The last few years have been a whirlwind 🌪️ for the hospitality industry. Technological advancements have hit the scene, consumer buying preferences have shifted, and costs have risen across the board.
But what does all this mean for operators in 2024?
It means that restaurant businesses need to adapt to a new normal (yes we hate that phrase too, but it’s fact).
So, you need to know what’s happening in the industry, how it will impact your restaurant, and what to do to keep up with future restaurant trends. The good news is that you’ve come to the right place to find out how to do this!
In this article, we’ll delve into the key challenges shaping 2024 for hospitality operators, and explore strategies that will help you weather the storm and ✨ thrive ✨ in this era of rapid transformation.
What is 2024 looking like for the hospitality industry?
Let’s start by taking a look at some of the trends that are already impacting the hospitality industry.
Minimum wage increases
The minimum wage will increase by 10–12% across the UK and Ireland in early 2024. It’s the largest cash increase to the living wage in the UK and more than twice the predicted rate of inflation for 2023 in Ireland.
For most restaurants, this leads to a minimum 10% increase in labour costs. And with a 30% average labour cost, that’s 3% of your revenue wiped off your bottom line overnight. As a result, restaurant businesses must figure out how to improve revenue to stay profitable.
Increasing prices across the board isn’t the answer. It could scare customers away (especially during the cost of living crisis), so owners need to think carefully and strategically about the best way to increase margins.
Boosting sales and cutting costs are good places to start. You can find out more about how to do this — and how to prepare for the minimum wage increase — in this article.
Labour shortages & retention issues
Labour shortages are happening across hospitality, a trend which was worsened by the double whammy of Brexit and the COVID-19 pandemic.
There are 132,000 vacancies in the industry — 48% above pre-pandemic levels. And not only do 70% of restaurant operators not have enough workers to support demand, but they also don’t expect a reprieve anytime soon.
Changes to the immigration system are also having a knock-on effect in the hospitality industry. The UK government recently announced that the minimum salary needed to get a skilled worker visa will rise from £26,200 to £38,700 after spring this year.
Kate Nicholls, Chief Executive at UKHospitality, says:
“There were 8,500 hospitality visas issued last year, which helped bring in talented chefs and managers of the future. Around 95% of those would no longer be eligible under these plans, despite being offered competitive salaries.”
However, efforts are being made to close the gap. UKHospitality has launched the Hospitality Workforce Strategy in an attempt to overcome this challenge.
And there are ways that restaurants can attract and retain staff. Improving the employee experience with intuitive scheduling, providing training and career development, and creating a positive work environment are some of the ways to retain staff (we’ll look at this in more detail later).
Easing supply chain costs
The cost of living crisis is real, and it’s impacting supply chains. Hospitality businesses have seen costs rise by up to 30% due to supply chain breakdowns, and 92% of kitchen operators say the cost of food is one of the most significant issues for their restaurants.
Thankfully food inflation rates are gradually decreasing. November 2023 was the eighth consecutive month of falls in food inflation, down from 10.1% in October. In fact, it’s the lowest it’s been since May 2022.
So it’s not all doom and gloom. Although costs are high, it looks like the rate of inflation is slowing down for 2024. This will lead to a more consistent Gross Profit.
And if you need a helping hand with supply chain costs, here are some of the ways to tackle this challenge:
- Centralisation of suppliers: 59% of hospitality businesses are working more closely with suppliers in an attempt to improve and solidify relationships for the future. The more you order from one supplier the better pricing they can afford to offer you. They can predict revenue from your business and also reduce cost of transport. Economies of scale is your friend.
- Embracing seasonality: Food pricing fluctuates seasonally as produce comes in and out of favour. Consider this for your menu over the course of the year – i.e. don’t lean on avocados as a staple offering out of season or you’ll take a hit.
A war for customer loyalty
Discretionary spending is decreasing*, meaning your regular customers might be pulling back on how often they dine out. With fewer diners on the scene, there’s a need to drive loyalty in 2024 to keep sales healthy.
Patrons want more value for their money, which they can get from the rewards with loyalty schemes. In fact, fast food restaurants are seeing growth driven by meal deals and loyalty programmes. This could be offering a discount after buying so many meals, providing a free side or drink, or giving early access to new menu items.
A loyalty offering done right will give your customers a feeling of a personalised touch. You can offer vouchers on their birthdays, track recurring visits and gamify it so they get rewards the more frequent they visit. Gone are the days where you open the door and hope people walk by – it’s all out war for attention and bums on seats. So you need to properly equip yourself for battle with the right loyalty offering and the right technology to track customer behaviour and to automate the offers (i.e. a CRM).
Increased adoption of AI
It’s no secret that technology has evolved massively over the last year, particularly when it comes to artificial intelligence (AI). One-third of people who responded to this McKinsey survey are using AI in at least one business function.
The market for AI in the food and beverage industry is booming right now. It’s expected to grow 46.3% from 2023 to 2024, which is an incredible amount of growth in such a short space of time! We saw 400% growth in locations signed up last year, which shows the appetite for AI in hospitality.
In the US, 41% of food operators plan to invest in AI sales forecasting and scheduling in the upcoming year, while 31% plan to use it for inventory and purchasing.
So, what does this mean for 2024?
It means that restaurant owners need to get ahead of the game and invest in AI to streamline operations, improve processes, and make informed decisions about how to grow their businesses. If you don’t, you risk falling behind and watching your competitors deliver a better customer experience.
Take a look at Nory as an example. Our AI-powered software learns how your business operates. As a result, it can forecast sales, plan labour deployment, and automate key parts of your processes.
How to get ahead of these trends and prepare your restaurant for success
So now you know what to expect in 2024, what should you do about it? To set yourself up for success this year, operators need to get a hold on three major fronts:
- Prioritising employee retention
- Getting control over your P&L
- Leveraging new technology to optimise operations management
Let’s look at these areas in more detail.
1. Prioritise employee retention
The labour shortage crisis is as much a retention crisis. Even when roles are filled they have turnover (LTO) rates over 100%. This is unsustainable. It impacts team morale and stability, guest experience, operations and profitability – effectively the heartbeat of your business. Now is the time to offer a viable career path within your brand.
Focusing on retention has a significant impact on profitability – for example, hiring a new team member with a salary of £27,600, will actually cost you around £62,890 in year 1. These hidden costs include sourcing candidates, interviewing, training, development, and so on. Nobody has the time or the bank to run this over and over again!
Here are some ways to increase retention and imrpove the employee journey in your restaurant:
- Improve learning and development opportunities. Invest in comprehensive training that goes beyond initial onboarding. For example, workshops, certifications, and cross-training opportunities can create a work environment that values personal and professional development. And with more career opportunities and learning experiences, staff are more likely to stick around.
- Enact proper performance management. A recent study found that employees who experience a lack of recognition are 32% more likely to look for a new job. By running official performance reviews, you can formally acknowledge accomplishments and address areas for improvement. This can help you boost motivation, engagement, and morale — all of which can increase retention.
- Adopt a goal-driven culture. Creating a sense of purpose and direction can encourage employees to stick around. To do this, make sure your staff understand the restaurant’s goals and how they play a part in it. Seeing how they fit into the bigger picture can increase motivation.
2. Own your P&L data
With restaurant cost bases increasing by a minimum of 10% from the minimum wage increase, increasing occupancy costs and stubbornly high COGs inflation — you need to get serious about managing your P&L daily, not monthly.
If you’re waiting 4-6 weeks to analyse your P&L statement, you’re already behind. The feedback loop becomes too long to operate efficiently.
To put it bluntly, this isn’t good enough.
Restaurant operators need to invest in technology that provides a real-time overview and control of their financials. Then, they need to work down the model and optimise the statement line by line with clear budgets.
It sounds boring (because it is), but it’s the difference between success and failure. The good news is that there’s software out there that makes the process easy to manage.
Nory, for example, can help you analyse all this information. In fact, our software was made to match your location P&L’s line for line. With our real-time performance data, you can make informed and strategic decisions to improve your restaurant’s bottom line.
3. Use technology to optimise operations
Technology is your friend. It’ll help you analyse performance, access valuable insights, and make smart decisions about how to succeed in a changing landscape. And when there are so many factors making it hard for restaurants to thrive, you need as much help as you can get to stay above the fold.
Check out some of the ways you can use AI technology to optimise your restaurant management.
- Improve in-store operations. AI-driven solutions can enhance your operational efficiency. Use it for demand forecasting, inventory management, staff scheduling — you name it, AI can improve it. You can also automate routine tasks, such as order processing and inventory tracking, to streamline workflows and reduce waste. It’s a win-win!
- Analyse and predict financial performance. AI algorithms can process large datasets in real-time, which provides valuable insight into sales trends, cost patterns, and overall financial health. You can then use this information to identify areas for cost savings, pricing adjustments, and revenue optimisation.
- Enhance guest experience and loyalty. In order to foster loyalty, you’ve got to give the people what they want. And in today’s digital-focused world, that’s a frictionless and personalised experience. With AI tools and technology, you can handle reservations, answer enquiries, and even personalise the dining experience by analysing customer preferences and behaviour to suggest menu items! This type of experience fosters deeper connections, leading to loyalty and positive reviews.
Prepare your restaurant for the future with Nory
The future of hospitality is never 100% certain, but there are trends that indicate what we can expect this coming year and beyond.
One thing’s for sure — restaurants need instant access to their restaurant data. Without it, you won’t be able to analyse P&L performance in real-time and will struggle to make quick and informed decisions about how to navigate the business in a challenging and complex trading environment.
The good news is that Nory delivers in this area!
Book a call with us to find out more about how our restaurant management software can improve your operations. We will help you get control your financial performance, manage your supply chain, and retain those rockstar team members you worked so hard to recruit — all in a single platform.
FAQs about the future of hospitality
What will be the future of the hospitality industry?
The future of hospitality will see an increase in technology integration (particularly AI), sustainability practices to meet evolving consumer expectations, and a strong focus on employee retention. For hospitality businesses to grow and develop during the next few years, they’ll need to pay close attention to their P&L in real time.
Why is the hospitality industry constantly changing?
There are a lot of reasons the hospitality industry is always evolving. Shifting consumer preferences, technological advancements, and global market trends all influence how the industry performs.
