Catering revenue on the rise in colleges
Only 12% of operators expect catering revenue to decrease in the next two years.
Though a large number of operators (45%) reported that their catering revenue stayed the same in the past year, there are some promising signs of growth in certain segments, according to The Big Picture. The segments with the largest number of operators who reported growth in catering revenue in the past year were B&I (48%), followed by colleges (43%) and hospitals (37%). The main reasons for the increase were more catered events (64%) and improved customer satisfaction (55%).
At the University of Illinois Champaign-Urbana, a more aggressive marketing campaign resulted in an increase in catering revenue. “We have a conference center on campus that we provide catering for, but it’s actually operated by a partnership entity,” says Catering Director Mike Loprete. “I’m not allowed to directly market to the outside community, so we rely on the conference center’s marketing. I give them incentives like free champagne for Friday weddings, and we’ve participated in some bridal expos and things like that.”
Patty Miller, dietary manager at Lisbon Area Health Services, in North Dakota, has experienced an increase in catering revenues because her hospital’s administrators are holding more meetings to discuss the changes in healthcare law and other system changes.
“We’re moving to an all computerized network, so we’re having a ton of meetings relating to that,” Miller says. “Offering catering to break up the monotony of those meetings really helps. Administrators are trying to keep people happy by bringing in food.”
College operators are optimistic about catering revenue in the next two years, with 60% reporting they expect an increase. At Ohio University, in Athens, Brian Thompson, director of auxiliaries, says his catering revenue will benefit from a new reception area capable of seating more than 200 guests and two private dining spaces.
Loprete says the catering revenue increase for colleges could be attributed to departments continuing to loosen their purse strings after several years of restricting catering budgets. “When the economy crashed, everyone slashed their catering budgets,” he says. “That has started to turn around. Plus, there’s more competition to get kids to come to this campus, so we’re doing a lot more catering for recruiting.”
About one-quarter of the industry reported a decline in catering revenue in the past year. The No. 1 reason for the decline was budget cuts, at 82%, followed by fewer events (48%) and a decrease in customer base (23%).
“Though in the past two years our catering revenues have mostly remained the same, it’s due to budget cuts that went into effect several years ago,” says Micheline Piekarski, food services director at Oak Park & River Forest High School, in Illinois. “We had cuts a while back, but since then we’ve stayed the same. With schools, you are really connected to the education budget. When they are going to cut department budgets, food is one of the first places they are going to cut.”
What percentage of your operation’s total foodservice revenue does catering represent?
On-premise Catering Rules
Seventy-eight percent of operators offer on-premise catering services. Schools and nursing homes/long-term care/senior living are the least likely to offer off-premise catering. Operations with $5 million or more in annual purchases were significantly more likely to offer both on- and off-premise catering (62%) than those with smaller purchases (20%). Most nursing homes/long-term care (56%) do not offer catering services, which is significantly higher than the other segments (16%). Self-operated locations are significantly less likely to offer catering (25%) than contract-managed accounts (13%).
For those operators who offer both on- and off-premise catering, 80% of their catering business comes from on-premise events. Nursing homes/long-term care/senior living facilities had an average of 26% of their catering business come from off-site events, which was a higher percentage than any of the other segments, while hospitals was the lowest at 18%. Furthermore, self-operated locations are significantly more likely to offer off-premise events (22%) than contracted-managed locations (16%).
Catering Revenue Stagnant
Overall, 45% of operators reported that their catering revenue remained the same in the past year. B&I (48%), colleges (43%) and hospitals (37%) were significantly more likely to report an increase in catering revenue than the other segments (16%). Contract-managed accounts (30%) were significantly more likely than self-operated locations (21%) to report a decrease in catering revenue. The average jump for those who had an increase in catering sales was 15%, while the average drop for those with a decrease was 13%.
Few Expect Catering Revenue to Decrease
Half of operators expect their catering revenue to remain static in the next two years, while 38% expect to see an increase and 12% foresee a decrease in these sales. Colleges (60%) and B&I (44%) were the most likely to expect an increase, while schools (18%) and hospitals (15%) were the most likely to expect a decrease. Operations with $5 million or more in annual purchases were significantly more likely to expect a boost in catering revenue in the coming years (60%) than those with lower annual purchases (34%). Contract-managed accounts were significantly more likely than self-operated locations to foresee an increase (46% versus 35%, respectively).
For those operators who saw a boost in catering revenue, increasing the number of catered events (64%) was the No. 1 reason for that jump, followed somewhat closely by customer satisfaction (55%). Operations with more than $5 million in annual purchases were significantly more likely to attribute changes in the menu (52%) to the increase in their catering revenue than those with smaller annual purchases (20%). Some of the other reasons for increased catering revenue mentioned by operators were the improved economy, increase/loosening of the budget, the addition of alcohol at events and better food/service.
For those operators who saw a drop in catering revenue in the last year, budget cuts were the No. 1 reason (73%). B&I operators were significantly more likely to attribute a decrease in customer base (71%) as a cause for their drop in catering sales than the other segments (19%). Contract-managed locations cited budget cuts more often than self-operated locations as a reason for decreased catering sales (81% versus 69%, respectively), while self-operated locations more often cited fewer customers as the cause for their decrease than contracted-managed locations (54% versus 39%, respectively). Some of the other reasons for decreased catering revenue mentioned by operators were the economy, a decrease in staff, new administrative controls and their food quality.