Recipe for success? Ghost kitchens cut deals with empty hotels

Hotel operators have come up with all sorts of ways to use their empty spaces during the pandemic, such as housing the homeless, creating temporary offices and hosting weddings.

Now, they are capitalizing on the surge in demand for delivery food by cutting deals with operators of ghost kitchens, a growing industry predicted to be worth $1 trillion in the next decade.

Restauranter Richard Zaro told the New York Times he had wanted to open a sandwich shop before the pandemic, but a lack of funding held him back. But after hotel occupancy tumbled to record lows last year, he saw an opportunity.

In July, he started renting kitchen space at the Four Points by Sheraton Midtown near Times Square at a rate of just $6,000 per month, according to the publication. Demand was so high that he moved the business, named Cutlets, into a standalone premises by December.

Zaro said starting out in the hotel kitchen gave him the chance to test the waters and skip a lot of traditional administration that comes with opening a restaurant.

“We were able to do decent business on Day 1, get open for next to nothing and test the market,” he said.

The concept of setting up ghost kitchens in hotels predated the pandemic, and such arrangements are still relatively rare. An estimated five percent of U.S hotels are operating ghost kitchens. However, industry experts are predicting that number will grow.

“Hotels see this as a profit center,” Frederick DeMicco of Northern Arizona University’s School of Hotel and Restaurant Management told the Times.

“It supplements the existing menu options at the hotel, and extends well-respected restaurant brands as partners in the hotel.”

[NYT] — Sylvia Varnham O’Regan