I'm not someone who has jumped on the bandwagon over the years to champion freestanding restaurants over hotels.

Having worked on both sides of the fence, I can appreciate the challenges that both face. This dual perspective helps me shed some light on why hotel groups seem to respond to competition by oscillating between strategic ambition and tactical execution in their approach to food and beverage.

But recent research we’ve conducted sparked a fresh thought; maybe hotels are overlooking a major opportunity; not because they lack capability, but because they’ve stopped looking in the right places.

The Mid-Market: Overlooked Opportunity

Two decades ago, the trend started to bring in Michelin-starred chefs and luxury F&B brands into prime hotel locations. These collaborations were great for PR and profile - less so for profitability. Many chefs and brand partners did well, but group F&B bottom line improvement was often marginal.

Since then, corporate F&B teams have also worked to improve the fundamentals: breakfast programs, in-room dining, and bespoke F&B tailored to new hotel brand launches. I sense that something more strategic may be within reach.

Today, rapidly shifting market dynamics suggest it's time to revisit the unfashionable but undervalued middle market; a segment wedged between fast food and fine dining. It’s currently under immense pressure: rising operating, occupancy, and utility costs are squeezing margins across the board. And there’s no sign of relief in the near future.

Mid-Market Pain Points and Post-Pandemic Pressure

Globally, the mid-market consists of a fragmented mix: independent, family-run outlets and scaled branded players. Both face shared headwinds: a lingering staff shortage, the long-term social effects of the pandemic, and the rapid growth of the delivery sector. These forces are reshaping consumer behaviour and business models alike.

In our recent work - especially in Saudi Arabia - we’ve identified a stark gap in mid-tier dining. If you're looking to spend between $30 and $50 per head, the options are remarkably limited in both quality and variety. I say this based on both personal experience living in Jeddah and the data we’ve analysed. When we compare the density of mid-market restaurants to quick-service venues, the disparity is glaring.

And this disparity may go hand in-hand with what we’re hearing industry experts say: the hotel mid market is under-served in the Middle East. Perhaps something to learn from the progress in Europe by Hoxton, Locke, Premier Inn Moxy, Canopy, Motto, Residence Inn and others.

In the UK, my colleagues tell me that the mid-market is under real pressure – closures, rising costs, and shrinking margins – so there are signs of a gap developing, especially as diners trade up in quality but down in frequency. Premiumisation also appears to be a feature in the UK and across Europe and aligns with the message we’re receiving of hotels offering “fewer, better” experiences.

Why Aren’t Hotels Seizing the Space?

Hotels already have critical advantages:

• They aren’t necessarily burdened with high street rents
• They have multi-skilled staff who can be deployed across departments
• They benefit from better procurement on food, beverage, and utilities
• In some cases, better access, parking and security

And yet, in many markets, hotels don’t compete in this mid-market segment.

Why? This is the bit where people will be telling me that hotels don't have prime sites, but that dynamic has now changed; people seek out leisure destinations and the days of being intimidated entering a hotel are behind us. Another part of the answer lies in a lack of confidence and plain gusto on the part of the hotel operators.

"Over the past 20 years, the explosion of independent and branded restaurants across Europe and the Middle East made many in the hotel sector feel outpaced and outmoded. But that sentiment is now obsolete".

Time for Hotels to Reclaim Relevance

Today, hotels can reassert their relevance in F&B by stepping confidently into the mid-market space. They bring built-in advantages beyond operations; on-site parking, captive audiences, and, in many cases, better working conditions and opportunities for staff than freestanding restaurants can offer.

We’ll soon be publishing data to illustrate this mid-sector gap in Saudi Arabia, before expanding our focus across the broader Middle East and into Europe. In Europe, we advocate that hotels revisit their F&B strategy through a mid-market lens, considering the dearth of credible competition and shifting customer values and expectations.

One thing is clear:

We have seen the demand, the space is open and hotels are in a prime position to fill it.