Mr. Wolf

Food & Beverage

Hotel F&B: The Benefits of Nurturing and Utilizing Local Products

By Erik Wolf, Executive Director, World Food Travel Association

Turn on the television and we're overwhelmed by the endless choices of food and travel programs. It's even easy to find food shows on travel channels and travel shows on food channels. Food and travel go hand in hand, and it's no surprise then, that food and drink are the fastest growing sectors of the travel industry.

That said, local foodservice businesses have a hard time competing against bigger companies like national chains and franchises. Consequently, many local foodservice businesses are closing. The reasons for struggle are many. A weak economy has beset us with job layoffs and reduced demand for travel. Foodservice businesses need a steady volume of customers to survive. Low-margin food establishments can hardly survive today without a higher volume of customers. None of us has to think hard to recall a restaurant, wine shop, gourmet store or other food-related business that has recently closed.

Researchers say we are bombarded with thousands of marketing messages each day. Consequently, we have to make many choices every hour - either consciously or subconsciously. It's so easy just to stop into a nearby outlet of Global Coffee (name changed but you know who we mean). The ordering process is seamless. The service is great. If they mess up, they'll make it right - no questions asked. Whether the coffee is actually good or not is another question. Yet the experience is terrific. Compare that to perhaps one of a handful of local coffee shops in your area. Sure, you have to drive to the individual café. There may not be parking. But the coffee is probably a lot better, it's probably not any more expensive, and chances are you may even know the staff who work there. And if a conversation ensues, it's probably rooted in a genuine relationship and/or interest in you. You're not just a number in a production line like at Global Coffee. It does take more effort to buy local, but it's worth it. Here's why.

Let's look at a locally-owned restaurant owner who serves 400 meals/day at an average price of $22/meal. The owner's income is $8800/day. He sources most of his food and drink from the local region. On an average $22 meal, let's say his net profit (after staff salaries, rent, insurance, cost of food and other business expenses) is $2.20/meal or $880/day ($22,880/month or $274,560/year). That's nearly $275,000 per year that is available to be reinvested back into the local community. The restaurant owner may buy a house or a new car. He may purchase new equipment for his restaurant, clothing and entertainment for his family, and so on. He has to pay his bookkeeper, accountant, lawyer, dentist and doctor. His profit pays for a lot of local goods and services.

Now let's compare that scenario with a national franchise restaurant owner who also serves 400 meals/day at an average price of $22/meal. The restaurant's income is $8800/day. Of that money, the owner needs to pay staff, rent and insurance. He sources most of his food and drink from a foodservice supply company that his franchise has procured through a national contract. His food costs will most likely be lower so on an average $22 meal, let's say his net profit (after staff salaries, rent, insurance, cost of food, national franchise fee and other business expenses) is $3.20/meal or $1280/day ($33,880/month or $399,360/year). That is an additional $400,000 of profit that is sent back to the franchise's national headquarters. Sure, money is spent on hiring local staff and managers, but that was accounted for in the net profit. $400,000 is leaving the local economy vs. $275,000 staying in the local economy. Multiply that by the hundreds of thousands of foodservice outlets in the US alone, and the impact is staggering. The bottom line is that with national chains and franchises, a lot more cash is leaving, than staying in, communities. This is an important fact that is not advertised to local residents who are all too elated when they learn that a huge hypermarket is slated to open in their area next year.

Now let's look at economic impact as it relates to travel specifically. Let's say a family of 4 from Australia comes to the USA for vacation for two weeks. The fly into Los Angeles and stay a couple days, visit Disneyland, drive to Las Vegas and then drive through the Grand Canyon, Bryce and Zion national parks in the area. They stay the last night in Scottsdale, Arizona and fly out of Phoenix back to Australia. Over the course of two weeks, they spend $150/night on hotel ($1950 for 13 nights). They will also need to rent a car ($600) and buy gasoline ($300). They'll need to eat out every meal ($50/person/day or $200/day = $2800 for 14 days). Of course they need to do some sightseeing ($500) and go shopping since many things are much cheaper in the USA than Australia ($3000). This very realistic scenario nets a total expenditure of $9150. Now let's say there are 50,000 such families per year who take this kind of trip (a very, very modest number judging by data from the Travel Industry Association of America). If these families chose not to take this trip, then that is nearly $457,500,000 million less each year that isn't being pumped into local economies.

What could your city or state do with the tax revenue alone from nearly one-half billion dollars in purchases? Most savvy tourism or economic development offices already have a model in place to assess the economic impact of tourism. An economic impact assessment (EIA) traces the flow of spending attributed with tourist activities in a region. It's also referred to as the ripple effect. It attempts to quantify visitor spending as it relates to employment, income and government tax revenue at the city, state and/or federal levels. The goal of an EIA is to show a multiplier number that shows a net gain: more cash comes in than was spent in promoting a destination, a local restaurant or winery, etc. There is no "holy grail" to aim for with economic multipliers. A number between 1.2 and 3.0 is common, and even runs might higher, based on a variety of factors that vary by area.

There are more reasons why buying local is worthwhile, one of which is that you will likely reap at least some health benefits by doing so. Of course, not all local foodservice operators have the same commitment to buying local and/or purchasing healthier options, but it's also your responsibility to ask. With a national franchise, you are almost guaranteed that your food and drink will have a much higher percentage of trans fats, high glucose corn syrup, GMO foods and other nasties. Why? In a word, cost. It's cheaper to make these products with fillers, additives, enhancers, preservatives, and so on. National franchises are in business to make a profit. It's not that national chains don't provide high quality products - many of them do. However, it's much less likely they'll be buying the locally produced honey or beer, locally raised grass-fed beef, wild-caught fish and other craft and artisanal products. Why? Because these products cost more. Locally-sourced goods that cost a bit more typically offer a higher quality product that may taste better and with fewer additives like preservatives, colors and artificial flavorings and sweeteners. That's good for your body as well as your taste buds. Of course it's hard to generalize, but it's our responsibility as consumers to ask the foodservice providers we frequent how they source their food and drink. Don't forget, when local food and drink ingredients are used to prepare and serve a meal for you in a local restaurant, the local producers benefit too because their products have been bought.

This is no tall claim. Just look at the wine industry for validation. According to the New York State Wine & Grape Foundation, for every $10 bottle of wine sold at the winery, the winery keeps $10. If the winery can get its wines into a local wine shop, the winery will only get on average $5 for the bottle of wine. If the winery works through a distributor (presumably outside the winery's local area), then the winery will only get $3 for each bottle of wine, on average. Selling locally means that more than 3 times the cash is kept by the winery. The more cash that stays local can be reinvested in that business or the local community. This recalls an important distinction between "new money" and "old money". New money allows a local economy to grow because jobs are created and services can be bought. Old money keeps circulating in the same local economy and becomes stagnant. The lack of fresh cash means an economy can't grow. When profits are exported to a corporate headquarters out of state or out of country, the leftover economic impact is dramatically less than in situations when the company was locally-owned.

The last factor to take into consideration about buying local is the storytelling coefficient. Take two pieces of meat of equal quality, cut, etc. One is sold by a rancher who is a local character in the area. He's been around forever, his sons have taken medals in the state rodeo each year, his daughters make award-winning cheese from the cow's milk, etc. There are pictures of the rancher and his family on the restaurant's walls. This is a great story. Compare that to the same quality and cut of meat that is delivered to the restaurant by a distributor's truck. Not so sexy. Savvy restaurateurs know they can charge more for enhanced perceived value - like a cedar plank underneath a salmon filet. It's the same with storytelling. A great story is worth another couple of dollars per serving. If it's really a great story, it should be written up in the restaurant's menu (called menu messaging) so every customer will have the chance to read it. That's a great way to build a positive word-of-mouth reputation, which in turn, increases sales.

Improved supply chain management and customer demand for convenience have perhaps made it a bit too easy to overlook our once so important local food and drink businesses. "Local food businesses" covers a lot more than just restaurants. Think wineries, breweries, farms, farmers' markets, food events, food manufacturers, coffee roasters, sauce makers, etc. Unless your familiar corporate logo is visible by cars careening by highway exits at 70 mph, visitors may not even be aware of the great food and drink choices that await just beyond every highway exit. Even local residents get busy and forget about great local food and drink options. We need reminders, constantly.

Every company manages its earnings and culture differently so it's hard to generalize about larger franchises and chains. Most of them provide product consistency and often, an exciting brand experience. They also provide quality training for staff, which can be taken into new jobs elsewhere. Larger brands also convey a sense of less risk. It's easier for visitors to pick the "Global Coffee" because they know it from back home. Local food and drink businesses need help to make it easier for visitors and locals alike to find and support. Food and travel are intertwined. By making them easier to find or helping to jog our memories, you'll help create new money for your area, and promote jobs and economic growth. If you do nothing, then don't complain in 20 years that you have only one coffee and one burger from which to choose.

Erik Wolf is the founder of the world’s food tourism industry, and of the World Food Travel Association. He is a highly sought speaker, thought leader, strategist and consultant, in the US and abroad, on all aspects of food and drink tourism. Mr. Wolf is considered the go-to food tourism industry resource for media outlets. He has spearheaded projects for world-class brands. While Executive Director of the Association, Mr. Wolf launched several innovative products for our industry, including the annual Food Travel Monitor, including the Monitor’s PsychoCulinary profiling tool for food travelers; the Certified Culinary Travel Professional program; Business Readiness Training in Food Tourism; and Food Travel Talk TV. Mr. Wolf can be contacted at (1) 503-213-3700 or erik@worldfoodtravel.org Please visit http://www.worldfoodtravel.org for more information. Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:
Coming Up In The November Online Hotel Business Review




{300x250.media}
Feature Focus
Architecture & Design: Authentic, Interactive and Immersive
If there is one dominant trend in the field of hotel architecture and design, it’s that travelers are demanding authentic, immersive and interactive experiences. This is especially true for Millennials but Baby Boomers are seeking out meaningful experiences as well. As a result, the development of immersive travel experiences - winery resorts, culinary resorts, resorts geared toward specific sports enthusiasts - will continue to expand. Another kind of immersive experience is an urban resort – one that provides all the elements you'd expect in a luxury resort, but urbanized. The urban resort hotel is designed as a staging area where the city itself provides all the amenities, and the hotel functions as a kind of sophisticated concierge service. Another trend is a re-thinking of the hotel lobby, which has evolved into an active social hub with flexible spaces for work and play, featuring cafe?s, bars, libraries, computer stations, game rooms, and more. The goal is to make this area as interactive as possible and to bring people together, making the space less of a traditional hotel lobby and more of a contemporary gathering place. This emphasis on the lobby has also had an associated effect on the size of hotel rooms – they are getting smaller. Since most activities are designed to take place in the lobby, there is less time spent in rooms which justifies their smaller design. Finally, the wellness and ecology movements are also having a major impact on design. The industry is actively adopting standards so that new structures are not only environmentally sustainable, but also promote optimum health and well- being for the travelers who will inhabit them. These are a few of the current trends in the fields of hotel architecture and design that will be examined in the November issue of the Hotel Business Review.