Wednesday, February 21, 2024

5 Key Strategies to be Successful in the Hospitality and Catering Sector

In 2023, the catering and hospitality industry is enjoying a welcome period of growth that is set to continue in the medium term. It is recognized that recent years have been exceptionally tough in this sector. One of the key challenges was how the industry coped with the recent pandemic. The onset of Covid-19 resulted in millions of firms in the sector needing to close for extended periods of time; this was in response to the lockdowns and restrictions on movement and public gatherings that governments imposed to slow the spread of the virus and protect hospitals and other vital healthcare services. For some businesses in the hospitality and catering sector, the short term closures became permanent as they could not sustain the ongoing costs that were not mitigated by sales and regular custom. Tens of thousands of companies ceased trading as a direct result of the pandemic, and the industry suffered a decline in the aftermath of this. Today, the hospitality and catering industry is once again enjoying a period of sustained growth and prosperity. If you are looking to move into this sector of business, it is a good time to consider setting up a viable concern. However, as with any business venture, it is important to consider a range of strategies that will help ensure the company’s long-term growth and financial success. In this article, five key strategies that can be used in the hospitality and catering sector will be explored. By adhering to these strategies, a business will be able to increase the likelihood of its long term success and profitability.

Reduce your unit costs

In any form of business, it is important to ensure that the unit costs of production is kept as low as possible. In the hospitality and catering industry a specific unit may be an individual meal or food product. The costs of these are calculated by working out all ingredient prices that go into making the food. When the total cost is known per dish or per unit, an accurate idea of the selling price can be determined which provides a suitable level of profit and absorbs other fixed costs into the calculation. A key way that businesses can lower their unit costs is to buy raw materials or ingredients in bulk quantities, thereby benefiting from economies of scale. In the catering industry, a prime example of buying in bulk is when companies buy key ingredients such as spices or staple ingredients. Suppliers such as Olam Spices will offer a wide range of these ingredients to trade customers. Generally, the greater the quantity ordered, the lower the cost of the ingredient is by weight. When this type of purchasing methodology is applied to all ingredients that are required in food production (barring food items that have a short shelf life or need to be fresh), significant savings can be made. This helps catering and hospitality firms to lower their unit costs and therefore achieve a higher profit margin on their sales.

Promote your company online

Another key factor in the success of any business that operates in the hospitality or catering sector is how well they promote their company. Put simply, customers may not be aware of the existence of the business unless they have seen some form of advertising relating to it. Any new restaurant or hospitality establishment should recognize the importance of promoting their company as a key way of generating consumer interest and building a profitable customer base. In 2023, one of the key ways to promote businesses in this sector is to harness the power of online advertising, specifically on social media channels. Popular platforms such as Instagram have over 1.3 billion active users who regularly access the site, and it is possible for businesses to use targeted advertising and promotional campaigns in specific parts of these sites. A restaurant may promote its business on dedicated channels for food lovers or by using a combination of popular hashtags that are commonly entered by their target market. Promotions on social media channels should be short, eye catching and feature consistent company branding and logos so that a strong business image can be cultivated. All adverts and promotions should contain a hyperlink to allow the viewer to navigate quickly back to the company website and this should allow bookings or orders to be made online.

Competitive salaries to retain staff

It is widely recognized that the hospitality industry has a far higher level of staff turnover than in other sectors of business. It is estimated that staff turnover levels in hospitality can be as high as 44% which is significantly higher than the average employee turnover rate of 19% for all industries together. A key reason for this high staff turnover is that the hospitality and catering industries typically employ a younger staff group. Many young people take first jobs in bars, restaurants and hotels and subsequently leave to pursue more lucrative careers. This is a problem for the hospitality and catering industry as it means that they must spend more than other industries on recruitment and training. However, the impact of this can be reduced significantly by offering staff more competitive salaries and improved employee benefits packages. For example, if you are a catering firm that pays your staff 5% above the industry average and has similar working conditions to other companies in the sector, you are likely to retain employees more effectively. There will be little desire for them to leave your company and pursue similar employment in the same sector if they will invariably receive a lower wage. In addition, by providing an enhanced employee benefits package that differentiates your firm from other similar organizations, you may also be able to retain staff for longer periods. You can read more about various employee benefits packages and how they help to retain staff here.

The value of positive customer reviews

It is a fact that in the catering and hospitality sector, few things are more important than positive customer reviews. Consider a restaurant with many neutral or negative customer reviews on sites such as TripAdvisor to one with many favorable ones. New customers will commonly look for customer reviews before booking into a hotel or reserving a seat in an unfamiliar restaurant. Customers can search online and gain access to this type of information in a matter of seconds, and it has a dramatic impact on whether they choose to visit the establishment. Put simply, all business owners in the hospitality and catering sector should strive to offer the best possible customer service and quality of food so that positive reviews are recorded, and these encourage trade from new customers.

Differentiate your offering

As a brief final point, it is important for all businesses in hospitality or catering to attempt to offer a truly differentiated product or service. By doing this, they can offer a unique customer experience that is not replicated elsewhere, and this can help to cultivate a loyal customer base. For example, a restaurant can differentiate itself from competitors by offering sustainably sourced ingredients across its menus or using only organic produce. Catering firms can also dedicate a small percentage of their profits to support local community organizations or charities that resonate with the values of their target markets. This also allows the company to generate increased goodwill from its brand and build a positive brand image. This can prove to be a vitally important strategy to help any business enjoy sustained growth and customer loyalty over the medium and long term of trading and may prove to be a key way to remain competitive in an increasingly crowded marketplace.