Let’s take a closer look at the true sentiment to success for restaurants in the hospitality industry: cash flow and creating a business that’s profitable.
One of the things that come out of professionalizing the industry, is people get into the restaurant business to run it as a business. There’s a lot of romance in the restaurant business. We all love eating food, preparing Grandma’s recipes, and we all like to entertain our friends. Who doesn’t like to have a beer with their buddy? There are lots of wonderful romantic aspects of the restaurant business.

However, unless you are someone who has lots of money and just needs a restaurant to be entertained, we want to be profitable. To be profitable, you must establish clear budget accounts. You must make sure that there is a cash flow analysis. That you will have cash when it comes time to pay the food bill, that you will have cash when it comes time to pay for salaries of your laborers. So cash flow is important. That comes off your budget and your profit-and-loss statement every month.

A good restaurateur must establish food costs and the pricing of their menu items. They make sure they are producing a profit revenue that will bring profit to the bottom line. It has to pay all of its bills. That’s your cash flow. It needs to leave something at the end for the owner.

Many restaurateurs overspend and over-design. They find themselves in debt before they get started, and they are never able to fully catch up. So you must look at those numbers every month and make sure that you are trending to profitable revenue.

Food cost becomes important. If your food cost is too high and your cost of the item to the consumer is too low, you’re giving food away. You’re not making enough money.

On the other hand, if your food cost is too low and your price to the consumer is too high, you’re stealing from the consumer. So you need to find a middle ground on your pricing. You need to compete in the marketplace and you need to produce enough revenue to pay your bills and have some money left over for the owner.

For the first three years of a restaurant, a lot of that profit you make is going to be put right back into the restaurant. You’ll look at different food products, maybe changing the to-go items, mounting a catering campaign, or getting involved in alcohol.

So you must reinvest in your restaurant product. The success of any restaurant-when I ask a student, the answer they give me is typical: good food, great service, beautiful dining room, good marketing. Well, they are all important. However, the main ingredient of any restaurant that makes it most successful is positive cash flow.

The airline industry deals with a lot of challenges.

For example, airlines have to set themselves apart from one another. Only two major players produce airframes: Airbus and Boeing. All of the big airlines by the same equipment.

As a result, airlines have to get creative. Some set themselves apart with business class innovations. Turkish Airlines, for instance, has a chef on board who prepares excellent meals.

Other airlines use loyalty programs. For instance, American Airlines has the American AAdvantage program. They sell points that people can use to buy a house, get a loan, use a credit card, or send flowers. In fact, American Airlines sometimes makes more money by selling loyalty points than booking seats.

The other challenge, of course, is earning enough revenue. When airlines used central reservation systems, some airlines made more money moving reservations than actually flying people.

Amadeus and Apollo, for instance, made most of their money this way. This method gets challenging because it depends on the airline’s load-in factor, or the amount of seats sold per flight. Some airlines would need to sell 90% of seats before making any profit.

Airlines also face timing challenges. For example, 2008 saw more business class carriers. However, the timing didn’t work because of the great recession.

These days, we have low-cost carriers like Southwest Air and JetBlue. They fly from point A to point B rather than through a hub. Low-cost airlines only make money when the plane is in the air. When the plane stays at the gate, it doesn’t produce revenue.

This strategy comes with its own challenges. For instance, if you’re going to a destination, you may not find direct flights. Not only does this add to your travel time, but it also comes with the risk of delayed flights. Many of these low-cost carriers have added more direct flights as a result, so they can save time.

Standardized equipment and operating procedures help, too. They don’t have to train their captains with several airplane types. They also strip down the service, and they charge extra for luggage.

We sat down with experts to discuss the interesting components of the cruise line industry and what makes it a unique sector within the hospitality industry.

Cruise lines are a very interesting business because a new ship could cost $1 billion. For instance, the Norwegian cruise line has ordered six new ships called Leonardo class ships. The only thing they said was, it’s going to have a passenger capacity of 3,300 people, but what concept should they be?

They announced this in 2017, and the first ship will sail in 2022, so we have a five-year time difference. You have to predict: how is the market? What are the consumer needs? What are the trends? What is the competition doing? Because when a ship is being built it’s hard to change. You can maneuver a few things in terms of the restaurant concepts and services, but it’s pretty much set.

Cruise lines have to look into the future and predict. But it’s an interesting business, because it is a substitute for staying in a resort, and it has advantages.

In a resort in Florida, you go to Orlando and you stay in Orlando. You could visit some of the attractions there. But with the cruise line, you can visit several countries and several ports and do excursions. Today’s cruise lines are a destination by themselves. It’s similar to Las Vegas. Big casinos are destinations by themselves, but they have advantages.

Their advantages include lower labor costs because most of the employees come from countries like the Philippines, and they get paid competitive rates in terms of what they could earn in the Philippines. Resorts pay higher rates in the United States because of the minimum wage and all these things. They have an advantage in terms of their labor costs.

They can also source cheaper food because they buy in quantity for big cruise lines. Carnival Cruise Line has 103 ships, Royal Caribbean has 60, and the Norwegian cruise line has 25. These three companies control about 75% of the global cruise market. It’s an interesting business in terms of economics and offering their best guests more options.

The Norwegian cruise line is an interesting company because they’re using a concept called Free at Sea. So if you buy a higher level cabin, let’s say with a balcony, you can choose from up to six different Free at Sea. It could be a free bar, free specialty dining, a free excursion, free Wi-Fi, or it could be that two more people can stay free in the cabin. All of this is factored into the pricing, but it adds value and adds loyalty.

Some attractions can become destinations in their own right. In Orlando, Florida, we think about theme parks and resort hotels. Disney World is an attraction in its own right with its accommodation facilities and services. It’s almost detached from the rest of Orlando, existing as a destination within a destination.
Atlantis, for example, is a hotel resort company that includes everything for the visitor, from accommodation to restaurants, water parks, and zoos. Because everything is in one place, guests rarely feel the need to leave the bubble to experience anything in its immediate surroundings.
The inner harbor in Baltimore is another example of a tourist bubble. It’s a beautiful development equipped with a stadium, hotels, entertainment, retail, and restaurants. Still, in many ways, it feels detached from the rest of the city. You can almost draw a physical border between the tourism development and the rest of the city. That’s what we would call a “tourism bubble”.
Other great examples of tourism bubbles focus on families. Here, you’re thinking of theme parks, resorts but also examples like Disney Cruises and Disney Islands. A cruise is more like a floating tourist bubble, but it functions in the same way. Everything is on board, from accommodation to food, beverage, and entertainment. You can even visit places along the way, but if you never leave the ship, you still won’t be bored for a single moment.
So, on one hand, we have tourist bubbles, which often mean there is a physical demarcation between the tourist area and the non-tourist area. In large cities, you’ll often find tourism precincts. They’re a little different since they’re areas where tourism services are concentrated, but that physical demarcation isn’t as clearly defined.
Times Square is perhaps the most famous example. A tourism precinct has softer edges. It flows more naturally into the surrounding area.

Catering is a real benefit to restaurants. It can take a lot of forms. I can cater by having you pick up food at my restaurant. So, it could be as simple as a deli catering out a sandwich platter that Mr. or Mrs. Customer is going to pick up. That’s easy.
It could be that I’m delivering that sandwich platter. That’s still easy. It could also be that I’m delivering that sandwich platter and providing a service staff member to serve it for you at your home or your party. So, catering increases what we call same-store sales.
If I have 20 seats in my restaurant and, on average, I get two turns at lunch and two turns at dinner, that means that 80 people are going to be able to dine in my restaurant.
If my average check is $10, that means that I have made $800 that day by people eating at tables in my restaurant. But, I can also prepare food for 80 people at a catered event that will not be in my restaurant.
The consumer would pick it up or I would deliver it. I would still get $10 a person, maybe even more, because I’m supplying all of these disposables.
Now, I made $800 in my restaurant that day from people who came in and sat at tables, and at least $800, if not more, by catering one event for 80 people. So, I’ve increased my same-store sales — meaning, my same four walls, my same hours of operation — just by sending out catering.
Catering can typically be prepared when I’m not in the lunch or dinner rush. When I’m doing garde manger in the morning, prepping food for lunch, I could be cooking the catering food and putting it in the refrigerator to be delivered or picked up later. Catering is an extremely positive and profitable benefit for restaurants.

Now, that is catering that doesn’t happen at my restaurant. Many restaurants may have a banquet room where they offer catering. That is a place mostly for celebratory events. I guarantee it’s dark most of the week and they’re perhaps using it on the weekends. But they can use that room at any time. It does increase same-store sales as well. But you’re paying rent on that.
I’m a proponent of catering. My favorite kind is preparing food, getting it out the door, and letting people eat it elsewhere because I’m getting paid that revenue. I’m not cleaning it up; I’m not worried about China plates and flatware disappearing, and I’m not worried about someone taking up a seat in my restaurant while they’re on their smartphone for 45 minutes. I’m just getting it out the door and getting paid for it.
So, catering, again, can be very profitable. However, from an operations perspective, you need to prepare a good catering program. It can’t be haphazard, because then you will wind up spending more money than you’re making. Maybe you’re not buying or packaging properly.
You need to make sure that it’s well-packaged so that, when it gets to the guest, it looks great. Maybe they’re going to heat it at home. That’s all well and good, but it still has to look and taste great. Therefore, the way you package food makes a big difference.

From healthier options to gourmet burgers, fast casual is changing the way we eat and think of food and is taking business from well-known fast food chains.

The restaurant business is responding to some consumer trends better than others. One key trend is healthy eating. A good example is the whole category of fast-casual, which is eating business away from traditional fast food.

Why? Because consumers want healthier options.

They want more choices. They also don’t want to go to a traditional restaurant during lunchtime, sit down for an hour and a half and wait for someone to serve them.

When walking down Broadway from 42nd down to the 23rd, there are about 20 new restaurant concepts. Just by observing, many of them are based on salads. There’s a green wave and the consumer wants fresh, innovative salads. That’s a key growth segment.

You also have a gourmet burger. Shake Shack is a good example of that. It’s not necessarily a gourmet burger, but it’s a much better burger that you can get in McDonald’s. Then if you take bread-based companies, like Panera, which dominates the category, there are other players but they’re not even close to as big as Panera.

Panera understands that consumers want freshly baked bread with innovative combinations, not the traditional ham and cheese. They also make good salads and soups, and it’s pretty fast.

You can use technology, especially here in Manhattan. You can order, pay online, and then just go pick up, or they can do delivery.

Talking about trends in Mexican, Chipotle owns that category. If you consider the ingredients that they have, there are about a couple thousand options that the consumer can choose from through this combination of a dozen or so ingredients.

Again, it’s fresh. The ingredients are fresh. It’s prepared right there in front of your eyes. It is not something that happens in McDonald’s where it’s prepared behind the counter, and it’s always the same standardized. You have more flexibility and better ingredients.

Fast-casual is taking business from the casual family restaurants, the TGI Fridays of the world, and the fast-food players like McDonald’s, Burger King or Wendy’s.

In the restaurant industry, the customer-facing employees that greet you when you walk in the door are referred to as “front-of-house.” The host, front-of-house manager, or dining room manager are all important and frequently assist guests.

Yet, there are many front-of-house positions. These are the employees who closely interact with guests. Their roles include:
* Maintaining a consistent pace within the dining room
* Ensuring fast and efficient service
* Correctly charge guests
* Processing checks

The restaurant manager, host, and reservationist are the first to interact with the guest and show hospitality. They ensure that the dining room runs smoothly and that guests who arrive with a reservation are seated promptly. Our front-of-house team also includes servers and bussers because it encompasses everyone who has direct contact with our guests.

Sales and Service Sectors
Front-of-house employees work in the sales and service segments. They sell catering orders, take reservations, and assist with wine selections. They ensure food is ready for pickup and that tables are available. These employees also assist individuals who may need help with the menu. The service segment as a whole participates in the guest’s service. Waiters, bussers, sommeliers, and bartenders all fall within this category.

The Impact of Food Ordering and Delivery Systems on the Hospitality Industry
Many restaurants are adopting what I call commissary models. It’s where you buy food and beverages through a delivery service (e.g., Grubhub, Seamless, Uber Eats) and have it delivered to your home.

In this scenario, front-of-house employees take the reservation and deliver the food. The front-of-house manager, or owner, is in charge of the entire operation. They make sure that everyone is on the same page. Guests continue to receive the level of service they expect from the restaurant.

Let’s take a look at how a successful last can be modified and changed in footwear and the footwear business to increase sales and reach a new audience.
We love the last. We had success with its sales, but we can’t make the same shoe we made last spring. So to continue using this last, we have to take and modify certain things about the footwear we’re producing on the last.

We know we have a successful last, we know that it sells well, we know it looks great. So we can change any number of design features. We can do something as simple as changing the top-line cut of the shoe. If it’s athletic, we can put a collar and change the shape of the collar, the height of the collar, the Achilles pen, so on and so forth.

If it’s a dress shoe, we can change the top line cut by putting a dip on one, an asymmetrical dip somewhere on the top line, or put some sort of embellishment on a top line that wasn’t used in the previous spring season.

We’re also going to be changing our materials and colors for the new season. Those are simple changes that help to make the same last we used last spring, look, have the shoe look completely different next spring, just by its color, it’s cut.

We can also do other things. We can take and change the component tree or the structure of the footwear. The structure is the way the bottoming is done: the heels and the soles.

Last spring we used just the very thin, a ladies shoe and we used a very thin sole and just a simple high heel, like a spike kick. Next spring, if we wanted to, we could do a platform. We could do a full platform, we could do a partial platform under the ball and a higher heel, which we may have marketed as a 10-centimeter heel last spring.

We put a two-centimeter platform under the front, we add two centimeters to the heel to maintain the balance, which is part of the last itself. Now we can market the thing next spring as a 12-centimeter heel. Same last, completely different footwear.

This is a way of taking a successful last and amortizing it out over time without looking like you’re repeating yourself.

In the hospitality industry, hotels are often described as two distinct businesses. One is the operating business, which involves the renting of the guest rooms and the provision of food and beverage. The other is the real estate business, owning the land and building which house the hotel property and operations. Those two distinct attributes, the fact that hotels are both an operating business and a real estate business, have been the cause of many of the major changes in the hotel industry over the past 30 years.

Going back to the 1990s, Marriott split into two companies, an operating company and a real estate company. The reason it did so was because investors felt that those two businesses were distinct and that the skill sets necessary to maximize both were different. There was inefficiency from having both under the same ownership structure. Due to increased online hospitality education on what works best, the hotel industry has largely moved in that direction of separating asset ownership from day to day operations.

One of the key concerns of hospitality and hotel investors is making sure the relationship with the manager of the property is on an even keel. Hotels often have a tension in that managers are compensated primarily on the basis of top line revenues while owners are compensated on the basis of bottom line profitability. Those two different attributes, as to how they are compensated, can lead to challenging relationships, especially as the business gets weaker during a economic downturn.

There is a whole field, in fact, of advisors and counselors that provide hospitality education and help hotel owners and managers work through these relationship issues. This affects everything from approving annual budgets to capital renovation plans as well as the day to day attributes that go into the hotel business.

Hotels often expand into what is called neighboring businesses. This concept is in addition to their core business of operating rooms for overnight guests.

Many hotels in resort destinations may feature a timeshare component. Overnight guests can buy weekly intervals of units.

It’s not uncommon for hotels to be a part of apartment buildings in urban areas. Residents who own apartments above or below the hotel property feel a unique sense of pride or value. They are happy having their units affiliated with a luxury hotel brand. As a result, hotels have expanded into businesses that are complementary to the hotel industry.

In resort markets, hotels have evolved into timeshares, residential condominiums, lot sales, and even community care facilities for the elderly.

Hotels need a large quantity of support space to ensure operations run properly. You might have basement sales offices, accounting offices, paint shops, upholstery repair shops, and more to assist the process. Yet, revenue is in selling guest rooms and food and the provision of food and drinks.

There is a lot of pressure in the hospitality industry to maximize the space in the hotel that generates money. Hotels must optimize efficiency with “facility programming.” It’s also essential to minimize the areas that are simply required for the support of the operation.