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Business leaders networking at the Peach 20/20 Conference  

23 Feb 2023

Be careful where you cut, you may start bleeding

The challenge for hospitality is not so much the cost-of-living crisis, but the cost of doing business crisis, says Peter Martin.

Strong trading from restaurant and pub groups in December, and into January, show that consumer demand is there. People are willing to spend on the experience of eating and drinking out.

The problem is converting those sales into profit. The question for everyone is what can be done about the cost line? Where to look for savings? Or to look at it a different way, how to drive sales even harder?

In energy and food supply there are ways to shave costs, although you might need to hire in outside expertise to be really effective. Next in the queue are always going to be marketing, tech and people. Those ‘cost’ lines are just crying out for trimming. 

Trouble is that this expenditure is there to deliver the fundamentals of the business - getting people into your sites and then giving them the best experience possible. Cut too deep, diminish the experience and you all know the consequence.

That’s particularly true of the labour line. So it was refreshing to catch up with a seasoned industry entrepreneur the other day who has turned the pay debate on its head. While so many are trying to keep the salary bill down - and as with most big corporations making sure it hits the standard cost ratio - he’s telling his managers to pay what they have to on staff if that means keeping his sites open, busy and in his case growing. 

He’s giving his GMs real flexibility - and it’s paying off, especially with the new sites his company is continuing to take on. Not surprisingly he has only a handful of vacancies - so no big recruitment bills and minimal churn. He talks about one location he acquired that was only trading three days a week with minimal staff - now it’s trading all week, it’s fully staffed and with three times the sales previously.

And he’s also investing in technology, developing a more sophisticated CRM system that links spending patterns to individual customers - so he and his team really understand their customers’ needs. Yes, that costs money too, but there is a pay back.

I can hear the ‘buts’. The moral though is that the industry needs to think differently especially when it comes to its people, to try new approaches - and not least share ideas. It has to move away from the low pay mentality that still dogs large parts of the industry. It’s no good supporting initiatives like Hospitality Rising, then moaning about how much you have to pay people. What are you really saving?

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