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Fri 20th May 2022 - Friday Opinion
Subjects: Hospitality needs another crisis-level government response, customers crying out for support when buying wine, seating dilemma for restaurants, bringing traditional experiences up to date
Authors: Neil Manhas, Katy Moses, Glynn Davis, Ann Elliott

Hospitality needs another crisis-level government response by Neil Manhas

As the threat of a global recession dawns upon us, business leaders are looking for more detail on how the government plans to tackle inflation and ease the economic pressure businesses are facing. 

Looking at the latest ONS inflation figures, a 9% rise in prices is astronomical – particularly for the hospitality sector, which relies so much on consumer spending. With significant inflationary pressure, labour shortages and supply chain issues already hindering the industry’s bumpy road to recovery, the sector needs the same crisis-level government response it had during the pandemic. Instead, we were told to wait until autumn for the crucial support we need today. But hospitality businesses, particularly the small ones, cannot afford to play the waiting game. 

The recent inflation figures reflect what hospitality businesses have been predicting: across most aspects of our supply chain – including food, utilities, packaging, and fuel – we’ll be expecting a double-digit inflationary pressure if government does not interject. For us, this has been further exacerbated by the Ukraine’s crisis impact on production as the country is a key producer of wheat. 

We know this is not sustainable. For a global business like ours, we have levers in place that can help us endure the challenge ahead, but small and independent businesses will struggle if we don’t give them support. Just from inflation, hospitality businesses will be expecting an impact on their operations and revenue, never mind the customer transactions that are likely to slow down as rising costs impact households. 

And while passing costs to our customers will always be our last resort, we know that our business model, like other businesses in our sector, can only withstand so much before needing to raise our prices. That’s why we need the same critical and innovative government support we received during the pandemic. And why we’re calling on the government to reconsider its decision not to extend the VAT temporary cut. 

Introduced during the pandemic, the VAT aid, which expired in April, was critical to keeping the industry’s lights on. It cushioned some of the effects from the last two years, alleviating the impact restricted trading and the costs of heightened safety protocols had on the sector. The reintroduction of such temporary aid would allow businesses to retain staff and avoid passing on too many costs to consumers while giving them more time to work with government on finding solutions to address the issue. 

Hospitality is key to economic growth
During last week’s Queen Speech, we were reminded that the key to resolving our economic difficulties is achieving growth. Hospitality is instrumental to this – with strong presence in every city, town and village around the country, we know the sector is a crucial player to the country’s economic recovery. 

We know that with growth comes more jobs, which will fuel spending in local communities. At Pizza Hut, we want to continue delivering on this growth. Only last week, we opened three new Pizza Hut Delivery sites – and our plan is to open a total of 50 new stores this year.

But we can’t continue our expansion plans without more investment and franchisee support – particularly the latter, who were so critical to our growth and agility during the pandemic. Continuing the VAT cut will offer our investors and franchisees the confidence they need to support our ambitious post-pandemic plans.

We know our government can support us. The last two years are proof of this as our government successfully and swiftly deployed supportive schemes that were crucial to our industry – for which we were and remain incredibly grateful. If they’ve done so in the past, we know they can do it again. If we’re to truly grow our economy, we need government to lower the VAT back to 12.5%, helping our sector protect jobs, stave off higher inflation and kickstart our economy.
Neil Manhas is Pizza Hut’s UK general manager and chief financial officer

Customers crying out for support when buying wine by Katy Moses

Wine. Do you remember your first glass? I do. It was with my friend, Katy Lawton, in her parents' kitchen, and it was a cold glass of Chardonnay. Her parents, it has to be said, were not aware of this at the time, and we might not have been of legal age. The fact that I remember drinking it alongside a cheese sandwich on Mighty White bread certainly points that way. 

Wine, and my consumption of it, has come a long way since 1995, but the experience of sitting in a pub or restaurant with good friends and sipping a perfectly chilled glass or three simply cannot be beaten. I have a feeling many of you would agree with me, but KAM’s latest research identifies one part of this experience that many hospitality customers really don’t enjoy – the actual process of choosing and ordering the wine.

I was surprised to find that one-in-three customers don’t feel confident ordering wine in pubs, bars and restaurants, with one-in-nine admitting they often find the experience intimidating. They are put off by confusing jargon and the perceived complexity around wine. They feel embarrassed to ask staff for advice and therefore default to what they know, switch to a different category or, worse, go without. Not quite the outstanding customer experience we’re hoping for in our great venues.

The research, carried out in partnership with Hallgarten & Novum Wines, a specialist wine supplier to the on trade, looks at the customer experience when ordering wine in pubs, bars and restaurants and found that 70% wine drinkers don’t feel that pubs and bars provide enough information to help them make an informed decision when ordering wine. Restaurants fared slightly better, with the equivalent figure being 43%.

So how can we address this confidence problem? How can we re-engage and connect with wine drinkers in venues? While the layout and copy on menus is critical in helping give greater clarity and confidence for customers, there is also obviously a key role for staff to play when it comes to breaking down this confidence barrier. Nothing can replicate the ease at which well-trained and knowledgeable staff can put the customer when guiding them through their selection.

During a recent chat with wine guru Harry Crowther, from Grain to Grape, he suggested that operators need to train their teams to talk about wine in a language that they can relate to. If they can relate to it, then so can your customers. We need to use less formal knowledge – indeed, the majority of customers really don’t care what soil or type of oak a wine comes from; they can’t relate to that. The research does show that “organic” and “sustainability” are, however, creeping into our wine customers’ vocab.

So, what is the current experience? How do our guests select their wines? Some 42% order a style of wine that they usually drink at home, while 30% always order the same style of wine when out, and just 26% told us that they like to try new wines they’ve not had before.

 Are we missing an opportunity here? Should venues be making it easier for drinkers to explore and discover new wines? 

Through creating the same, well-worn path, we inevitably end up leading customers down the same route. We end up in a situation whereby on-trade sales are influenced most by what consumers are drinking at home, and not by what hospitality venues have to offer. We see that one-in-four drinkers want to try something new. Firstly, are we helping these customers on their journey of discovery? And secondly, we should be encouraging this figure to rise higher.

If customers are just drinking the same wine in pubs, bars, and restaurants as they are at home, then it becomes much easier for them to stay at home and not venture out. In 2022, we need to work hard to provide that point of difference for customers – and wine is a great place to start.

Since the lockdowns, we are seeing a much more discerning customer base. Venues must recognise the value proposition for customers – if the experience isn’t there, then it’s a much easier decision for them to enjoy their wine experience at home instead of going out. Getting that experience right is key for venues, and with a category that customers find so enjoyable, it needs to be dialled up to ensure it’s an experience they don’t forget. 
Katy Moses is managing director at KAM

Seating dilemma for restaurants by Glynn Davis

News that EasyJet is removing a row of seats from some of its planes in order to reduce the crew required because of the ongoing shortage of staff is particularly telling. The airline industry operates on the most precarious of margins, and therefore typically looks to pack its flights with passengers and squeeze every ounce of juice out of them.

The management of seats looks set to also be an increasingly important aspect of the hospitality industry, encompassing all parts of the marketplace – from multi-Michelin star restaurants to the global value-led fast-food brands. As a result of factors including employee shortages, changes in customer behavior and greater recognition of the work/life balance, we’re seeing a move away from dining rooms crammed with the maximum number of tables possible, and in quick service restaurants, the increased volumes of delivery and click-and-collect orders is forcing a radical rethink of the dine-in space.

At the two-Michelin-starred Restaurant Sat Bains in Nottingham, the number of tables has been reduced from 15 to 11 in order to reduce the long hours the team previously worked, and to compensate for this, its menu prices have increased. Meanwhile, at The Ritz, the restaurant covers have been reduced from 110 to 70, and in the Palm Court, where the legendary afternoon tea is served, the daily covers have dropped to 370 from 420. The Ritz found an upside to this move has been the greater enjoyment of its customers.

This has been recognised by Holly Hallam, managing director at DesignLSM, who says her restaurant clients are moving away from wanting to squeeze as many covers as possible into their dining rooms, which has not only helped overcome the shortage of wait staff, but the more “luxurious” experience it has created is being enjoyed by customers. 

“Clients can see where the covers were crammed in before, and it’s not happening now. With fewer staff numbers, they have found they can deliver the same experience,” she said, adding that in order to make the economics stack up, they are taking their pick from a menu of elongating the service hours, turning tables, and/or increasing prices.

Undoubtedly, it is at the fast-food end of the market where the most radical changes are taking place, and it is in the US where the pace is being set. McDonald’s, El Pollo Loco and Jack in a Box are among those operators to have unveiled prototypes of new restaurants that have, in some cases, completely eliminated the dine-in element. At Chick’nCone, its units typically housed 24 seats, but its new restaurants have zero, while Mexican chain QDOBA is reducing its square footage by 20%.

Even the likes of Panera Bread and Starbucks, who have prided themselves on offering the sacred ‘third-place’ – the sanctuary between home and office – are shrinking their venues with fewer seats. Jean Chick, US restaurant and foodservice leader at Deloitte, says: “I wouldn’t be surprised if we see more and more quick serves close dining rooms altogether and move entirely to drive-thru and pick-up only footprints.”

This structural shift is reflected in research from TD Bank that found 55% of restaurant operators planned to add more space for pick-up orders, and 45% intended to open additional drive-thru locations. Interestingly, as many as 43% were looking to add outdoor dining space, which suggests a continued post-pandemic demand by many dinners to sit outside. 

For UK consumers, the ability to continue to sit outside their favourite restaurants and pubs has been dramatically enhanced by the inclusion in the Queen’s Speech of a move to make the temporary alfresco licenses issued during covid-19 permanent. This is certainly good news, because it has been calculated that every outdoor seat has been worth as much as £6,000 in extra annual revenue. 

The big question though is how this will impact the ongoing seat management of hospitality businesses as they find it increasingly tough to recruit employees, handle the chunky delivery volumes and get the numbers to stack-up across their digital channel, as well as indoor and outdoor seated areas.
Glynn Davis is a leading commentator on retail trends

Bringing traditional experiences up to date by Ann Elliott

Over the last few weeks, I have been to Leeds Castle, Port Lympne, Uppark, West Dean House and Gardens, the Raphael exhibition at the National Gallery, Stowe Gardens, RHS Wisley and The Weald and Downland Living Museum – all ‘experiential’, I suppose. It’s been fascinating to see how these longer established attractions are now competing for their share of consumer spending in the face of so many newer and exciting experiences.

Some of these, like Leeds Castle and Port Lympne, seem to have really upped their game in the last few years in order to add real value to their visitor experience. I suspect they were already on this trajectory pre-covid, but the pandemic has given them some time and breathing space (although not income) to accelerate these plans on reopening.

Leeds Castle, as well as having a castle (surprise, surprise), has a knights’ stronghold playground, adventure golf, the squire’s courtyard playground, a maze, a grotto and birds of prey demonstrations.

It was absolutely packed with young families when we visited, so we did beat a quick and hasty retreat towards the tea rooms, away from the screaming, shouting and crying of parents and children alike. 

Port Lympne has outstanding gardens and a wildlife park, a dinosaur forest, a jeep safari complete with safari guide and pre-bookable animal experiences. Something for everyone in our family at least.

The Weald and Downland Living Museum is home to the filming of Repair Shop and says: “From our historic life weekends, exhibitions, courses in traditional trades and crafts and seasonal activities to a selection of open-air theatre for you to enjoy against the backdrop of our beautiful museum, there really is something for everyone.” It really does try to provide an immersive guest experience.

To a certain extent, Stowe and West Dean are what they are – beautiful gardens with no huge attempt by either to entertain or inform their audiences. Uppark, though, even with its hugely knowledgeable and engaging guides, is typically old guard National Trust (NT) and mirrors many of the experiences I have had in NT properties. I am not sure where the NT audience of the future is going to come from if it continuously fails to innovate its approach to entertaining its customers. It’s staid and boring in many respects, and that’s rather sad considering the land and properties it has at its disposal.

Two things though really stood out for me – accommodation and food and beverage. Leeds Castle and Port Lympne have both made determined efforts to generate income from accommodation in the form of hotels, lodges, cottages and glamping. As has the Yorkshire Wildlife Park, visited about a year ago – another superb example of an old-fashioned visitor attraction transforming itself into a ‘must visit’ experience, including 18 independent retail stores, three restaurants, a number of epic play areas and the UK’s number one walkthrough wildlife adventure. Accommodation is definitely the way forward for these attractions. Direct competition for hotels and ‘pubs with rooms’ operators. And they do it very well.

From a food and beverage perspective, my experience varied wildly. The NT still fails to deliver to expectations in its offering. Its operation is slow, its processes laboured, its queues long and its food average at best. I feel awful criticising it as I think its cafés are often staffed by volunteers, but it needs to get its act together. It feels like its constantly trying to keep up to the changes in the wider hospitality market but never quite getting there. It needs help.

West Dean was okay but not outstanding. RHS Wisley was brilliant, run by external caterers, I believe (Company of Cooks), with superb food and a smooth operation. Likewise, the National Gallery although it suffers from lack of seating. Top marks go to The Weald Museum though, where the food was tasty, well presented, value for money and arrived at our table quickly and efficiently.

This is a different type of experiential market to the likes of Bounce, Gravity, Flight Club et al, who do it brilliantly. These visitor attractions of years ago have now modernised and pivoted their offer (on the whole) for a new generation of families, and for an older generation of those with money and time. Both can learn from each other, I think.
Ann Elliott is a hospitality strategist, connector and adviser

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