Is Room Service Profitable for Hotels?

I just woke up at Paris-Las Vegas today and called for room service. They told me room service was suspended because of COVID, which seems like a weird excuse to me, since literally everything else is open. My question — is room service not profitable for hotels?

We put your question to UNLV’s Alan Feldman, longtime veteran of Mirage Resorts and MGM Resorts International.

He replied, “In normal times, room service is not a loss leader. However, these are not normal times and hotels in Las Vegas and around the country are trying to manage their costs. Many are temporarily reducing hours or eliminating room service. In some cases, they’re converting room service from full menu to packaged meals and snacks. It’s always best to check ahead of arrival to know what any hotel is offering as operating strategies change frequently.”

That said, our research indicates that room service is marginally profitable, if at all, for hotels. Perhaps it is at MGM properties in Feldman's experience, but in fact, a few years ago, a professor at the Harrah College of Hotel Administration at UNLV, Mehmet Erdem, was quoted as saying, “It’s very rare, if not impossible, for hotels to produce revenue in terms of room service.”

You'd think that it would be profitable, considering the wildly inflated prices hotel guests pay to have meals delivered to their door. Before the New York Hilton Midtown, for example, started a trend by discontinuing room service in 2013, room-service cookies and milk there cost $20, not including the significant service charge (usually 15% or more), an in-room-dining surcharge ($5-$15), and tip. We've all seen the menus: BLTs that start at $23, mac 'n' cheese (from a $2 box of Kraft) $20; bagel and cream cheese anywhere from $15 to $25.

Part of the problem for the hotels is labor management. With wait staff hanging around all day, and at some hotels all night, for orders to come in, payroll alone can account for losses in the room-service department. It's expensive to have staff spending a lot of time not delivering a bagel to a guestroom.

That's exacerbated by guests increasingly unwilling to pay the freight for room service, especially when they can order in from local restaurants via any number of apps. Indeed, many but the most exclusive hotels now not only allow food deliveries from outside the hotel, but even encourage it by providing menus from nearby restaurants in their rooms. One statistic we saw showed a decrease of 25% in room-service revenue between 2007 and 2012 and we're sure it's even more now with the ubiquity of ordering and delivery apps.

Another reason we saw that hotels are backing away from room service is the unsightliness of trays and dishes on hallway floors outside rooms. You'd think that with room-service staff sitting around waiting for something to do, they could patrol the halls looking for settings to bus, but we're not alone in our experience of trays and plates sitting on hotel-hallway floors sometimes for far too long after the meal is delivered. It certainly reflects badly on the hotel's food and beverage management.

Finally, here's the probable reason that the pandemic was cited as the reason that room service at Paris was suspended. A report from the American Hotel and Lodging Association a few years ago indicated that business travelers are "the most prolific users of room service." But business travel almost completely dried up in 2020 and has been slow to get going since. So COVID, as it's done in many other areas of business and life, accelerated an existing trend. We won't be surprised if room service doesn't return to many hotels post-pandemic.

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O2bnVegas Oct-25-2021

be creative

Last trip, at an MGM property, the person who delivered our room service meal said "Leave your try outside the room.  I will come back at eight thirty to pick it up, or would another time be better?" Sure enough, shortly after the time he quoted the tray had been picked up! (Of course I looked out of curiosity.) First time for that, for the delivery person to promise to pick it up, and at a certain time, without us having to call.    

I've complained about trays in the hallways for years, upscale hotels.  Early on I though Housekeeping had this duty but that isn't true.  At least they could call In Room Dining to report trays on the floor but I suppose that isn't in their job description either.  

We finally learned to just call the IRD number they tell you to have the tray picked up when finished eating.  It is picked up in minutes.

Candy

jpfromla Oct-25-2021

ElDiablo

I’m sure CET CEO Tom Reeg would prefer you eat at McDonald’s (since he can’t be bothered with the needs of his guests) or have you sit down for the “Over-priced, Underwhelming, Celebrity Restaurant Experience”.

jay Oct-25-2021

Management

I worked at a Radio Shack during my university days. We were widely busy evenings and weekends with marginal traffic around noon and dead the rest of the time. For safety reasons we always had two staff on. I often picked up a morning shift as most of my classes were in the afternoon. If you were not busy with a customer, you had a dust cloth in your hand, windex for the display cases & front window, or you were out front with a broom. There was no idle time, the first to say "thats not my job" found themselves without one. 

The conventional thinking is that with a union in place you can't get a sandwich guy to park cars - and you would be right. You can however write up a new job description that would include both scopes of work, post 10 new jobs and stop scheduling in the others. Employees would be free to apply for the new hybrid roles. 

The problem is that when the casinos want a suggestion from middle management they will give them one. Management needs to think outside the box

AL Oct-25-2021

"Ya think?"

Those prices quoted for room-service items at that New York hotel were absolutely ridiculous.  Who in their right mind (except millionaires or billionaires) would pay such exorbitant amounts?  If they're going to charge such high prices, they should expect that the clear majority of people will say "No thanks" to that menu, meaning there will be very few takers, and thus the operation would be so infrequent that it would grind to a halt.  You don't have to be a genius to see this.

Kevin Lewis Oct-25-2021

$5 extra for sesame seeds

If you're actually getting people to pay $25 for a bagel, and you're still not making a profit, then maybe you're in the wrong business.

Gregory Oct-25-2021

Seems weird....

I have always wondered what the attraction is for room service.  Is it because that's what they do in movies?  When is the last time you had dinner in your bedroom?  I've heard of breakfast in bed, but that's kind of a TV/Movie thing too.

rokgpsman Oct-25-2021

No thanks

Me too Gregory,
I never order room service, prefer to get my butt out of bed, get dressed and go downstairs if I need to eat. I don't watch tv in the hotel room either. I go on vacation to be doing fun things like the pool, casino games, eating at different places, attractions, sightseeing, etc. Last thing I want to do is spend wasted vacation time in the room when there's so much outside of the room to see and do. I never do the time-wasting timeshare presentation things either. To each their own I guess. Each hour of my vacation is for doing things I can't do back home. The room is for sleep and shower/change of clothes.

Dave in Seattle. Oct-25-2021

Breakfast in bed?

 You bet! My overnight guest loves strong coffee and cinnibons!

Question of the Day - 25 October 2021

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