Ari Tenzer Quoted on GlobeSt.com the Economics Behind Hotel-F&B Tie Ups
By Jennifer LeClaire | Miami
“Owners are giving these third-party providers the ‘keys’ to the F&B kingdom,” says attorney Ari Tenzer.
MIAMI—Have you noticed more hotels are partnering with third-party food and beverage providers who, in turn, provide room service, banquet catering, and other amenities to hotel guests? Ari Tenzer, founder of boutique transactional law firm Tenzer PLLC, has his fingers on the pulse of this trend.
Of course, there are pros and cons for hotel owners with respect to these food and beverage (F&B) agreements. Tenzer would know, having played a role in Miami’s growing hotel market. His firm has recently handled transactions for hotel groups such as Eden Roc, Marriott, and Hard Rock.
GlobeSt.com caught up with Tenzer to discuss what he’s seeing in the hospitality industry, the advice he has to offer for hotel owners looking to increase their bottom lines, and the economics behind partnering with high-end F&B providers in part one of this exclusive interview. Be sure to come back this afternoon for part two.
GlobeSt.com: What trends are you seeing in the hospitality industry?
Tenzer: Hotel owners have been outsourcing their F&B operations to third-party F&B providers on the expectation that the F&B provider’s brand will help turn the hotel’s F&B department around. Owners are giving these third-party providers the “keys” to the F&B kingdom, allowing them to run the hotel’s F&B department, open restaurants and bars, and sometimes even giving them the opportunity to brand some of the hotel rooms.
GlobeSt.com: What suggestions do you have for hotel owners looking to increase their bottom lines?
Tenzer: Making the F&B component profitable—which, more often than not, is not the case—is a good place to start. F&B services delivered by experienced providers with brand power can increase F&B profitability. Sometimes, positive upticks in both average daily room rates and occupancy levels result, especially in cases when rooms are branded with the F&B provider’s name.
GlobeSt.com: What are the economics behind the trend of boutique hotel owners partnering with high-end F&B providers?
Tenzer: Hotel owners should expect to foot the bill for any construction or renovations associated with the project. In exchange for their services, F&B providers usually receive a base management fee and, sometimes, an incentive fee. The base management fee typically ranges from 2% to 3% of revenue, and the incentive fee varies much more, but a good benchmark is usually 10% of the profit.