The new reality which hospitality businesses must confront

10.07.2020
Matt Crawley
News

Communications with customers and maintaining a flexible business model are the key to survival for businesses in the hospitality sector.

The measures announced to help the hospitality sector in the Chancellor’s summer statement on Wednesday were both eye-catching (‘Eat Out To Help Out!’) and of substance (specifically, the cut in VAT to five per cent on food, accommodation and attractions for six months).

But to take advantage, restaurants, pubs and cafes need to embark on a serious communications campaign with customers – and remain flexible in what they are offering.  Because the truth is that consumer habits have changed, and it is going to extremely hard to change them back.

There are two reasons why customers will be reluctant to return to such businesses, and unfortunately the measures taken to reassure the first group are likely to alienate the second.  There is a delicate balancing act to be performed in putting across the right messages. 

For those consumers who are anxious about the health implications of going out for a drink or a meal, businesses need to emphasise the measures they have taken to make it safe: social distancing, enhanced cleaning regimes, ordering by app and the like.  

But concern over the impact on the whole experience of these very precautions is the reason that others could stay away: there is a real concern that the whole fun of going out is going to be neutered.  Drinkers used to a spontaneous pint may be put off by the prospect of having to book a timed slot at a table. 

The evidence from the first week of trading is that the situation varies enormously; in the city centre, where rents are higher and therefore the density of customers needs to be higher in order to cover costs, many establishments chose not to open, and those that did saw trading at well below pre-Covid levels.  More spacious businesses in the county may have fared better. 

Even with potentially higher margins following the cut in VAT, many restaurants and pubs are going to struggle to break even in such circumstances, with the triple whammy of a nervous customer base, reduced capacity and increased costs. 

So what is the key to survival? In essence, it is twin-track: businesses need to communicate with their customers like never before, and they need to be creative and flexible with the business model.

That communication is about reassurance: that all the necessary precautions are being taken to ensure that it is safe to visit, but also that he experience will still be enjoyable.  Encouraging customers to post about their experiences on social media will be an essential part of this. 

Alongside this, there needs to be a recognition that consumer habits have changed, certainly for the medium-term, and possibly for good.  Not only have people got used to sharing takeaways with friends at home, but they have come to realise that this is a cheaper option, and for many, this will continue to be a factor for some time to come.

So restaurants which have been providing a takeaway or collection menu service during lockdown may need to carry on doing so despite re-opening their doors to eat-in diners. 

The various initiatives announced by Rishi Sunak this week, including the VAT cut, the meal voucher scheme and the Job retention Bonus, will all be useful for a sector which has been hit harder than most.  But these things won’t change overall consumer behaviour, and so businesses are going to have to be prepared to adapt their business model to survive the new reality.

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