The Response of Hotels to Increasing Food Costs due to Food Shortages

Abstract

During 2008–2009 the hotel industry in Hong Kong had to respond to a steady price increase in general food items and in basic food commodities. As most hotels in Hong Kong predict their food cost budgets a year in advance, these sudden and unexpected increases in food commodities came at a time when there was a downturn in the global economy in the wake of the financial crisis and a worldwide influenza A (H1N1) epidemic. There have been articles published in hospitality and tourism journals that have discussed the issue of food cost and control in hotels resulting from poor storage and purchasing, portion control, and preparation and production methods. However, none of the previous studies has examined the sudden and rapid increases in the cost of foods and the impact that this has had on the hotel industry. The measures adopted by Hong Kong hotels of different tiers to control or reduce expected food costs are analyzed in this study. This study employed a cross-sectional exploratory design, encompassing in-depth personal interviews with food and beverage managers and executive chefs in high-, mid- and low-tier hotels in Hong Kong. Empirical findings revealed that mid- and low-tier hotels found the increases in commodity prices challenging and thus employed innovative methods to combat rising food costs. High-tier hotels were more concerned about satisfying customers' needs by maintaining high-quality food products and services. The findings indicate that hotels and restaurants at all points of the market adopted functional strategies to increase their efficiency and profitability. Based on the operating experience of existing hotels, this study demonstrates that enhancing the quality of suppliers' commodities, good staff communication and training practices, and innovative ideas can improve a hotel's financial situation.

Keywords:

• food shortages
• food wastage
• cost control
• sustainability

Acknowledgement

The authors would like to thank the two anonymous reviewers for their constructive comments on improving an early version of this paper. Ms Rosanna Leung's assistance on data collection is also acknowledged. This project was supported by a research grant funded by the Hong Kong Polytechnic University (Contract Number: G-U534).