JUSTIFYING MINI-BARS -- AN ECONOMIC EVALUATION

The focus of this analysis will be to explore all of the specific elements that lead to the final analysis of how profitable the system will be.  Obviously, that means we will evaluate cost of goods, operating expenses, and system expenses.   Additionally, we will explore the soft costs and subjective issues related to operating these systems profitably while ensuring that the customers (guests) are pleased with the refreshment center's looks, ease of use and accuracy of billing.

In the simplest sense, in room bars are a "pay for" guest amenity that becomes attractive to a property under on or multiple of the following considerations:

1. The hotel's typical guest is a traveling business person who will utilize the mini-bar for a beverage or snack approximately 33% of the time.
2. Sensitivity to the price of goods in the vend units indicates that elasticity is significant and as long as it is below room service prices, deemed reasonable.
3. Unlike "family" hotel guests, the business traveler is unlikely to bring "packaged" goods into the room and therefore will vend products if he/she finds a selection they like.
4. Inner city hotels and airport hotels in the major business centers of the U.S. (like N.Y., Chicago, Atlanta, etc.) find that the hotel guest does not want to stroll about in search of a coke, beer, etc. outside the hotel and therefore represents a captured audience.  A beer, coke or glass of wine while the guest is working, reading or watching T.V. in their room becomes a reasonable conjecture if the guest is encouraged to utilize the in room refreshment system.
5. There is an evolving mentality in the hotel industry that can best be described as a "we have it also".   Consequently, this is driving the property to evaluate the economic possibility of procuring an in room refreshment system.
6. In many hotels, they have experienced a surprisingly high number of impulse buys of boutique products.  These are specially packaged, unique items indigenous to either the hotel or local geography.  These types of products are priced at a very high margin, sold in large quantities and in most instances taken home to the spouse or kids.  (Based on personal experience, I refer to this as the guilty-complex, "I had better bring something home to stay out of the dog house" buying pattern).

All of these factors contribute to the business decision to evaluate an in room refreshment system.  Now an evaluation must be performed to analyze the cost.   However, unfortunately for hotels there are no published studies that present empirical data for them to rely upon.  Instead, it is up to the vendor to expose those true costs unless the property or management already has operating experience with mini-bars.

Most systems today are made available by the supplier under either a rental or lease-purchase.  The contract length is traditionally seven years in term.  This total cost is then expressed in the business proposal as a cost per day per vend unit.

This then brings us to the final presentation of the financial analysis.  Two examples are presented to show you the difference that location, guest usage and pricing has on the profitability of an in room refreshment system.  These examples are extricated from current Inn Room proposals where the hotel supplied us all the data, as well as the specifics from proposals submitted by our competition.  You will find that the financial comparison evaluates the costs and profits associated with implementing a true un-automated mini-bar, a semi-automated mini-bar and the fully automated Inn Room system.