The UK hospitality industry is facing ‘the perfect storm’ of challenges in 2018, according to one leading proprietor – and if there was ever a year when only the strong survive, this is it.
David Fox, owner of five Tampopo and East St restaurants in Manchester and London, recently warned that several factors are aligning in a way they never have before.
For his £6m business, that includes a massive rates hike, a huge jump in food costs, wages going through the roof and a rent review, potentially totalling almost £400,000.
Whatever the size of your business, whether you run a bar, restaurant or hotel, there’s no doubt times are tough. 2017 certainly saw some big-name closures making headlines.
Yet as technology providers to the UK industry, we’ve also seen many exciting openings and new concepts developing over the past three years.
For instance, our customer Coyote Ugly, the saloon concept with outlets all over the US, launched its first UK bar in Cardiff recently and has already opened another in Liverpool.
To celebrate the strength and innovation in the industry, we are Gold Sponsors of the Restaurant Association’s 50th birthday celebrations this year – and I’ve been looking at the biggest challenges the industry faces and how to overcome them.
I believe they are:
1) Rising food prices
2) Staff shortages
3) Well-informed customers
4) Property costs
And from our long experience with customers, here’s how the best hospitality businesses are tackling them successfully – with the help of technology.
1 – Rising food prices:
Thanks to inflation and the effects of Brexit pushing down the value of the pound, food prices have soared, particularly in some areas including butter and seafood.
One food price index reported inflation at its highest in August at almost 10%, and although food and beverage inflation is expected to drop back to around 3.5% in 2018, it’s still a steep addition to the bills.
Hospitality providers are naturally reluctant to pass on the extra cost through menu rises, which are a common cause of complaints from customers. So it’s fair to say that well-informed procurement and a focus on waste reduction are the best method to tackle this major threat to your profits.
Growing steak-house brand Gaucho/CAU finds using electronic point of sale (EPOS) technology vital in improving their stock control across their group. Estates and Property manager Colin Williams says: “EPOS is amazing for stock control – one of our biggest challenges.”
EPOS captures detailed data about what’s selling and what’s not, even identifying trends, and provides comprehensive reports that slash waste and make informed procurement decisions easy.
So when butter and seafood becoming expensive, you genuinely know how much to order – and reduce what you throw away, even across a multi-site operation.
2 – Staffing shortages:
That brings us onto another cost issue that was always tricky, but which has become a real hot potato since the UK voted to leave the EU.
A KPMG report noted that the UK hospitality industry is highly reliant on EU workers. Official figures say 12.3% of employees from Europe, but the report suggests it might be as high as a quarter.
With Brexit already biting, this flow of workers is drying up, and KPMG suggests it’s going to be tricky to replace them. So the upshot is, it’s even harder than usual to get good staff, and chances are you need to pay them more.
On top of the food price rise, the labour wage bill can be crippling. Luckily, this is another area where technology – or a good property management system (PMS) if you are a hotel – can help, by improving your rota and helping you avoid overpaying for labour in down time.
By providing a clear view of the busy and quiet periods in your establishment – or establishments – the technology enables efficient labour control, making sure you have the right number of staff on at the right time.
3 – Well-informed customers:
Customers can be fickle, as any hospitality business knows, and the trend that I see is that there is vast choice that the customer has and their dining habits are also changing.
They are keen to try different experiences – or as a recent Deloitte report noted, they continue to display: “Lack of brand loyalty and willingness to experiment with alternative cuisines”, and want to engage with restaurants online.
For instance, we know restaurant guests are being increasingly drawn to casual dining, with the average time now spent in an establishment down to just 45 minutes.
But with online reviews playing a huge part in the decision-making process, customer are also becoming more demanding. After all, they are being hit by inflation and Brexit uncertainty too – they want to make sure they dine, drink or stay somewhere they are truly appreciated.
Today, the customer engagement platform of choice is the smartphone app, perfect for alerts on special offers and for getting feedback. They also enable customers to manage their own loyalty account.
Savvy organisations use their technology to safely capture data about their guests that allows them to provide the highly-personalised service that makes them feel special. In addition, the information (securely held) allows establishments to create loyalty programmes that work, bringing guests back with offers such as happy hour that your data assures you they will appreciate.
4 – Property costs:
Business rates have risen extraordinarily recently, and coupled with a national rise in commercial rents are hitting hospitality businesses hard.
Technology can’t keep down these expenses, of course. But with its advanced data capture and up-to-the-minute reporting, hospitality systems can provide an end-to-end view of your establishments’ performance, as well as streamlining operations to save costs.
The challenge in combating property costs is in getting volume throughput, maintaining consistency over the week so you can maximise revenue. Technology that manages your restaurant efficiently and handle reservations and seating, while providing great customer engagement, is a valuable tool.
5 – Competition:
Many towns and cities have seen a large increase in the number of bars, restaurants and even hotels in recent years, with large chains particularly pushing forward with expansions.
It’s all extra competition, of course. And as the Deliveroo/Just Eat style of delivery service gains becomes even more popular, it’s getting harder and harder for restaurants to grab custom.
Many restaurants are considering broadening their business by providing convenient online ordering and delivery without using Deliveroo. Technology means they can engage customers and enable them to order and collect food without using an intermediary (and paying its commission charges).
A great guest experience, of course, will always be a winner for restaurants. As well streamlining operations, elements of EPOS create customer service enhancements – tableside ordering and payment-taking, for instance, that speed up the customer experience.
The overall result? Guests feel treasured and well served, and are all the more likely to return and post good reviews. And from the restaurateur’s point of view, efficient service means greater table turn.
That’s a win all round, then.
So if a ‘perfect storm’ of challenges really is on the way in 2018 it’s definitely the right time for every restaurant, bar and hotel in the UK to check how efficiently their operations are running – and reach for the hospitality survival kit of technology without delay.