The Nigerian hotel industry is under pressure. While occupancy rates may look respectable on paper, many hotel owners are discovering a troubling reality: their food and beverage operations are bleeding money. Despite steady guest traffic and active restaurant services, profit margins remain stubbornly thin or, worse, non-existent.
The culprit? Poor food costing practices.
In an economy marked by persistent inflation, naira depreciation, and volatile food prices, the margin for error in food and beverage management has shrunk dramatically. A plate of jollof rice that cost ₦800 to produce six months ago may now cost ₦1,200, but many hotels are still pricing it based on outdated calculations. Imported ingredients like cheese, pasta, and cooking wine have doubled or tripled in cost, yet menu prices remain static. Meanwhile, unmonitored waste, inconsistent portioning, and poor inventory controls continue to erode profitability from the inside.
Food costing is no longer a back-office detail. It is a frontline survival skill. Yet many hotel managers either misunderstand it, oversimplify it, or avoid it altogether, relying instead on guesswork, instinct, or outdated pricing templates borrowed from competitors.
This article exposes the most common food costing mistakes that are quietly killing hotel profits in Nigeria, and more importantly, shows you exactly how to fix them.
What Is Food Costing—and Why Hotels Get It Wrong
Food costing is the process of calculating the exact cost of producing each menu item, from raw ingredients to preparation labor, then using that data to set profitable, competitive prices.
It sounds straightforward. But in practice, most hotels fail to do it properly.
Some managers assume food costing means adding up ingredient prices and multiplying by three. Others rely on “feel” or copy competitor pricing without understanding their own cost structure. Many update their costs once a year, if at all, despite monthly fluctuations in tomato, rice, protein, and cooking gas prices.
The result is a disconnect between what a dish actually costs and what the hotel charges for it. Over time, this gap becomes a silent profit killer.
Mistake #1: Not Standardising Recipes
How it happens:
In many Nigerian hotels, recipes are not documented. Chefs prepare dishes “by eye” or based on personal technique. A chef preparing fried rice today may use three cups of rice and half a kilo of chicken. Tomorrow, another chef uses four cups and 700 grams of protein. Guests may not notice the difference, but the cost structure shifts with every service.
Why it kills profit:
Without standardised recipes, you cannot calculate accurate food costs. Portion
sizes vary, ingredient quantities fluctuate, and waste increases. Worse, when a
skilled chef leaves, the replacement may use entirely different measurements, which further distorts your cost baseline.
How to fix it:
Document every recipe. Specify exact quantities: 300g chicken, 2 cups rice,
50ml vegetable oil, 1 sachet curry. Laminate these recipes and keep them in the
kitchen. Train all kitchen staff to follow them precisely. Standardisation
ensures consistency in both cost and quality.
Mistake #2: Poor Portion Control
How it happens:
Portion control breaks down when there are no clear guidelines. A server scoops
an extra spoonful of salad. A chef adds two extra pieces of meat to impress a
regular guest. These small generosities seem harmless, but they accumulate.
Why it kills profit:
Uncontrolled portions mean you’re giving away food for free. If your standard
portion is 200g of grilled chicken but staff routinely serve 250g, you’re
absorbing a 25% cost increase on every plate without adjusting your selling
price.
How to fix it:
Use measuring tools: kitchen scales, ladles with marked measurements, and portioning scoops. Train service and kitchen staff on standard serving sizes.
Conduct random spot checks during service. Portion discipline is not
stinginess, but cost management.
Mistake #3: Inaccurate Pricing of Menu Items
How it happens:
Many hotels price their menu items based on competitor pricing or “what feels
right.” They calculate food cost once, set a price, and never revisit it, even
when ingredient costs rise. Others use a blanket multiplier (e.g., “triple the
cost”) without considering the complexity, labor, or waste involved in
different dishes.
Why it kills profit:
Underpricing means you lose money on every sale. Overpricing drives customers
away. Both scenarios hurt profitability. In Nigeria’s current economic climate,
a dish priced six months ago may now be sold at a loss.
How to fix it:
Calculate the true cost of each menu item monthly. Include ingredients such as
cooking gas, water, and labor. Apply an appropriate markup based on your target
food cost percentage (typically 28–35% for hotels). Review and adjust menu
prices quarterly or whenever major cost shifts occur. Transparency with guests
about price adjustments is better than silent profit erosion.
Mistake #4: Ignoring Food Waste and Pilferage
How it happens:
Food waste occurs at every stage: over-ordering perishables, poor storage
leading to spoilage, excessive trimming during prep, and uneaten food sent back
from tables. Pilferage happens when inventory controls are weak, staff take
home ingredients, suppliers short-deliver, or “ghost” consumption occurs
without documentation.
Why it kills profit:
Waste and pilferage are invisible costs that never appear on a guest bill, but
they directly reduce your bottom line. A hotel losing 10% of its food inventory
to waste and theft is effectively operating with a 10% lower profit margin
before the first guest is served.
How to fix it:
Implement strict inventory tracking. Conduct weekly stock counts. Install CCTV
in storage and prep areas. Use FIFO (First In, First Out) rotation to minimize
spoilage. Train staff on proper storage and portion utilization. Investigate discrepancies
immediately. Track waste in a daily log and analyze patterns to identify
problem areas.
Mistake #5: Failing to Update Food Costs Regularly
How it happens:
Hotel managers calculate food costs once, often during menu planning and never
revisit them. Meanwhile, the price of tomatoes doubles, rice increases by 40%,
and cooking gas jumps by 30%. The menu prices remain unchanged.
Why it kills profit:
Static pricing in a volatile economy guarantees losses. A dish that was
profitable in January may be sold at a loss by June. Many hotel owners realize
too late that they’ve been subsidizing meals for months.
How to fix it:
Review your food costs monthly. Track the prices of your top 20 ingredients
weekly if possible. When a key ingredient experiences a significant price
increase (e.g., 15% or more), adjust your menu price accordingly. Consider
seasonal menu adjustments to take advantage of ingredient availability and cost
fluctuations.
Mistake #6: Overreliance on Imported Ingredients
How it happens:
Many Nigerian hotels design menus around imported ingredients such as imported
rice, pasta, cheese, wine, sauces, and proteins in order to appeal to
international guests or project prestige. When the naira weakens, these items
become prohibitively expensive, but hotels continue using them to “maintain
standards.”
Why it kills profit:
Currency fluctuations can double or triple the cost of imported goods
overnight. A hotel stuck with an import-heavy menu faces unsustainable cost
increases with limited pricing flexibility.
How to fix it:
Redesign your menu to prioritize local ingredients. Nigerian cuisine, like jollof
rice, pepper soup, suya, moi moi, efo riro is not only cost-effective but also
increasingly popular with both local and international guests. Where imports
are necessary, source locally produced alternatives (e.g., Nigerian rice,
locally processed tomato paste). Diversify your menu to balance premium
imported dishes with profitable local options.
Mistake #7: Poor Inventory Tracking
How it happens:
Many hotels operate without proper inventory management systems. Stock is
ordered loosely, stored haphazardly, and consumed without documentation.
There’s no clear picture of what’s in the storeroom, what’s been used, or what
needs reordering.
Why it kills profit:
Without inventory tracking, you cannot calculate accurate food costs.
Overstocking leads to spoilage. Understocking leads to emergency purchases at
inflated prices. You also lose visibility into theft, waste, and usage
patterns.
How to fix it:
Implement a simple inventory management system; even a spreadsheet will work.
Conduct regular stock counts (weekly or bi-weekly). Record all deliveries and
issues from the storeroom. Reconcile physical stock with records monthly.
Identify slow-moving items and adjust purchasing accordingly. Proper inventory
control is the foundation of effective food costing.
Mistake #8: Ignoring the Cost of Energy and Utilities
How it happens:
Most food costing calculations focus solely on ingredients. They ignore the
cost of cooking gas, diesel for generators (critical in Nigeria), water, and
electricity used in food preparation and storage.
Why it kills profit:
Energy costs in Nigeria are substantial and rising. A hotel running generators
18 hours a day to power cold rooms, freezers, and kitchen equipment incurs high hidden costs that never appear in the “food cost” calculation, but
they still eat into profit margins.
How to fix it:
Factor energy and utility costs into your overall food and beverage cost
structure. While these may not be itemized per dish, they should influence your
overall pricing strategy and target profit margins. Invest in energy-efficient
equipment where possible. Optimize generator usage schedules. Every naira saved
on energy flows directly to your bottom line.
Mistake #9: No Cost Analysis on Menu Performance
How it happens:
Hotels treat all menu items equally. They fail to analyze which dishes are
profitable, which are popular but unprofitable, and which are neither. The menu
remains static, driven by tradition or chef preference rather than financial
performance.
Why it kills profit:
Some dishes may be popular but sold at a loss due to high ingredient or labor
costs. Others may be highly profitable but underordered because of poor menu
positioning. Without analysis, you’re flying blind.
How to fix it:
Conduct a menu engineering analysis quarterly. Identify your Stars (popular and
profitable), Plowhorses (popular but low profit), Puzzles (low popularity, high
profit), and Dogs (low popularity, low profit). Promote your Stars, reprice or
reformulate your Plowhorses, reposition your Puzzles, and eliminate your Dogs.
Data-driven menu management maximizes profitability.
Mistake #10: Lack of Staff Training and Accountability
How it happens:
Kitchen and service staff are rarely trained on the financial impact of their
daily decisions. They don’t understand how an extra scoop of rice, a wasted
ingredient, or poor portioning affects the hotel’s bottom line. There’s no
accountability for cost control.
Why it kills profit:
When staff don’t understand or care about food costs, waste, and inefficiency
become normalized. Small daily leaks add up to significant annual losses.
How to fix it:
Train your kitchen and F&B staff on food costing basics. Explain how their
actions impact profitability. Set clear standards and hold staff accountable.
Recognize and reward cost-conscious behavior. When your team understands the
“why” behind portion control and waste reduction, compliance improves
dramatically.
How Better Food Costing Transforms Your Hotel Business
Proper food costing is not just about reducing waste; it is about gaining control. When you know your true costs, you can:
Make smarter pricing decisions: Set menu prices that are both competitive and profitable.
Improve cash flow: Eliminate hidden losses and redirect resources toward growth.
Negotiate better with suppliers: Armed with data, you can challenge inflated pricing and source more strategically.
Identify opportunities: Discover which menu items drive profit and which drain resources.
Build long-term sustainability: In an unpredictable economy, disciplined cost control is the difference between surviving and thriving.
Hotels that master food costing don’t just increase profit margins; they create financial resilience. They can weather economic shocks, invest in improvements, and compete more effectively.
Moving Forward: From Guesswork to Systems
The Nigerian hotel industry can no longer afford to manage food costs based on intuition or outdated practices. The economic environment demands precision, discipline, and proactive management.
The good news is that these mistakes are fixable. The solutions don’t require expensive consultants or complex software, just commitment, consistency, and a willingness to challenge old habits.
Start small. Pick one or two areas from this article, standardize your top ten recipes, conduct a weekly inventory count, or review your menu pricing, and implement them this month. Build momentum. Over time, these incremental improvements compound into significant profit recovery.
Food costing is not a one-time project. It’s an ongoing management discipline. But once you embed it into your hotel’s operations, the financial returns are undeniable.
Take the Next Step: Scale Your Hotel Business with Confidence
If you’re serious about transforming your hotel’s financial performance and building a more profitable, sustainable operation, you need more than isolated fixes; you need a comprehensive strategy.
That’s why we’ve created “10 Things to Do to Scale Your Hotel Business in Nigeria,” a practical, step-by-step guide designed specifically for Nigerian hotel owners and managers who want to move beyond survival mode and into strategic growth.
This guide covers:
✔ Revenue optimization strategies tailored to the Nigerian
market
✔ Cost control systems that work in high-inflation
environments
✔ Operational efficiency improvements that boost
profitability
✔ Guest experience enhancements that drive repeat business
✔ Staff management frameworks that reduce turnover and
improve service
✔ Marketing and positioning tactics for competitive advantage
Stop guessing. Start scaling.
Click here to get your copy of “10Things to Do to Scale Your Hotel Business in Nigeria.”
Your hotel’s profitability doesn’t have to be a mystery. With the right systems, knowledge, and commitment, you can build a thriving, resilient business, even in Nigeria’s challenging economic climate.
The question is: are you ready to take control?
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