COGS stands for Cost of Goods Sold. In hospitality, it's the direct costs of producing and delivering what you sell. For restaurants, that's the cost of food ingredients, beverages and sometimes labour involved in food prep. For hotels, it's the cost of amenities in the room, breakfast items and other consumables guests use during their stay.
Understanding and managing COGS is key to being profitable in hospitality. By keeping an eye on these costs you can price correctly, identify where you're overspending and make informed decisions on menu changes or supplier negotiations. A low COGS to revenue is a healthy profit margin, while a high COGS means you need to adjust your pricing or procurement strategy.
Let's say you're a restaurant manager reviewing your monthly reports and you see your COGS for the popular seafood pasta has gone up. You investigate and find the prawns from your supplier have increased in price. Now you have options: find a new supplier, adjust the portion size, increase the price of the dish or replace it with a more cost effective option. This is how COGS helps you make data-driven decisions to keep your restaurant profitable without compromising on quality or customer satisfaction.