March 25th, 2018 | By Lou Trope
Getting a placement in a national accounts banquet and events (B&E) beverage program is seen like winning a golden ticket. In most major hotel brands and large independent convention and resort properties, banquet and events’ food and beverage (F&B) revenue can make up as much as 80 percent or more of total F&B revenue. In some extreme cases, F&B will produce more revenue than rooms. So getting a B&E placement can sure feel like you got a first class ticket on the money train. No more selling bottles – you have now graduated to the world of pallets and truckload deliveries. And this tends to be true … in most cases.
However, let’s be clear – B&E not only drives huge amounts of revenue but also is the primary contributor to profit in the F&B area. These operations are very driven on margin performance and are very good at taking the necessary measures to constantly look at improving the operational efficiencies.
If you are fortunate enough to get a national account placement, do not think your work is done. In fact, it is just starting. As a supplier and distributor, it is imperative that you build relationships with the operators as well as promote, train and defend your placement. If you think other competitors are going to throw in the towel because they didn’t get the placement, you are fooling yourself. Competitors will fly in offering very tempting deals at a property level, to sway the operators off of the national account program for a lower acquisition cost, if they can improve margin. So the goal is to hit the streets, build relationships, educate and train on your products, and be available when needed.
For wine especially, getting a B&E placement can be a double-edged sword. First, be prepared for major depletions and to have the product available to distributors. If the placement is well received and the properties are embracing the program, inventories can deplete quickly. The scenario of running out of wine is a very real possibility and can turn a dream into a nightmare quickly. The other scenario to be aware of is if the product is not widely supported or embraced by the operators, there can be a very tepid acceptance and forecasted depletions will be far shorter than expected. For this reason, it is important to support any B&E placement with training materials, tastings when possible and general relationship-building. Also realize that because the B&E operation is dependent on maintaining aggressive margins, the entry-level placement may be not deliver high margins and could be a loss leader.
Most B&E programs are designed in tiers so the guest can “buy up” from the basic package. In the most desirable scenario, the entry level wine program is a secondary or proprietary label that is not readily available to the general public, if at all. All too often during event negotiations, customers will compare the listed banquet price to retail pricing or in some cases will opt to bring in their own wine and pay the corkage fee if permissible. Needless to say, this puts the event sales manager in a very difficult position. For this reason, the secondary or proprietary label is appealing to the operator. Second and third tier wines should have some premium characteristics as well as a level of brand recognition that will persuade guests to upgrade their experience.
The same scenario holds true for spirits. The base package program may include brands that have marginal recognition with an acceptable quality level to drive margin. The second and third tier spirit selections will include recognized and premium brands that align with the positioning of the hotel or brand. This is an area where premium spirits can certainly upgrade a program. Given the strong brand alliance many people have with premium spirit brands, this is often an area for an upgrade opportunity.
Although the majority of events may be based on an entry-level beverage selection, there is no doubt that the B&E area is a great opportunity to drive revenue. This comes in the usual forms of open bars, wine service at tables and upgraded receptions. However, operators are constantly being challenged with driving revenue and increasing the average check.
Yes, the majority of clients – social and corporate – will choose an entry-level wine, spirits and beer package. However, many hotels do multiple high-end events a week for corporations, philanthropic associations and social events. These high profile customers are looking for creative and innovative ways to make their events stand out from the rest. In many cases, they do not want the same “cookie cutter” event and are open to ideas that will differentiate their event and impress their guests.
The above reasons explain why the B&E space is the most innovative area in the entire hotel operation. Event managers are constantly meeting with the executive chef, beverage manager and audio-visual team to come up with new and unique ideas for events. In most cases, the high-profile events are all custom designed in an effort to create some amazing mind-blowing spectacle like the guests have never seen before. Creativity runs from walking receptions in the live, operating kitchen interacting with the chefs, to interactive drink-making stations with world-class mixologists. The ideas and possibilities are endless.
Unfortunately, in many cases the hotel operators are pushing the innovation internally with little to no involvement from their beverage partners, who could participate with them to produce amazing events. The operations teams are often stretched – just staying ahead of business demands – and would openly welcome any innovative ideas from beverage professionals, to help create unique events. Meeting with the hotel team to understand their needs and desires can open the door for a multitude of opportunities. When the opportunity has been taken to engage the beverage suppliers with the hotel team, the outcome has been spectacular – from interactive wine-tasting sessions with winemakers, smoking cocktails and molecular mixology, to limited release special tastings. These are the opportunities to unlock creativity and shoot for the moon. In some instances, high-profile clients have “flexible” budgets and can find resources to create the extraordinary.
The keys to unlocking this opportunity are communication and relationship building on a supplier, distributor and operator side. Building a strong relationship with the property and being available to assist with high-profile site visits and tastings, can make all the difference in the world. It will not get to a signed event every time, but what it does is put that supplier or distributor top-of-mind when opportunities present themselves.
It should come as no surprise that many operators may be hesitant to try something completely new and highly innovative on a high-profile group. For this reason, start small with groups of 20 to perfect the experience and gain valuable feedback. As Andrew Moffett, Global Event Leader for Marriott International, notes, “Our teams are always looking to drive innovation and build revenue. The partnership with our beverage suppliers is crucial to make this happen to elevate our guests’ experience.” Something as simple as creating a signature cocktail for an event, that can easily be batched for service, can create a lasting impression not only for the hotel where the event was held, but also for the spirit brand that was used in the cocktail.
In a recent awards banquet for 500 people, the hotel offered a Champagne menu at each table that featured well-known brands as well as prestige brands, offering both 750ml and magnum-sized bottles, with the most expensive bottle priced at $800. During the evening as teams of colleagues celebrated their success for the year, they started ordering bottles for the table. At first it was slow, and then it caught on like wildfire. Before the event team knew it, they sold out of magnums and ended up getting more Champagne from inventory to keep up with demand. By the time the evening ended, there were dozens of pictures on social media of teams doing toasts and posing with their bottles of Champagne, and the hotel had over $18,000 in incremental revenue.
Many times limited release or special items that may not be widely available to the market for multiple reasons, can be highly desirable to differentiate a corporate or social event. Although these items may not be appropriate for a core event menu, they may be perfect for a single high-profile event for 200 people. Can that special limited release be available and showcased as part of the event? Absolutely! These unique experiences can make a host look like a superstar to their guests by giving them the ultimate unique experience.
Consider different formats of drink delivery to differentiate the event. Can a large format bottle be used to pour the wine instead of typical 750ml bottle? Can a special drink or presentation be made with that limited production Bourbon with hand-carved ice? All these opportunities should be explored on a regular basis. But it requires creative thinking, strong relationships and flexibility.
In other words, being available and open to collaborate on creating unique events builds credibility and trust. It must also be pointed out that these events are not “showcase” events for the product – these are the client’s event and not a trade show. The client is the star. Any merchandising must be subtle and approved by the hotel operator. They may allow special glasses if it supports the idea of the experience, but logo napkins, branded trinkets and logo banners will all be out and just offering them could be a deal killer. First and foremost, this is about making the client have a great event, not showcasing the product.
All things considered, the B&E space is an exciting, innovative and potentially very profitable area for all involved. However, it will not happen by osmosis. Diligence, relationship building, creativity and flexibility are all needed components for success. There is no doubt it is one of the most creative areas in food and beverage, and truly extraordinary things can happen to secure lasting business. Nevertheless, it is dependent on the collaboration of industry beverage experts in understanding the hotel’s needs, and sharing their insights with the hotel’s operations team to make the magic happen. Relationships are crucial so persistence, honesty and teamwork are all necessary not only to create one but many events over time, for all to enjoy success.
Lou Trope is President of LJ Trope & Co. LLC, an independent consultant working with the hotel industry to provide innovative restaurant concepts, operational assessments and b2b beverage strategies.