Food and Beverage: Convention Catering Reinvented

When it comes to convention food and beverage, economic indicators are positive — with some caveats.

Hotel F&B revenue growth lags a little behind that of room rates, reflected by relatively slow growth for the industry's leading large-venue caterer. Overall volume, not price increases, is driving hotels' revenue gains, while convention center clients are demanding hotel-quality food from large venues — for the same amount of money they used to pay for rubber-chicken buffets.

Hotel F&B grew 6.7 percent between 2003 and 2004, PKF Hospitality Research said in its 2005 hotel industry trends report. At the same time, room rate revenue increased by 8.6 percent and total hotel revenues by 7.6 percent.

However, F&B's lag behind other sectors of hotel revenue masks a rise in profits, which were up 8.1 percent in 2004 compared with the previous year. That was on par with the total operating income increase for all hotel departments.

Yet it appears F&B managers achieved the growth only through hard work. The PKF study found that more guest and customer counts — not higher prices — accounted for revenue gains. And cost controls appear to be responsible for increased profits, with labor (the bulk of any hotel department's costs) actually being cut and chefs keeping a lid on back-of-house costs.

The meetings sector brought some good news, with banquet and room rental revenue remaining strong. Combined, they accounted for 63.9 percent of total F&B sales, compared with the 36.1 percent from restaurants, lounges and room service. Banquet and catering revenue grew 7 percent over the previous year, while restaurant and lounge revenue grew 6.1 percent.

Compare this with the performance of Aramark, the largest caterer in the convention center business. The Philadelphia-based corporation generated $288.5 million in net income on $11 billion in sales in fiscal year 2005, compared to $263 million in net income on $10.2 billion in sales for fiscal year 2004.

Meanwhile, Aramark's U.S. food and support services division (which encompasses convention center catering) last year generated $7.1 billion in sales, compared with $6.9 billion in 2004 — an increase of only 2.9 percent.

Still, the U.S. food and support services division accounts for 65 percent of total sales for the company, which employs some 240,000 people in 20 countries.

With contracts at 58 U.S. venues (40 of which are convention or expo centers), Aramark leads the convention F&B field. The company's clients include four of the 10 largest exhibit halls ranked in the Tradeshow Week Major Exhibit Hall Directory. Aramark serves the likes of the Las Vegas Convention Center, the Ernest N. Morial Convention Center in New Orleans and the George R. Brown Convention Center in Houston.

Jack O'Brien, Aramark's executive vice president of convention centers and cultural attractions, said convention managers' demand for hotel-quality food is the driving trend in his industry.

"Many of the clients we're now dealing with have conventions that have grown so much, they've moved from hotels to convention centers," he said. They expect the high-end menus and services to follow them to mega-facilities.

Aramark is doing a number of things to meet this challenge. It has begun recruiting star chefs and sponsoring foreign chef exchanges. It has invested heavily in research and technology to perfect the transport of food over the sometimes miles-long distance from kitchens to banquet rooms. It has adopted NASA-developed standards in food safety. And it has launched a massive sales training program to teach account representatives everything from menu preparation to dealing with associations.

The company also has had to learn to develop five-star events on three-star budgets. "I can't remember the last time somebody walked through the door and said, 'I have a lot of money, so give me whatever you want,'" said O'Brien. "The best sales and catering people are the ones who can, with a restricted budget, deliver a stupendous menu on the budget they're assigned."

Some developing trends might help compensate for the challenges. O'Brien said organics are "huge. We see that coming down the road." Clients will pay more for what they see as higher-quality ingredients, he noted.

One success story is the tasting room that opened a year ago at the Washington State Convention & Trade Center in Seattle. It is essentially a fancy space just off the kitchen where potential customers and VIP groups can be entertained with samples and pairings. Other tasting rooms are planned in Aramark-contracted facilities in Phoenix and Philadelphia.

Jami Leveen, Aramark's director of marketing for convention centers and cultural attractions, said the Washington tasting room has "had a significant impact, financially, on the sales in the facility, because of the ability to showcase what we can do in our kitchen."