Food inventory in a hotel with five revenue centers: one storeroom, many ways out

Your hotel storeroom receives food purchases once or twice a week. From there product goes out to the restaurant, the bar, room service, the pool bar and the lobby coffee shop, each with its own hours, its own cook and its own shift close. At the end of the month the controller has a food cost for the hotel, and when asked how much of that cost belongs to the pool bar, the answer is a shrug. The storeroom knows what came in. Nobody really knows where it went.

One storeroom and five ways out: the attribution problem

In a street restaurant inventory is simple: what enters the storeroom goes out to one kitchen and is sold in one dining room. Food cost is a fraction of a single sales figure. In a hotel the same product can go out to five places with five different sales figures, and each revenue center’s cost percentage depends on the storeroom issue having been recorded under the right center.

Without that attribution, the hotel has a global food cost, say 26 %, that hides a restaurant at 25 % and a room service at 32 %. The average looks reasonable, and the center that is off never shows up. And the hospitality accounting standard asks for precisely the opposite: revenue and cost by revenue center, so each one has its own result.

Attribution is not a software problem; it is a discipline problem with three movements: the requisition, the transfer and the count. Software only makes that discipline possible in thirty seconds instead of in a spreadsheet at month-end.

Requisitions by center: the storeroom issue is the center’s cost

A requisition is the document a revenue center uses to request product from the storeroom. The bar asks for twelve bottles and three kilos of limes; the storeroom delivers them and deducts them from its inventory. At that moment the cost of those twelve bottles stops belonging to the storeroom and belongs to the bar. That is the whole system: a revenue center’s cost is the sum of its requisitions, adjusted by its own inventory.

What a requisition should carry

• The revenue center requesting, with the responsible person who signs or authorizes.
• Product, quantity and unit, in the same unit the storeroom uses for its inventory.
• Unit cost at the moment of issue, taken from the storeroom, not estimated by the requester.
• Date and shift, so the cost lands in the right period.
• A status: requested, partially issued, fully issued, so what was not delivered is not charged to the center.

The requisition most often skipped is room service’s (Room service), because it usually prepares in the same kitchen as the restaurant and takes product from the same walk-in. If it does not requisition separately, all of its cost lands on the restaurant, and room service looks profitable when it is actually consuming product another center pays for.

Transfers between centers: the movement nobody records

On Saturday at four in the afternoon the pool bar (Pool bar) runs out of limes and ice. The server walks over to the restaurant and takes a case. Nobody writes anything down. At month-end the restaurant has a lime cost that does not match its sales, and the pool has a cost that is too low. That movement is called a transfer, and it is the most common attribution leak in a hotel.

A transfer should be recorded just like a requisition, but between two centers instead of between the storeroom and a center: who gives, who receives, what, how much and at what cost. In practice, the record only happens if it is easier than not doing it: a server with the handheld in hand should be able to record “one case of limes, restaurant to pool” in the time it takes to carry it.

Some transfers go the other way and are forgotten too: the bar returns to the restaurant what it did not use overnight, or the coffee shop sends the kitchen the bread left over from breakfast. Without a record, all of that becomes apparent waste at one center and hidden cost at another.

Inventory at the center and inventory in the storeroom

Each revenue center has its own small inventory: the bar counter, the pool bar refrigerator, the room service station. If it is not counted, the center’s cost is only what it requisitioned, and that overstates cost in the month it stocked up heavily and understates it in the month it consumed that stock.

The center count does not have to be as detailed as the storeroom’s. It is enough to count, at the close of the month or the week, the highest-value and fastest-moving products: spirits at the bar, proteins at the room service station, beer and soft drinks at the pool. The storeroom is counted in full, because it is the origin of all cost.

The formula per center is the same as for the whole hotel: the center’s opening inventory plus requisitions received plus transfers received minus transfers given minus the center’s closing inventory. That is the center’s food cost for the period, and divided by its net sales it gives its percentage.

The cost attributed to each center

With requisitions, transfers and counts, the controller (Controller) can build the table the hospitality standard expects: each center with its revenue, its cost and its percentage, and the storeroom with its inventory, which is not cost until it goes out. What remains in the storeroom at month-end is an asset, not an expense, and confusing the two is the most common reason a hotel’s cost jumps from one month to the next with nothing changing in the operation.

There are also issues that belong to no revenue center and still have to be attributed: staff meals, the manager’s comps, product for the breakfast included in the rate. Each needs its own destination in the record, because charged to the restaurant they inflate its cost, and charged to nobody they vanish into waste.

An illustrative example with numbers

The figures below are made up to show the calculation. They do not correspond to any real property or any industry average. To simplify, each revenue center’s inventory is assumed to be the same at the start and the end of the month, so the center’s cost is what it received minus what it gave.

The hotel storeroom starts the month with 20,000 in inventory, buys 100,000 and ends with 25,000. Storeroom issues are 20,000 + 100,000 − 25,000 = 95,000. Those issues were split across requisitions: restaurant 55,000, bar 15,000, room service 8,000, pool bar 7,000 and coffee shop 10,000, which add up to exactly 95,000. During the month there was one recorded transfer of 2,000 from the restaurant to the pool bar.

The hotel total, 95,000 over 367,000, is 25.9 %, which looks fine in the meeting. But room service is at 32 % and the pool at 30 %, and those two centers would not have been seen without attribution. At room service the cause is usually packaging and portion; at the pool, the unrecorded transfer, which in this example was recorded. Had it not been, the restaurant would have carried 55,000 and the pool 7,000, meaning 23 % instead of 30 %, and the problem would have stayed hidden.

Common mistakes in hotel inventory

• Charging all food cost to the restaurant because “that is where the kitchen is”, leaving room service and the pool with no cost of their own.
• Counting the storeroom inventory but not the centers’, and calling cost what is only stocking.
• Recording requisitions at a price estimated by the requester, instead of the real issue cost from the storeroom.
• Allowing verbal transfers between centers, especially on weekends, when they move the most.
• Giving no destination of their own to staff meals, comps or the included breakfast, and letting them disappear into waste.
• Closing inventory on one date and sales on another, so the center’s cost and revenue do not describe the same period. The shift close guide by revenue center (/blog/guia-del-corte-de-caja-por-punto-de-consumo) explains how to align the two dates.

What to do this week

1. List the revenue centers in your hotel that today take product without a requisition of their own. It is almost always room service and the pool bar.
2. Open a separate requisition for each one starting this weekend, even on paper, with product, quantity, issue cost and signature.
3. Record every transfer between centers for seven days, on a sheet next to the walk-in, and add up how much moved without passing through the storeroom.
4. At the close of the week, count the ten highest-value products at each center, not just in the storeroom.
5. Define a destination of its own for staff meals, comps and the included breakfast, and agree it with the controller.
6. Calculate each center’s cost of sales with the formula in this article and compare it with the hotel’s global percentage.

Inn Restaurant keeps the storeroom and each hotel revenue center’s inventory in the same place, with requisitions and transfers recorded from the handheld and an attributed cost per center the controller sees next to that center’s net sales. If you want to see how your hotel’s cost splits across five ways out, the 15-minute demo is booked on the contact page (contact).