotthelf, owner of the Southampton Inn and the restaurant Claude’s. One plus is the variety of guests the restaurant attracts, and the flavorinternational diners and families bring to the dining room.

The benefit, she says, “is the security, administration, front desk, cleaning, utilities, permits, and other shared personnel can reduce some of the operating costs for the restaurant.”

But one of the big issues can be conflicts, she says. “The best thing for a restaurateur may be the late night scene, which could be the worst thing for a hotel where quiet and calm, a good night's sleep, and a family/friendly ambience conflict with the scene.

There can be other conflicts, too, Gotthelf says. “Hotels can use complimentary food and beverage for issues with rooms or weather, or setting up packages that include food and beverage. But which side of the ledger do these comps fall on?”