U.S. hoteliers are struggling to increase revenues in 2025, as rooms revenue (the largest source of revenue for hotels) increased by just 0.8% during the first half of the year, according to CBRE’s August 2025 edition of Hotel Horizons®. Given the expected slowdown in U.S. lodging performance during the second half of 2025, CBRE’s forecast for the annual growth in RevPAR is just 0.1%.

Because of the softer outlook for rooms revenue for 2025, hoteliers have focused on other sources of income to grow hotel revenues. One of the primary sources of ancillary revenue has been the food and beverage (F&B) department, historically the second largest source of revenue in the industry.

To analyze why food and beverage revenues have been a bright spot amidst declining overall performance, we have analyzed the operating statements of 2,669 U.S. full-service, resort, and convention hotels that participated in CBRE’s annual Trends® in the Hotel Industry survey in both 2023 and 2024. To provide more current information, we relied on the monthly operating statements of 866 properties during the period January through June of 2025.

— Source: CBRE Hotels

Revenue Trends

Since most hotel food and beverage patrons are in-house guests, we analyzed revenue trends on a dollar-per-occupied room (POR) basis. During the first six months of 2025, F&B revenue POR for the hotels in our survey sample increased by 3.8%, exceeding the 3.0% increase in total hotel revenue during the same period.

When analyzing the growth in F&B revenue POR by property type and chain-scale, significant increases during the first half of 2025 have been observed at luxury and resort hotels. These properties have benefited from the relative strength of the leisure and “bleisure” demand segments since the pandemic, as well as the financial stability of high-income households.

— Source: CBRE Hotels

Properties are also harvesting the benefits of a post-COVID resurgence in hotel F&B demand, where hotel restaurants were deemed safer spaces. Increased interest led to the hospitality industry investing in and focusing on food and beverage, as operators and brands introduced more creative offerings, personalization, and enhanced engagement. Ownership focused and invested in revitalizing underutilized venues, bars, and open spaces and these investments in more modern concepts were very well received by both in-house and external patrons.

Hotel redevelopments and renovations completed in the last few years included more activated food and beverage real estate, in many cases blurring the lines between lobby lounges, retail, and entertainment. Owners shared their intentional financial goals for these investments with operators and have been closely measuring the ROI of these projects. This created transparency between the operator, and ownership, and ultimately encouraged F&B teams to make more responsible and informed choices that contribute positively to the bottom line.

Refurbished physical spaces, elevated culinary programs, the utilization of data to drive floor decisions, and an overall more sophisticated focus in F&B operations also gave operations the confidence to increase prices. Hotels should not focus on offering bargains to attract patrons; instead, they should lean on their well-thought-out concepts, quality of implementation, reputation management, and service delivery to generate demand. Well-run F&B hotel outlets should be confidently competing with local standalone restaurants. Given the very limited growth in occupancy for the properties in our sample, the rise in F&B revenue on a POR basis can be attributable to increases in prices and capture of external patrons.

— Source: CBRE Hotels

Generating more revenue requires hard work. Common elements of successful operations include: delivering an enhanced consumer experience, a serious approach to menu optimization, quality talent, and effective marketing. Management must ensure that restaurant teams understand the daily, monthly, and annual goals for each outlet. Key positions should be assigned specific revenue goals, participate in customized upselling training courses, and ensure that appropriate incentives are in place to keep personnel motivated and engaged. Depending on the market and type of hotel, creating an F&B marketing and sales manager position may be a sensible approach.

Luxury resorts have enjoyed gains in F&B revenue, but convention hotels have struggled in 2025. After benefiting from the recovery of group demand in 2023 and 2024, occupancy levels for convention hotels have declined in 2025. While banquet revenue has declined at convention hotels by 7.3%, it has increased at resort hotels by 8.7%. This could indicate a preference of groups to host their meeting at resort properties, especially during the offseason when room rates can be more favorable.

This trend can also be attributed to the different types of visitors that resorts and convention hotels attract. There has been a decrease in the attendance and participation of government and federal employees in associations, conferences, and meetings, organizations that rely on government funding were affected by new federal policies, budget reductions, and workforce shifts, resulting in reduced meetings and events. On the other hand, the social and wedding group business continues to thrive.

Food revenue in both hotel venues (5.2%) and banquet spaces (4.0%) have increased in 2025. Unfortunately, the trend of declining beverage revenues has carried over into the year. From the first half of 2024 to the first half of 2025, beverage revenues have been flat in hotel venues but declined by 2.0% at hotel banquets.

Mindful drinking has led to the emergence of two new beverage categories – low-alcohol offerings and mocktail alternatives. For example, one hotel in our sample has reinvented the Shirley Temple, which has been a hit for their brunch offering. Cocktail menus that were historically limited to adults are now creatively offering mocktails for the entire family.

While mini bars have registered the greatest percentage increase in revenue from 2024 to 2025, they still represent just 0.2% of total F&B department revenue. Other minor sources of F&B department revenue exhibiting strong growth in 2025 are public room rental (9.5%) and service charges (7.9%), two items that have been considered “negotiable” costs for meeting and event planners, historically. Given the relatively strong growth rates in these two categories, it is clear that hotel catering and meeting sales managers have been more diligent in enforcing these as mandatory charges in 2025.

Expenses and Profits

Not only have F&B departments contributed more revenue for the hotels in our sample, they have also improved the profitability of the properties. The year-to-date F&B department profit margins for hotel F&B departments have increased from 28.7% during the first half of 2024 to 29.1% in the first half of 2025. This implies that expenses have increased at a slower pace than revenues.

The primary cost categories within a hotel F&B department are the cost of goods sold (i.e. food cost, beverage cost), labor expenses (i.e. salaries, wages, benefits), and other expenses, (i.e. china, silverware, linens, equipment, decorations, menus). As a percentage of total F&B department expenses, labor is the greatest (59.4%), followed by the cost of goods sold (24.0%), and other (16.6%).

— Source: CBRE Hotels

Of these three expense categories, the greatest percentage increase in 2025 has been in the other category (17.3%). Labor expenses have risen by 2.1%, while the cost of goods sold rose by 3.3%. Tempering the increase in the cost of goods sold has been a reduction in the cost of beverages, which is commensurate with the decline in beverage revenues. Muting the increase in total labor expenditures is a combination of adjustments to F&B service delivery (more buffets and grab-and-go), as well as the continued challenge of finding employees resulting in staffing shortages.

From an asset management perspective, occupancy expenses need to be included to understand the true profitability of an outlet and its food and beverage operations. These expenses, which include repairs and maintenance, utilities, real estate taxes, insurance, and management fees, are legitimate costs associated with culinary spaces. We can always analyze that well-positioned and successful F&B outlets have a tangible halo effect on rates but holding operations accountable starts with a fair assessment of the profitability of each component as a standalone business.