How much cash are you throwing in the trash?

Proudly contributed by Benjamin Lephilibert

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There’s an old story about an economist who found a $100 bill laying on the ground, but didn’t bother to bend over and pick it up. When he was asked why, he said that if it had been real, someone would have already picked it up. We find this story similar to the way food waste is treated in the hotel industry, wherein it’s usually assumed that those resources are already being optimized. But in reality, most large hotels unfortunately send hundreds of thousands of dollars to the landfill each year.

Imagine the following scenario. You’re at a conference for hotel executives and the speaker asks you to take out your phone and perform a calculation based on the average number of monthly covers served on your property. He tells you to take that number and multiply it by twelve, divide it by three, and then multiply by five. He then asks you to raise your hand if your answer is greater than 200,000. (Every hand goes up.) He then says to keep your hand up if the number is above 500,000. (Many hands go down, but a solid contingent of raised hands remains.)

He then explains what they’ve done. “I just asked you to take your monthly covers and multiply that by twelve to get an annual figure. You divided it by three to get to an estimate of the total kilograms of wasted food, and then you multiplied that figure by five to estimate a dollar figure for your property’s annual food waste. Now, please put your hand back up if you think the figure you calculated is a realistic estimate of your food waste. (Zero hands go up.) Okay. Please raise your hand if you think your food waste is less than ¼ of the figure. (Most of the people in the room raise their hand.)”

This scenario has played out with similar results across boardrooms and banquet centers. Given the chance to calculate a rough estimate of their waste, hotel executives reflexively deny the possibility that their food waste could be so significant or that they could even be performing anywhere near the average. (Even though they’ve typically made no effort to compete on this front.) In doing so, these leaders tend to miss the mark by an order of magnitude. So, when they think it’s one to two hundred kilograms per day, we’ve learned to expect the measured amount to be around a thousand.

When we actually go in to measure it and share the results, they still tend not to believe it. Then we show them the waste and the conversation changes as they begin to understand and accept the problem. (It’s hard to ignore a day’s worth of food waste when it’s piled up in front of you.) Once you get to that point, building commitment for change is easier, as the problem that was hidden in plain sight can no longer be ignored. But working to gain the support necessary for success doesn’t end there, and why is it so hard to get to that point?

Food waste is often seen as either nonexistent (that’s where the conversation typically starts), or as a necessary evil (that’s where it often shifts to once it’s been proven to exist). But neither of these are ever the full story. Properties that take food waste seriously know that it occurs, and even when they’re doing a good job of avoiding and diverting it, they know there are always ways in which they can improve. While at the other end of the spectrum, it sometimes seems there’s a bit of a Dunning-Kruger Effect in play, wherein those who haven’t really jumped into this work believe they’ve already mastered it.

Source: Skeptical Science

There are two key questions we find ourselves going back to around the problem of food waste:

  • Why is the control over these resources so lax, even for hotels with annual food expenditures of several million USD, especially when Food and Beverage sales can represent as much as half of all revenue for a property?
  • Why is the emphasis on selling more, when a better return is often on offer for optimizing the returns for the sales that exist?

The answers to these questions are often a mix of challenges stemming from a lack of awareness of the level of waste that exists and the value of that food that’s wasted, as well as structural challenges around the way that food is utilized in a property, as well as how that use is tracked and analyzed.

Along with the aforementioned gap between the perceived level of waste and the much greater level that’s produced in reality, there are other significant perceptual challenges that need to be overcome. Many professionals also perceive food waste minimization as an effort to control their work. And managers often view it as a threat to guest satisfaction or as an attempt to go against their brand’s quality standards as it is assumed that most of the waste in their businesses come from buffets and customer plate waste. But this is due to a lack of information about where food is wasted in the operation, as buffet and customer food waste often represent no more than 50% of the total volume of wasted food. And they also tend to believe that guests expect to see an abundance of food on their buffets—that seeing an excess of food is a key to guest satisfaction—when no recent studies have been conducted to validate this belief. It is easier to think that guests expect to see loads of food piled up high, even in an age in which customers are steadily gaining awareness of the need for sustainability. It’s worth questioning whether such practices are costing more customers than they’re saving.

A lack of relevant metrics contributes significantly to the lack of understanding about the severity of the problem. When managers are asked what Key Performance Indicators (KPIs) they use to track performance around food, the conversation always starts with food cost percentage, a metric that’s long been a standard for food service operations. The conversation typically ends there as few organizations go beyond that metric in tracking their performance around this expensive resource. That’s a bit like trying to solve a jigsaw puzzle while sitting in a pitch black room.

This lack of information makes hotel food waste a classic example of a principal–agent problem. This is where one person makes decisions on behalf of another, wherein the agent often has more information than than principal and their interests are not well-aligned. In fact, between corporate offices, property teams, and ownership groups, there may well be three different sets of priorities. When managers who are only given food cost (if that) as a performance metric, it’s easy to see why there’s not a greater focus on this area. As the Food and Beverage director of an international 5-star hotel once told us, “If I push my food cost down by three points, I’d be stuck with that number in my future budgets.”

But food cost percentage merely represents the portion of food sales revenue that covered the purchase of food supplies. It does not reflect how efficiently you are managing the resource. We have seen examples of urban 5-star hotels that are consistently meeting their food cost percentage goal, while discarding more than a third of the food that was purchased. To combat this issue, we use a different set of metrics, including the food efficiency indicator (FEI), that helps managers see the ratio of food wasted to food purchased. An FEI of 65 lets them know that 65% of the food they purchased was served to customers, while 35% was discarded. This is the sort of information that facilitates good management decisions. The idea of “what gets measured gets managed,” is overused, but in this case it’s right on the mark.

Another challenge is the lack of knowledge around the volume of food ordered and the average cost per kilogram. Most managers we speak with don’t know what their purchase volume is either in aggregate or on average. When you do that math, you often find the amount of food ordered approaches a figure that’s as much as five times the amount that will be served for an average cover. Having this information available facilitates a rethink of purchasing. And knowing the average cost per kilogram helps put a point on the problem at the end of a shift as you multiply it by the amount of kilograms of waste collected. Whatever portion of waste can be avoided gets added directly to the bottom line.

Many also view all efforts to reduce waste equally. Many believe that in redistributing some food surplus to charity that they’ve done their part to reduce waste. This is another common misconception. The best thing that can be done with food waste is to avoid it in the first place! A kilo of food that’s not purchased is a kilo that’s not transported, stored, prepared, held, and transported again to a landfill–a journey that consumes significant energy in addition to the resources that went into producing the food. Feeding people via charities, with food you had good reason to order is a great practice, but it can be a way to hide problematic ordering. And if it’s the only thing you do, you’re likely to be far from where you might go if you developed a comprehensive approach. In looking to do so, the Food Waste Pyramid is a simple guide that can help foster good decisions as you gain a better understanding of the waste your property produces.

Food for thought- WHAT can be done about it:

For those who are ready to get started, it is comforting to think that there is a single solution to the problem of food waste. But it’s a complex issue with psychological and technical challenges to overcome. Some promote technological solutions, while others promote the need for greater awareness of the problem, and adapted human systems at every level. We believe that both can play a part, but that without making a robust effort on the human side of the equation, nothing significant and durable will be achieved.

There are currently a number of “solutions” available, but they tend to be evolving in silos. On the technology front, many startups now offer smart scales that enable you to monitor food waste, and new technologies are being explored to reduce spoilage waste through smart cold chain management (using IoT and RFID codes featuring product shelf life and push-notifications), and some believe blockchain technology will be  the ultimate solution to this issue. A growing number of mobile applications are now being used by hotels to reduce their food waste. Some offer end of shift deals to customers on over-prepared dishes or items that cannot be kept.

Service providers are active in this area as well, like food banks that collect and redistribute food surplus for charity, to training providers and consulting companies helping hotels on that front, with some remarkable achievement in some cases. There are also some innovative standards and certifications emerging that are working to pull these solutions together under one banner to make a serious impact on the industry. Ultimately, pressure from shareholders and broader stakeholders will play a big part, as well as reporting schemes like the Dow Jones Sustainability Index or the Carbon Disclosure Project. As Laurence Fink (the founder and CEO of the world’s largest asset management firm) put it, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Such forces are steadily growing, but you can ward off their sticks by keeping the carrots out of the bin.

We’ll likely never know whether the fabled economist was right about the $100 bill, but we know for a fact that food waste is a massive challenge for hoteliers. A few have gone ahead and lit the way as first-movers, but most are still stuck in the starting gates. Wherever you are on that journey, there are probably opportunities hidden in plain sight that are just waiting for you to go looking for them.

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