What F&B margin should your hotel achieve?

Should we keep the restaurant open? Should we open it at weekends only? Should we close it for January and February?

There is no single food and beverage margin every hotel should achieve, because no two hotels use food and beverage for the same thing. There is a quick test of whether yours pays its way, and it only works if the margin going into it has been calculated properly. That is where to start.

Those three questions come up at budget time, or in a bad quarter, and usually for the same reason: the margin isn’t where somebody thinks it should be. This chapter is about how to tell whether they’re right.

This is Part 5 of USALI for independent hotels, from the general ledger up. Part 1 made the case that a standard accounting package produces an accurate P&L but not a departmental one. Part 2 described the shape the standard gives a hotel’s accounts. Part 3 covered moving an existing ledger into it, and Part 4 worked out what each booking channel costs.

It matters most to smaller hotels. The Irish Hotels Federation reported in February 2025 that sub-100-room Irish hotels lean hardest on food and beverage, so the margin question carries the most weight in exactly those hotels.

Why is there no single right figure?

Because food and beverage does a different job in different hotels.

• In a country house where dinner is why people book, the restaurant is the product, and it should be judged like one.
• In a city hotel where breakfast and the bar are there mainly for the people staying, F&B is closer to an amenity. Part of its job is selling the room.
• In a wedding hotel, banqueting carries the department, and the restaurant may be the least important outlet in it.

A margin that would worry the first hotel could be perfectly respectable in the second. So a rule like “
” doesn’t get you far. It’s the same answer this blog gave about what EBITDA(R) your hotel should achieve: every hotel has its own advantages and challenges, so a definitive target is hard to give.

What you can ask of any hotel is whether food and beverage pays its way.

Does your F&B pay its way? A back-of-the-envelope test

Paying its way means covering its own costs and carrying its share of the hotel’s overheads.

1. Take last year’s undistributed costs, admin, sales and marketing, maintenance, energy and IT, and work out what percentage of total hotel revenue they were.
2. Take the F&B margin, departmental profit as a percentage of F&B revenue, and knock off that same percentage.
3. If something is left, F&B is carrying its share of the overheads and adding to the bottom line. If not, on paper, it isn’t.

It’s rough. Sharing overheads out in proportion to revenue is a simplification, and Part 6 of this series deals with allocating them properly. But it’s a fair first look, and it takes ten minutes with last year’s accounts.

Take an illustrative 92-room hotel. Its undistributed costs last year came to 20% of total revenue. Its food and beverage department, as the accounts show it:

Run the test. 18% less 20% is minus 2%. Charged its 20% share of the overheads, €250,000, the department comes up €25,000 short.

On those figures, somebody is going to ask about January and February. Before anyone answers, check the 18%.

Is the margin calculated correctly?

Two allocations matter most: how package revenue is split, and where staff food sits.

Package revenue

A B&B rate, or a dinner, bed and breakfast package, is one price for things two departments provide. Somebody decides how much of it the restaurant gets. Is that share reasonable, or is Rooms getting all the profit while the restaurant just recovers its costs?

Even a split that looks fair isn’t neutral. Say a package gives the guest 10% off what the room and the meals would cost separately, and both departments take the same 10% cut. If F&B runs at a 25% margin, giving up 10% of its revenue costs it 40% of its profit on those meals. Rooms, at a 60% margin, gives up about 17%. The same discount hurts the department with the thinner margin more than twice as hard.

So there’s a case for splitting a package so that each department gives up the same share of its profit, which moves more of the package revenue to food and beverage.

At the hotel above, the meals included in packages last year would have sold for €400,000 on their own, and the rooms for €1,000,000. Guests paid €1,260,000 for the lot, 10% less. Three ways to split it:

Rooms gives up 7%, 17% and 20% of its profit on the same three rows.

There’s no single right row, and reasonable people will choose differently. But the first row is the hardest to defend. If it’s the one in your accounts, the restaurant is being judged on meals it served at cost while Rooms keeps the profit.

The worked example below uses the middle row, the cautious one. The bottom row would move another €20,000 into food and beverage.

Staff food

Staff eat food the kitchen bought, so it’s easy for it to sit in food cost of sales. It isn’t a cost of anything F&B sold. It’s a staff benefit, and it belongs with the departments whose people ate it, in their payroll-related costs.

At this hotel staff food came to €40,000. F&B’s own staff ate €15,000 of it, which moves from cost of sales into F&B’s payroll-related costs and leaves the margin where it was. The other €25,000 belongs to Rooms, administration and maintenance, and leaves food and beverage altogether.

And one that can go the other way

Not every correction helps food and beverage. Banqueting staff paid from another department’s payroll, because that’s whose rota they’re on, make weddings look better than they are. Correct that and the margin goes down. That’s fine: the aim is a margin you can stand over, not a bigger one. The example leaves it out to keep the arithmetic simple.

Run the test again

Same hotel, same year, same kitchen. As shown, food and beverage doesn’t pay its way. Corrected, it does, with about €48,000 to spare.

The hotel’s total profit hasn’t moved. The €60,000 of package revenue comes out of Rooms, which still runs at a far higher margin, and the €25,000 of staff food lands in other departments’ costs. Anyone presenting the corrected F&B figure should show the other side in the same breath, or the next meeting will be about credibility rather than the restaurant.

This is not a claim that your food and beverage is secretly profitable. It may not be. Correct it and it may still come up short, and then you have a real answer. The point is that until the margin is calculated properly, you don’t know which answer you have.

If F&B still falls short, would closing it save anything?

This is the second question to ask before closing anything, and it applies even to the figures as shown.

The test charged food and beverage 20% of its revenue for overheads. Close the restaurant and how much of that goes? The general manager, the accounts office, the sales team, maintenance, insurance and most of the energy bill are all still there on Monday morning. Most undistributed costs are fixed, or close to it.

So take the as-shown figures, where the test said F&B was €25,000 short. Close it and the hotel loses €225,000 of departmental profit, and saves only the small part of the €250,000 of overheads that actually goes. The bottom line gets worse, not better.

A food and beverage department making a positive margin is paying towards overheads that are mostly fixed. That’s something to defend.

Then there’s what closing does to Rooms.

• Some guests book a hotel because it has a restaurant.
• Packages stop working. At this hotel, €1,260,000 of revenue came through packages that include meals.
• It shows up in reviews. Guests write about what wasn’t open.

Partial closure, weekends only or shut for January and February, is the middle path, and it can be the right call. You save the variable costs, staff hours and some energy, in the quietest weeks. But the fixed costs stay, the package and reputation risks get smaller rather than disappearing, and a restaurant that reopens in March has to win its regulars back.

None of that comes down to a formula. It depends on your hotel. But every version of that conversation goes better with a margin you can trust.

What can you fix this month, and what has to wait?

The split is the one Part 3 drew for the ledger.

• Available today: the test itself, on last year’s accounts as they stand, and a rough sense of which way the corrections would move it. Treat that as a direction, not a figure.
• Available from the month you change the coding: package revenue split on a basis you can state and repeat, staff food out of cost of sales and into each department’s payroll-related costs, banqueting labour on food and beverage’s own payroll. These are coding decisions rather than system projects, and Part 3’s rule applies: a new code’s history starts the month it is created.
• Never available: a corrected prior year built by applying this year’s split backwards. It would look like a measurement and it would be an estimate. Where the basis changed, say so in one line of commentary and let the comparison stand honestly.

The SSOT Platform is built around that division. The financial controller uploads the GL transactions and the monthly statistics, and the management accounts come back in the USALI layout with every line drillable to the transactions behind it. What it will not do is invent the history the old coding never captured.

So what margin should your hotel achieve?

There isn’t one figure that’s right for every hotel. What there is: a margin calculated properly, a quick test of whether it carries its share of the overheads, and an honest look at what closing would and wouldn’t save. Start with the first. The other two are only as good as it is.

Three questions to take back to your own accounts:

• When a package includes breakfast or dinner, how much does the restaurant get, and who decided?
• Is staff food sitting in food and beverage cost of sales?
• What percentage of last year’s revenue were your undistributed costs, and how much of that would actually go if the restaurant closed?

USALI (the Uniform System of Accounts for the Lodging Industry) is published by HFTP. SSOT Analytics is independent of HFTP. This series explains the concepts in our own words; for the authoritative text, buy the 12th edition at usali.hftp.org, or in the UK and Ireland via hospa.org. There is no substitute for reading the book.

If the first question has an uncomfortable answer, that is the place to start. Talk to us about making your hotel’s reporting benchmark-ready, or follow the series and do it yourself.

Colin Donovan has spent 30 years in hotel finance, as financial controller, general manager and managing director. He is the founder of SSOT Analytics, which builds USALI-aligned financial reporting for independent hotels.