In the past, restaurant owners who wanted their children to go into the family business often sent them to business school.

“Get a business degree,” common thinking went. “It will help the business grow.”

But make no mistake—the hospitality industry is different than other business areas.

Today, hospitality education—including NYU School—offers students the chance to earn degrees in a wide range of related subjects. They can complete a hospitality degree in concept development, for example, or asset management, where they can learn how to manage a physical location.

The only thing we haven’t developed yet at NYU—and hopefully, we will in the future—is formal culinary training. But this element of hospitality education is coming. At good schools across the country, chefs are earning bachelor’s degrees as they are being trained.

Those chefs are coming into their kitchens not only with a wonderful creative spirit, but they’re also understanding clean foods better. They understand the entire food supply chain. They know how to work with purveyors, how to buy food from small farms or small suppliers, and that the consumer wants their food from within a 100-mile radius, eating fresh food while reducing their carbon footprint.

Then there are the nuances of customer service within the hospitality industry. Marketing a restaurant is different than general marketing, for example. Today, it is important to build rapport with restaurant guests, through both social media and a genuine brand. This is true, whether your guests connect with the ethnicity of your menu or the history of your restaurant.

It’s important for a restaurant developer to understand how the concept dictates every aspect of the dining experience. For example, the concept dictates the menu; the menu dictates the kitchen; the kitchen dictates the staffing and the aesthetics of the dining room and service efficiency. Furthermore, social media and ordering logistics—whether ordering ahead or ordering for delivery—can help or hurt a restaurant, depending on the business concept and organization.

Did you know? When a customer sits down at a restaurant with a smartphone, there is usually a delay in ordering by up to 18 minutes.

Why does this matter?

If, as a restaurant owner, you want to turn a table two or three times a night and each guest takes an extra 18 minutes to order, you’ve lost an entire hour. This challenge arises when guests decide to look at their phones, instead of looking at the menu.

These are just a few of the details that help graduates of professional hospitality degrees to understand the nuances of the industry. They have more direct, specific knowledge than they would have gained through a general business degree. Students are graduating from online hospitality education programs with degrees in hospitality, hotel operations or restaurant operations. These graduates are able to jump in with both feet and adapt more quickly to a changing landscape.

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.

It isn’t only Airbnb. Other brands have attempted to enter the sharing space—the sharing economy for lodging.

Oasis Collection is one of them. Oasis has attempted to accomplish something similar to Airbnb by utilizing unused capacity. They’ve attempted to design it in a manner that is distinct from Airbnb. While Airbnb tries to offer any type of rental goods, Oasis has defined the kind of product they want to sell on their platform, which is why they call it the Oasis Collection.

Another intriguing aspect of Oasis is the variety of destinations available. They also strive to build a member club where individuals can go if they rent one of their products in a specific location. So, for example, you might rent a curated apartment in Marbella, Spain. Marbella is well-known as a hotspot for nightlife enthusiasts. So you’d go there, rent the Oasis apartment, and at the same time, you’d be able to go to the Oasis club once a week for an all-night party. And you’re only permitted to visit because you’ve rented an Oasis.

Another notable feature of that concept is those apartment owners who rent on Oasis are also club members. If you’re an owner who puts your property on the Oasis platform and your apartment is in Marbella, Spain, but you’re traveling to Paris, you can enjoy the club in Paris because you’re an Oasis Collection owner. As a result, they’ve attempted to build a community of owners and guests who prefer to utilize curated apartments rather than Airbnb-style services.