Why are hospitality businesses failing at such a high rate?

Negative headlines often paint a dire picture, but it's important to remember that the hospitality industry has weathered many storms, from recessions to global financial crises. I've been around this industry my entire life, and I've seen firsthand the challenges and triumphs, including my parents losing everything in a pub venture, despite their tireless efforts and being genuinely good publicans.

Here are some insights I think are worth sharing:

1. it’s Not Business as Usual—it’s Business Very Unusual: Customer behaviour has shifted dramatically since the pandemic, compounded by rising cost of living and interest rate hikes. However, there are also intergenerational forces at play. Many hospitality businesses are adapting in the short-term rather than developing new business models that will truly serve their evolving customer base in the long term.
2. Know Your Customer: Understanding who your real customers are is crucial. Chasing after a new customer base with new menus or promotions can drain your energy and resources, with minimal ROI. Instead, focus on rewarding, engaging and attracting more of the customers who already appreciate what you offer.
3. Growing Pains: Expansion is exciting, and economies of scale can be beneficial, but site selection is critical. Without thorough assessment and rigorous financial analysis, you risk undermining your growth strategy. Managing multiple outlets is vastly different from running just one or two. Success lies in being slightly ahead in your operational structures—running lean is essential, but running ragged is disastrous.
4. Smarter Pricing: There’s much to learn from big supermarkets in the way they approach the perception of value. The traditional hospo method of applying a blanket margin across the menu is outdated. Leveraging the rich data available today to adopt a more dynamic approach to pricing and cost control can set your business up for long-term success.
5. Your Customers Want to Hear from You: Your online presence has never been more important. Sadly, in hard times, marketing tends to take a backseat. Good digital marketing relies on a quantifiable strategy and relevant content that resonates with your audience. Your website, social channels, and email databases are critically important assets—how much time and attention do you spend on them?

The hospitality industry is resilient, but adapting to the new landscape requires innovation, strategic thinking, and a customer-centric approach. By understanding the current challenges and focusing on sustainable practices, we can navigate these turbulent times and emerge stronger. Let's continue to support each other, share insights, and drive our industry forward.

Annette Verhoeff - Hospitality expert bringing clarity and practical solutions to transform business challenges into sustainable growth.

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