May 23, 2018

2018 predictions — the perfect storm is here!

2018 is here: a blank sheet and a whole year of new possibilities, new challenges and new goals for leaders and entrepreneurs in the hospitality industry. Think of 2017 as a season of your favourite Netflix series. At this point in time, the final credits are rolling, and you might be thinking back to all the twists and turns in the story so far.

In this blog, we will show you an exciting preview of what we believe will happen in the next season. Will the Hospitality House of Cards fall? Who will be the Designated Survivors? With plot twists, cliffhangers, winners and losers, victories and messages of hope for the many adventurous leaders and entrepreneurs out there in the hospitality sector, we look ahead to the 2018 season.

Our preview will show you:

  • The many forces driving the ‘perfect storm’ that is already approaching the hospitality industry from the not-so-distant horizon.
  • The strategies that you as the hero of the story, the leader of your hospitality business, should be aware of and consider for your 2018 business plan.
  • 5 Maverick questions to ask yourself before entering 2018.

2018: Disaster Movie or Hero’s Journey?

You’d be forgiven for entering 2018 with rather a sense gloom. Throughout 2017, there’s been talk across the hospitality industry of a series of emerging crises, many which are now arriving at your doorstep. Take your pick from growth challenges, rising food and labour costs, intensive competition, critical skills gaps, technology adoption, rising employee turnover, labour market shifts, changing customer tastes and shrinking guest loyalty.

We’ve certainly heard this from our clients and contacts, and picked it up in the news, and these gloomy prospects are also being confirmed by research.

The Hays Macintyre UK Hospitality Index benchmarking survey identified a lack of skilled workforce, rising costs and consumer confidence as the biggest threats facing the industry. Out of the 120 chief executives, business owners, board members and senior management (ranging from start-up to established brands) surveyed in the UK CGA Business Leaders Confidence Survey Q4 , only 30% agreed that they feel positive about the market — a pretty staggering 17% drop from Q1 2017, and a deflating reflection of leaders’ own confidence in the future context for the sector.

So how can hospitality leaders weather the perfect storm in 2018?

Operators are becoming increasingly desperate to find new ways of boosting sales, reducing costs and being relevant to employees and customers (especially in the fast-casual world, where the there are rumours of blood on the high street in 2018).

We know from our many years’ leadership experience in the hospitality sector, that operators have a well-honed bag of tricks to dip into when the going gets tough. To mention just a few…

  • Squeezing the cost base
  • New offers and loyalty programmes and promotions
  • New customer experience initiatives
  • New menus
  • New equipment to boost productivity and many more.

Will these tactics be important in 2018? Yes, of course to some degree. Will they be enough and will they be sustainable? Definitely not.

You might not be surprised to hear us say that to navigate through the storm ahead, and successfully into 2019, 2020, and beyond, you will need to think like a Maverick. The Cambridge English Dictionary defines a ‘maverick’ as “a person who thinks and acts in an independent way, often behaving differently from the expected or usual way”.

A maverick knows the the importance of combining disciplined culture and operations with the right amount of innovation. A maverick knows when it’s time for a paradigm shift rather than a new customer experience initiative or loyalty card. Mavericks hack the old and dusty ways of doing things in the industry.

As Maverick David Chang says:

“Things are changing so fast in food that if you’re still using what worked for you in the past, you’re screwed”

Here are 3 strategies that can help you hone your maverick skills in 2018.

STRATEGY 1: A New Business Model

Over the last couple of years, industry mavericks have experimented with new and different business models to grow and build new revenue streams to their existing business model. The most relevant and storm-proof model, in our view, has various names including ‘virtual restaurant’, ‘app-based establishment’ or ‘ghost-kitchen’.

For example, Ando (Backed by David Chang) in New York City offers “second-generation American food” like bibimbap, fried chicken and cheesesteak egg rolls.

It’s also worth mentioning Green Summit with 9 units, and an $18 million turnover who offer all sorts of cuisines including meatballs, salad, sandwich, burgers, grilled cheese and juice.

Overall they are an almost “delivery only concept”, largely skipping the front of house and bringing high-quality restaurant/takeaway food straight to the customers. The customers are placing orders via a website/app or third-party service like Seamless. Customers can either get it delivered or pick it up themselves at the unit (Click and Collect). Some of them even operate with a small sit-down area where potential walk-in customers can enjoy the food and drinks.

These ‘virtual restaurants’ are being fuelled by various trends, including the development and growth of third-party delivery companies, increasing consumer confidence in mobile ordering, and also the explosion of meal-kit businesses, like Amazon and Blue-Apron in the US.

These concepts solve a number of the risks and challenges that the perfect storm blows in. Not having an actual storefront means much lower establishment costs as well as lower operations overheads (such as rent and labour). Another benefit is that they can also change menus faster in response to changing customer demands and taste.

Many experts and Mintel reports claim that delivery market will grow by 13–16% in the next 5 years, reaching £11.2bn in the UK alone. In general, the take-away market is still characterised by unhealthy food options, leaving a massive gap in the market for new healthy offerings (a story for another blog post…).

STRATEGY 2: The Values Revolution

The so-called ‘Values Revolution’ has seen the rise of the ‘virtuous organisation‘ that strives to do well and do good simultaneously. Why is this a competitive advantage?

Although many hospitality organisations do a great job at keeping their values at their heart, the sector hasn’t always had a stellar track record when it comes to winning and keeping trust from its employees and customers. Dubious claims about food provenance. Cases brought and won for failure to pay the minimum wage. Non-recyclable coffee cups dumped in their millions. Bad press on employment contracts and conditions. We could go on…

A recent survey conducted by the Global Tolerance Institute (GTI), found that two-thirds of the upcoming talent pool say they want to work for a company that makes a difference in the world. This will give mavericks a distinct competitive advantage when hiring and develop new talent, as well as growing strong management teams from within the organisation.

Both customers and employees are more loyal to the brands and companies that they perceive as being ethically and sustainably run, and as treating their employees well. In fact, the GTI report mentioned above showed that the majority of millennials (60%) prefer to buy products or services from ethical companies.

This has led to a kind of ‘super-fan loyalty’ enjoyed by profoundly purpose-driven story-brands like SweetGreen, Chipotle and Founding Farmers. The companies behind these brands also have a new breed of highly visible CEO who personally embodies the company’s environmental and social commitments and are campaigners in their own right.

Too often however, this is skin deep, and too many organisations jump ahead straight to the end game, with a focus on communications and marketing rather than meaningful change.

Mavericks are different: they clearly state the organisation’s values, and live them across all areas of its activities, thereby achieving stronger loyalty amongst employees, customers and other key stakeholders.

STRATEGY 3: Technology that makes business sense

As mentioned in The Power of a Digital Workforce in Restaurants, the hospitality sector has a growing gap compared with other industries when it comes to putting digital tools in the hands of their employees to ramp up productivity.

Companies such as Sweetgreen, Founding Farmers, Itsu and other first-movers do understand the importance of utilising digital tools to make a more aligned, agile and relevant experience for their employees as well as their customers.

To the consumer on the high street (or increasingly in front of a website or mobile phone screen), it may seem that technology implementation is already widespread, with in-store order kiosks, apps for ordering and paying, electronic loyalty cards and in-store technology like wifi and tablets becoming increasingly common. And this reflects the rather lopsided pattern of investment in technology, often driven by marketing and customer experience teams.

We believe that industry mavericks will soon be focusing more on how they can optimise internal tech solutions. Not to cut labour costs, but to improve communication, streamline operations and boost productivity. Internal tech solutions should help managers in particular with the heavy lifting on repetitive tasks that take up their time and distract them from focusing on the employee and customer experience. These solutions should also boost the speed and ease of service and/or production, releasing a pressure valve on the often frenetic working conditions that are typical of the sector.

We have identified a number of applications that are worth considering as part of your 2018 plan:

  • Trail — Smart daily operations checklist which saves time and improves consistency across your operations
  • Ziik — A work app that improves communication, engagement and productivity
  • StartMonday — A recruitment platform that gives you a stronger brand and cuts recruitment time
  • Winnow — Helps operators to cut food waste by understanding waste patterns better

Not only doom and gloom

There is no doubt that operators are facing tremendous pressure from all sides and need to adapt fast due to the perfect storm. We don’t see this as doomsday for the industry, but as an opportunity to hack the old and dusty ways of doing things.

Here at Hospitality Mavericks, in 2018 we will continue to follow the trail of innovation wherever it leads us, to better understand what these maverick leaders and entrepreneurs are up to and what makes them and their businesses tick.

Yes, we know it is not easy. The reality is that there is no quick fix formula to create a sustainable, unmistakable business and culture. But you can make a start in future-proofing your business today.

Use these 5 maverick-inspired questions in your team to kickstart the journey to a stronger and more sustainable 2018.

  1. What unfinished business from 2017 do you need to resolve so you’re free to surge into 2018 — and how and when will you do this?
  2. What are the values at the heart of your business? How confident are you that your employees and customers agree?
  3. How sure are you of how the different elements of the perfect storm will impact your business? What is your plan to overcome these?
  4. What 3 initiatives could the strategies above inspire for your business? What would the impact be of implementing these?
  5. If there was a newspaper headline describing your business as it enters 2018, what would it say?

And last remember as Abraham Lincoln said;

“The best way to predict the future is to create it.”

This post is best sent to folks who are curious and open to joining and supporting a revolution in the industry.

Michael is a heart-centred operations pro, who believes and lives by building hospitality and restaurants businesses from the inside out. When your employees love your company, your customers will love you — brand nirvana. He helps leaders and operators to build unique blueprints and business systems that create strong employee and customer experience, which translate into improved sales, profits and positive impact.

Claire is an organisational development and L&D whizz who creates bespoke learning ecosystems; from strategy through to implementation — to amplify your team’s skills and energy so your people can deliver your business goals and a unique customer experience.