Gulf hotels and cloud kitchens join forces to cook up extra profit

Reuters/Lucy Nicholson

• Radisson and Krush deal introduces food delivery from hotel 
• Global cloud kitchen market estimated to reach $112.7bn by 2030

Partnership between hotels with spare capacity and fast-growing cloud kitchens is a “no brainer”, say industry experts.

Radisson Hotel Group in Dubai recently announced a partnership with food technology company Krush Brands, with the first cloud kitchen location at Radisson Red Silicon Oasis.

Cloud kitchens are companies that prepare food solely for home delivery without having sit-down restaurant space.

Krush, which operates brands including Freedom Pizza, Salad Jar, Wildflower Poke, Rumba, Viking Bageri, Goi, Coco Yogo, and Alannah’s Pastry Boutique, will be available to the hotel’s guests and the wider community around the Silicon Oasis technology park.

• The sky’s the limit for cloud kitchens in the Gulf
• Global hotel brands rush to be part of Saudi tourism push

“Hotels have traditionally focused on maximising occupancy in their properties with a secondary focus on F&B [food and beverage],” Ian Ohan, founder and CEO of Krush said.

“However, our ecosystem enables hotels to generate additional revenue from quality F&B delivery to their surrounding communities, and provide hotel guests with a greater variety of quality, on-premises food options.”

It follows a move last year by French hotel group Accor which teamed up with Kitch-In, led by restaurateur Evgeny Kuzin and renowned chef Izu Ani.

Gabrielle Mather, CEO and founder of UAE-based restaurant consultancy Restaurant Secrets Inc. said the tie-up between hotels and cloud kitchen companies was a “natural progression”.

“Getting into the cloud kitchen sector is a no brainer for hotels,” Mather said.

“They’ve got kitchens that are under-utilised and the smart ones – especially the three and four-star units that have seasonal traffic and are not really the destinations for F&B concepts as dine-in – can build an ecosystem because of the way they’re located.

“They can be a great ecosystem for brands that operate multiple cuisines to collaborate with each other and run their operations from these kitchens.”

While many businesses suffered due to the coronavirus pandemic, cloud kitchens were beneficiaries of the online ordering boom.

“The global pandemic forced companies to be agile and seek out new revenue sources and this is a continuation of the same,” Scott Turner of Auden Hospitality in London, said.

“Numerous hotels flourished by providing short-term delivery services and further developed this idea to create well thought out and carefully planned concepts.”

In the UAE the number of cloud kitchens is on the rise with notable brands including Kitopi, Kitch, Kitchen Nation and Kitchen Park.

Kitopi, founded in Dubai in 2018, raised a further $300 million in its Series C round in 2021, taking the unicorn’s post-investment valuation to $1.55 billion.

The global food delivery industry is forecast to be worth $150 billion, says a report from management consultants McKinsey.

According to Allied Market Research, the global cloud kitchen market was valued at $29.4 billion in 2020, and is estimated to reach $112.7 billion by 2030, growing at a compound annual growth rate (CAGR) of 13.12 percent.

Of the collaboration with hotels, Mather said: “I believe that it’s a great business arrangement and everybody benefits, both commercial partners and consumers.

“There is a huge demand. People are looking for delivery and it is an area that is proven to be successful. All stakeholders benefit.”

Saudi Arabia’s online food delivery market, which was valued at $4.71 billion in 2022, is expected to expand at a CAGR of 10.98 percent over a six-year period and is projected to reach $8.8 billion by 2028, according to a market report from Innovius Research.

Technology company Matbakhi in Riyadh is looking to capitalise on this with the introduction of a neighbourhood focused cloud kitchen concept. This includes working with hotels to repurpose under-utilised kitchen spaces.

“The company partners with hotels by offering full F&B services from procurement to staffing and operations,” co-founder Joe Frem said.

“This elevates the culinary experience by offering exciting local chef-led brands that not only result in better food, but also in faster delivery within hotels through cutting edge room ordering technology, which feeds into a better customer experience.”

Farid Mebarek, a French hospitality professional who is working as a consultant with F&B brands in the Middle East and Europe, said that while he sees the popularity of these partnerships increasing, care must be taken to weigh up potential cost and quality implications.

“I do see more hotel brands following in the footsteps of the Radisson in Dubai,” Mebarek said.

“However it will, I hope, be limited to only a certain criteria and not all hotel brands as it could affect the whole gourmet or even culinary experience that the hotel lifestyle enjoys.

“It also adds a substantial cost to create the right softwares and integrate analytics and AI systems for this emerging business.”