Ghost in the kitchen

A hundred years ago, when New York last faced down a deadly pandemic, separating the city’s hotels from the city’s restaurants would have felt impossible. This was an age of high-flown extravagance and something as inconsequential as the Spanish Flu couldn’t possibly get in the way. So, even as public health officials battled to keep cases down, and 20,000 New Yorkers died during the outbreak, the city’s grand hotel restaurants continued to welcome guests with velvet gloves outstretched. Typical is the menu at the Hotel Astor, just off Times Square, which in 1920 offered everything from Cape Cod oysters to mushroom velouté served with celery – even as New York was stumbling through its fourth wave of influenza.

Over the following century, hotel restaurants, and the kitchens that inevitably accompanied them, have burrowed deep into the marrow of global hospitality. According to an industry expert, serious hotel restaurants can make up to 20% of the property’s total profits, although invariably that figure depends on the place in question. More than dollars and cents, however, hotel restaurants have become institutions; names the Savoy Grill or Le Cinq are as illustrious as the buildings that host them. As Ernest Hemingway |put it of another distinguished restaurant: “When I dream of afterlife in heaven, the action always takes place in the Paris Ritz.”

New York is now in the midst of a new pandemic – and this time, oyster-soaked feasts are out of the question. With lockdowns ravaging occupancy rates, 140 of the city’s hotels, and dozens of its hotel restaurants, have gone to the wall. Yet, even before Covid-19, Hemingway’s old dream of grand meals in grander halls was fading. Years before the pandemic, US hotel F&B numbers had already started dropping from their 2016 peak. More broadly, these trends are likely to accelerate with new technology. Why would someone spend an extortionate sum on a hotel dinner when apps like Seamless offer cheap and easy alternatives? Not that the situation is hopeless. Spurred by recent crises, hotels are starting to adapt, abandoning traditional F&B, and opening their kitchens to new chefs and new opportunities to make money.

Cooking up a storm

Wander the streets of New York – or London, or Sydney – and one will eventually come across an unusual sight. There will be a kitchen, often with its doors flung open to the pavement, complete with ovens and fridges, and sinks. There’ll likely be chefs there too, busy chopping up vegetables and carving up meat. The only thing missing are diners – and that’s the whole point. As a ghost kitchen, this is a place expressly designed to cook food for remote customers, with finished meals delivered to their homes. Traditional storefronts, and the customer service that accompanies them, are unknown, yet their austerity makes ghost kitchens cheap. Entrepreneurs might be able to open a ghost kitchen for as little as $50,000, compared with the $750,000 they likely need to start a regular restaurant.

Though the hospitality industry has rushed into this lucrative new world – burger chain Wendy’s recently announced it was opening 700 ghost kitchens – hotels have historically been slower to follow. For Richie Karaburun, that’s partly down to experience. “Before Covid-19, frankly not that many people knew about ghost kitchens,” says Karaburun, a professor in hospitality at NYU. That’s unsurprising given how deeply F&B has been woven into the fabric of hotel finances. Despite increased competition, in fact, hotel food and drink revenue has increased by 4.5% a year from 2010 to 2016. Then there’s the question of space. To put it bluntly: why would hotels adopt the ghost kitchen model when it has a fully-staffed kitchen all of its own?

This all changed with the pandemic. With some 80% of US hotel rooms unoccupied, and indoor dining literally banned across much of the planet, properties suddenly found their kitchens ominously empty. As Karaburun puts it, hospitality is “all about the money” – and owners had to pivot away from money-losing ventures sharpish. Fred DeMicco agrees. Because outsourcing lowers the cost of real estate, cuts the need for staff and often fits neatly into the online ordering zeitgeist, the Northern Arizona University professor explains that ghost kitchens can easily make money. “Coupled with Covid-19,” adds DeMicco, “we’ve seen a perfect storm of events – all of which have only accelerated the development of virtual kitchen concepts.”

Nouvelle cuisine

If nothing else, this ‘perfect storm’ can be observed in how quickly hotel-focused ghost kitchen companies have proliferated. Over the past 18 months, they’ve puffed up like pastries in the oven, scrambling to find hotel partners with cold stoves and empty freezers. In the UK, Kbox Global and Karma Kitchen are just two of the companies to set up shop in the country’s hotels. Karma Kitchen, for its part, recently raised £252m in funds – despite initially looking for just £3m. Across the Atlantic, meanwhile, companies like Butler Hospitality and C3 have been welcomed into a number of hotels, the latter recently signing a deal to cater in the Graduate chain.

What does this new culinary world look like in practice? One of the most striking shifts is the independence of C3 and its cousins. Apart from the physical cooking space – which obviously still belongs to Graduate – C3 is mostly left to its own devices. Operating its own range of brands (‘Umami Burger’ and ‘Sam’s Crispy Chicken’ are just two of the most popular), the New York company plans to cook across several Graduate properties. Beyond that, explains a C3 representative, its kitchen staff are ‘cross-trained’ across different brands, meaning that hotels don’t have to worry about securing the right talent. For its part, Butler Hospitality is similarly independent, boasting uniformed staff, automated ordering and dedicated “guest experience” teams.

To put it another way, hiring their kitchens out won’t leave hotels with much to do themselves – something Karaburun suggests suits them just fine. “Hotels benefit in the sense that they don’t have to worry about food costs, payroll cost, staffing for the back of the office, operational costs, insurance and permits,” he says. “That’s a big, big win for them.” That’s especially true given how widely many ghost kitchens spread their wings. Though Butler Hospitality focuses on room service, it’ll happily cook food in one kitchen then deliver it to guests at another property nearby. In other words, a hotel can even profit from food ordered at a rival. By a similar token, C3 offers its services to local residents, using its Graduate bases to rival Seamless, UberEats and other food delivery platforms. Considering that this is an industry expected to be lucrative by 2023, that’s surely a good strategy.

As cheeky titles like ‘Krispy Rice’ imply, ghost kitchens are helping revitalise a sector long associated with more traditional cuisine. “I feel hotel ghost kitchens can fill a need – creating new, exciting, innovative concepts that hotel guests will enjoy,” says DeMicco. That’s true, he adds, even for arrivals who don’t necessarily want to eat at a hotel. As DeMicco continues: “If done well, ghost kitchens can add a positive buzz to a hotel.” C3’s representative makes a similar point. “Having a single full-service restaurant on-site is one thing, but adding another brand can generate $1m in additional revenue per year, and has the potential to reach new demographics as a secondary space.” C3’s partnership with Graduate is again instructive here. Apart from rustling up burgers and chicken for hotel guests, its ‘Graduate Food Hall’ concept encourages college students to grab lunch at Graduate properties in university towns. All told, the partners hope to reach 3.5 million kids from Virginia to California.

Oven ready

Now that vaccination campaigns are intensifying and hotels are buzzing once more, might the ghost kitchen bubble burst? Neither DeMicco nor Karaburun think that it will. “This is here to stay,” emphasises the NYU professor. “Ghost kitchens might evolve, but they’ll continue to simplify things for hotels.” This makes sense, given the financial downturn the hotel industry now has to drag itself out from. When even a giant like Hilton saw revenue tumble by around half in 2020, it makes sense that hotel owners and operators would hunt for ways to cut costs – with ghost kitchens a prime example. This is similarly reflected by the kinds of brands that are taking the plunge and outsourcing their F&B. Even major players – IHG and Marriott among them – are now following where Graduate led.

More broadly, specialised companies are appearing to complement the gaggle of ghost companies in their midst. In New York, for example, ‘Kitch’ is a start-up that acts like a ‘kitchen matchmaker’ and connects hotel operators to chefs eager to rent out their space. With developments like that on the horizon, no wonder C3 is so optimistic about the future of their field. “More hotels will seek out this type of digital kitchen concept, while hotels in development will opt for digital kitchens over singular restaurant concepts,” the company’s representative says, adding that C3 is already in conversation with other potential clients too. We may not be returning to a world of Cape Cod oysters to mushroom velouté, but kitchens are still where the action is.

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