Operating conditions
- Cost of sales represents the product cost attached to food and beverage revenue, while payroll and other operating expense remain separate components of the F&B department.
- In a published U.S. hotel sample for the first half of 2025, cost of goods sold represented 24.0% of total F&B department expense, compared with 59.4% for labor and 16.6% for other expense.
- Cost of goods sold increased 3.3% during the same period, while labor increased 2.1% and other expense increased 17.3%.
- The cost ratio moves with purchasing conditions, waste, transfers, outlet mix, banquet mix, beverage mix, and the revenue denominator against which the product cost is measured.
Cost of sales inside the department
Food and beverage cost of sales captures the inventory consumed in producing the revenue reported by the department. It sits alongside payroll and other operating expense, so movement in product cost can improve while total F&B profitability weakens, or move higher while the department still retains more profit because labor, revenue mix, or other expense changed in the opposite direction.
That separation matters when a property has several outlets and material banquet activity, because equal revenue dollars can carry very different product economics. A banquet-heavy period, a stronger bar mix, a menu shift, or a change in complimentary presentation can alter the cost ratio without indicating the same operating condition.
Published evidence
Cost of goods sold was one-quarter of F&B expense
Share of total F&B department expense in a published U.S. hotel sample, first half of 2025.
CBRE Hotels Research, Hotel Food and Beverage: A Bright Spot in 2025. The analysis covers 2,669 U.S. full-service, resort, and convention hotels in the annual sample, with 866 properties used for January through June 2025 operating statements.
The published expense mix is 59.4% labor, 24.0% cost of goods sold, and 16.6% other expense. These percentages describe the composition of total F&B department expense, rather than percentages of F&B revenue.
Mix changes the ratio
Product cost does not move independently of the revenue mix beneath it. In 2024, combined food and beverage purchases in a published U.S. hotel sample declined 2.3% while F&B department revenue increased 2.8%, with the published analysis attributing the divergence largely to a greater contribution from buffets and banquets and lower beverage activity rather than to purchasing cost alone.
The consequence is visible in the denominator. A stronger revenue contribution from formats carrying lower food cost ratios can reduce the reported cost percentage even when individual purchase prices remain under pressure, while a shift toward higher-cost menu or service activity can move the percentage in the other direction.
Published evidence
Cost pressure separated sharply in 2025
Indexing each F&B expense category to 100 in the prior period isolates the published year-over-year movement.
CBRE Hotels Research, Hotel Food and Beverage: A Bright Spot in 2025. Published year-over-year movement for the first half of 2025: labor +2.1%, cost of goods sold +3.3%, and other expense +17.3%.
The index sets each prior-period expense category to 100 and applies the published percentage change. It preserves the reported growth rates without implying that the categories began at equal dollar amounts.
Food and beverage carry separate economics
Food and beverage cost ratios use their corresponding revenue bases, which matters when a property's sales mix changes between restaurant food, banquet food, alcoholic beverage, and non-alcoholic beverage activity. Combining the lines too early can conceal a shift in one part of the department behind movement in another.
Inventory treatment adds another layer. Spoilage, waste, spillage, transfers between food and beverage preparation, vendor rebates, and the treatment of complimentary items can change the reported cost line even when purchase volume appears stable, which makes consistency in account treatment material to period comparison.
Property data behind cost of sales
- Food revenue and food cost. The food ratio depends on the product cost charged against the food revenue produced during the same reporting period.
- Beverage revenue and beverage cost. Alcoholic beverage cost remains tied to beverage revenue, keeping beverage economics separate from the food denominator.
- Inventory movement. Opening inventory, purchases, transfers, credits, and closing inventory determine the amount of product consumed rather than simply the amount purchased during the period.
- Outlet and event mix. Restaurants, bars, banquets, room service, lounges, and other formats create different combinations of product cost and revenue inside the consolidated F&B statement.
Conditions that distort comparison
- Revenue mix. A shift between banquet, restaurant, bar, and other F&B activity changes the denominator and the product profile behind the reported percentage.
- Timing. Inventory counts, accruals, credits, and late invoices can move cost between periods even when underlying consumption has not changed materially.
- Transfers. Product moved between food and beverage preparation or into another department can alter the reported cost line when treatment is inconsistent.
- Waste and complimentary activity. Spoilage, spillage, waste, and product presented without direct revenue can change the relationship between inventory consumed and revenue recorded.
What the F&B P&L establishes
- Product-cost movement. The statement shows whether food and beverage cost is rising or falling relative to its associated revenue.
- Mix effect. Separate food and beverage lines expose whether the consolidated percentage is being moved by the composition of sales rather than a uniform change in purchasing economics.
- Department context. Reading cost of sales beside labor and other expense shows whether product cost is the principal source of margin movement or one offsetting component.
- Period comparability. Consistent inventory and transfer treatment determines whether changes in the ratio represent operating movement or accounting timing.
Analytical limits
The cost-of-sales percentage establishes the amount of product cost absorbed by reported food or beverage revenue, but it does not isolate the operating cause by itself. Purchase prices, recipe composition, portioning, waste, inventory timing, outlet mix, banquet mix, transfers, and selling prices can produce similar movement in the ratio through different operating conditions.
Cross-property comparison carries additional limits because outlet configuration, service level, banquet intensity, alcohol mix, purchasing scale, complimentary treatment, and accounting conventions can differ materially. A comparable percentage can therefore arise from very different underlying economics, while different percentages can coexist with similar departmental profit outcomes.
Property-level application
City Shift Finance works with hotel owners and operators evaluating F&B revenue mix, product cost, labor, other departmental expense, and the contribution that remains before property-level support expense reaches GOP.
- 2025 F&B expense evidence. CBRE Hotels Research, Hotel Food and Beverage: A Bright Spot in 2025. First-half 2025 expense mix: labor 59.4%, cost of goods sold 24.0%, other expense 16.6%. Year-over-year movement: labor +2.1%, cost of goods sold +3.3%, other expense +17.3%.
- 2024 F&B cost movement. CBRE Hotels Research, All Eyes on Operating Costs in 2025: Lessons Learned in 2024. F&B department revenue increased 2.8% while combined food and beverage purchases declined 2.3% in 2024.
- Cost-of-sales classification. Uniform System of Accounts for the Lodging Industry, 11th Revised Edition. Cost of Food Sales and Cost of Beverage Sales definitions, including spoilage, waste, spillage, transfers, and vendor rebates.
- Current reporting context. USALI 12th Revised Edition became effective January 1, 2026 and retains Food & Beverage departmental schedules and expense classifications as part of lodging-industry operating reporting.
