8 Proven Ways to Reduce Costs in Hospitality

The food service industry continues to face significant economic pressure from rising energy prices, staffing shortages and falling margins. The good news? By adopting a data-driven, targeted approach, you can cut costs in your hospitality business without compromising on quality or guest experience.

In this article, we share eight proven strategies to help you reduce costs in key operational areas, including purchasing, energy, staffing and digitalisation.

1. Control your cost of goods sold effectively

The cost of goods sold is one of the largest expenses in the hospitality industry. Yet many businesses still rely on instinct rather than real-time data. Modern tools make it easier than ever to monitor your COGS and identify saving opportunities.

Procurement

Using regional and seasonal produce can reduce transport costs and improve freshness. Consider using an F&B management platform to consolidate orders from multiple suppliers, track spending, and optimize purchasing control.

Regularly compare prices, negotiate discounts and optimize your product mix. Strategic procurement can save money while maintaining food quality.

Inventory and stock management

If you want to reduce costs in the long term, it is essential to carry out regular inventory checks. These checks help to prevent shortages and overstocking, while providing you with a clearer picture of your current stock levels.

Digital tools can make inventory checks faster and more accurate. They enable you to track partial items, such as GN containers or bottles, directly within the system, eliminating the need for manual input. This helps to prevent losses from expired goods or input errors.

Portion sizes and waste control

Any food that guests leave on their plates costs you money. If you often have leftovers, you should regularly review and adjust your portion sizes to better control your food costs.

Pre-portioning ingredients before cooking helps to reduce inconsistencies and ensure consistent quality, while also saving valuable preparation time — especially during busy periods.

Menu design

Your menu directly affects your food costs. Expensive ingredients and complex preparation increase expenses, so aim for balanced pricing and smart design.

Dishes with premium ingredients that rarely sell tie up capital and storage space. A targeted menu redesign can help to highlight high-margin items and cut back on less profitable ones, thereby improving efficiency and the guest experience.

2. Cut energy costs with smarter operations

Energy costs may not be the largest expense in hospitality, but they’re one of the easiest to reduce. With simple changes in daily operations and smart investments in efficient technology, you can lower costs and boost sustainability at the same time.

Invest in efficiency

Replacing outdated equipment usually pays off in the medium term. For example, an A+++ dishwasher uses up to 60% less energy than a class A model. Other helpful measures include LED lighting, modern ventilation systems and smart controls for heating and cooling.

Train your team

Technology alone won't save energy. Ensure that your team is regularly trained in mindful energy use. Make sure coolers are not opened unnecessarily, hot food is cooled before being put in the fridge, and unused equipment is fully switched off.

Visual reminders, such as stickers on light switches or notes in recipes (e.g. 'Use a lid'), can help reinforce these habits.

3. Design a menu that boosts profitability

Your menu is your business card and a key cost factor. It directly impacts your food costs, inventory and profit margins. Taking a strategic approach to menu design can significantly reduce expenses without compromising the guest experience.

Menu engineering

Which of your dishes are popular with customers, and which are just costing you money?

A thorough menu analysis can help you evaluate your offerings. Remove items with low demand that tie up capital and inflate food costs. Instead, promote your best sellers with the highest margins. A more streamlined, focused menu will improve both profitability and the overall guest experience.

Seasonal and local ingredients

Using seasonal ingredients offers multiple benefits: They’re fresher and often more affordable, as well as bringing variety to your menu. Shorter delivery routes also reduce hidden logistics costs.

Regular seasonal updates signal freshness and relevance and can be an effective cost-cutting tool for your business.

Smart ingredient use

Reduce your purchasing costs by using ingredients in multiple dishes. This allows you to benefit from volume discounts, simplify inventory management and reduce food waste.

For example, leftover roast beef can be used in wraps or salads. Less visually appealing produce still works well in soups or smoothies.

4. Reduce food waste with smart planning

Food waste can be costly. However, the solution lies in smarter planning, improved processes and creative thinking.

Plan ahead

Forward planning is one of the most effective strategies. Closely align purchasing with daily demand and use pre-portioning to control quantities more effectively. Adjusting portion sizes helps to avoid unnecessary waste, too. Add creative daily specials to your menu that make smart use of surplus ingredients.

Use a digital inventory sytem

A well-managed inventory prevents spoilage and unnecessary costs. Apply the first-in, first-out (FIFO) principle and use digital tools to track best-before dates and automatically record stock movements. Alert systems for expiring items or low stock levels help to ensure that no valuable products are wasted.

Conduct regular inventories

Regular stocktaking is also essential for reducing food waste. Digital inventory systems allow for quick and accurate counting, even of partial items such as bottles or GN containers. Comparing inventory data with sales figures allows for more precise calculations and increases overall transparency.

Creative use of surplus

Not everything that 'looks expired' needs to be thrown away. Work with your team to find ways to repurpose surplus ingredients creatively, such as making soups from vegetable scraps or desserts featuring overripe fruit. You could also highlight these dishes on your menu as sustainable specials.

5. Keep labor costs under control

Labor is usually the biggest cost in the hospitality industry, often accounting for 30–45% of revenue. Optimizing your team planning and deployment is key to controlling costs.

Smart shift scheduling

Structured staff scheduling is essential to avoid over- or understaffing.
Digital tools can help you to monitor occupancy and reservations in real time, making it easier to create efficient shift plans.

Smart scheduling reduces labor costs and leads to a happier team, which boosts motivation and performance.

Cross-training staff

Invest in training your team. Staff who can handle multiple roles offer greater flexibility in day-to-day operations and are better equipped to cover unexpected absences.

Short sessions on hygiene, point-of-sale (POS) systems, and guest communication also help streamline processes and improve quality, ultimately contributing to lower overall costs.

Boost employee retention

Every new hire costs your business time, money, and valuable resources. Investing in employee retention reduces long-term expenses.

For younger generations, such as Gen Z, a good working atmosphere is often more important than monetary incentives.

Track key metrics

Accurate data is essential for effectively managing labor costs. The following KPIs will help you maintain control:

• Labor cost percentage
• Prime cost percentage 
• Employee turnover rate

Modern HR software provides these metrics and more at the push of a button, enabling data-driven decisions.

6. Leverage outsourcing to save time and money

Not every task needs to be handled in-house. In fact, outsourcing certain functions can reduce fixed costs and allow your team to focus on what matters most: hospitality.

Bookkeeping and payroll

Bookkeeping and payroll, for example, are time-consuming and prone to errors, especially without the necessary expertise. External service providers often offer more professional, efficient solutions at lower costs than in-house staff. Plus, they help ensure that you stay up to date with legal requirements.

Cleaning and waste management

Professional cleaning services ensure consistent results and reduce operational risk. Outsourcing waste disposal can streamline compliance and offer savings through bundled services.

Marketing and social media

Maintaining a strong online presence requires time and expertise. Agencies and freelancers can more efficiently manage content creation, campaign execution, and community engagement.

7. Build supplier relationships that lower costs

Suppliers play a larger role in cost control than many operators realize. Actively managing these partnerships enables you to negotiate better terms, reduce waste, and improve product consistency while cutting costs.

Negotiate better terms

Prices are rarely set in stone. Be proactive and ask your suppliers about discounts, tiered pricing, and rebates. Those who order regularly or pay on time often have a better chance of securing special terms.

Open, respectful communication, long-term partnerships, and mutual trust are key to building strong, cooperative supplier relationships

Consolidate orders

Reducing the number of suppliers or bundling more purchases with a key partner can lower delivery costs and unlock volume discounts. Even better, join or form a purchasing group with other local businesses to strengthen your bargaining power.

Go local when it makes sense

Although regional products may seem more expensive at first, shorter supply chains often mean fresher ingredients, fewer intermediaries, and lower hidden costs. Local suppliers may also be more flexible during shortages or market shifts.

Regularly benchmark alternatives

Even if you value long-term partnerships, it's important to stay informed. Compare offers and evaluate new vendors regularly to ensure your pricing remains competitive. Transparency and loyalty aren't mutually exclusive.

8. Use digital tools to simplify and save

Digitalization isn't just about keeping up with trends; it's about solving real challenges more efficiently. With the right tools, you can reduce waste, save time, and lower operating costs in every area of your business.

Modern inventory and procurement systems

Digital inventory tools provide real-time visibility into stock levels, expiration dates, and usage trends. They help prevent overordering and minimize food waste. Integrated purchasing features allow you to automate orders and quickly compare supplier pricing.

Smarter shift scheduling

Use staff scheduling software that considers availability, peak periods, and absences. Systems like e2n help create fair, balanced schedules that align with your team's needs and your restaurant's workflow.

Automate repetitive tasks

Digital solutions can handle tasks such as reordering low-stock items, tracking deliveries, and generating cost reports. In the front of the house, QR code ordering and mobile point-of-sale (POS) systems improve service speed and reduce manual entry errors.

Improve guest planning

Online reservation systems simplify capacity management and collect valuable data on guest behavior. Combine this data with point-of-sale (POS) data to better plan staffing, tailor promotions, and reduce no-shows.

Where to start cutting costs – without cutting corners

Reducing costs in the hospitality industry doesn’t require radical changes. Often, significant savings result from the smart combination of small, well-targeted measures.

Optimizing purchasing, cutting energy consumption, training staff more efficiently, and embracing digital tools are all areas that hold the potential to improve profitability without compromising service or quality.

Start with the area that offers the biggest opportunity in your business. From there, build momentum. Even small steps can lead to greater stability, efficiency, and long-term success.