Matthew Wyatt FCA explores the 6 key areas for proprietors to review and action during times of uncertainty in the hospitality trade.
All businesses in the hospitality sector are currently trading through uncertain and demanding circumstances. At times like this, experience tells us that we should, "go back to basics" and review the key dynamics in the business.
With that in mind here is a checklist to review and action.
Dark clouds over the high street, 6 tips on how to make money in the hospitality industry:
1. Cash flow
Consider the financal managment of your business and be sure to watch the cash coming in, and going out, very carefully on a daily basis. Every item of expenditure, no matter how small, should be reviewed.
2. Managing your people
Your staff are your most important asset. Keep them well managed and motivated. Engage in training your people regularly with a view to using upskilling them so as to refine the menu, bolster service and improve upselling. Remember, high levels of staff turnover are the most costly error in any organisation.
3. The financial ratios
Monitor the key ratios in the business on a daily basis. Think:
Revenue per available room (RevPAR) and occupancy in the hotel trade
The gross profit percentage in food and beverage sales
The share of wages as a percentage of revenue
If you find figures are incorrect, this is a severe warning sign that your systems may not be fit for purpose and you need to take immediate action to rectify the issue.
4. How you achieve growth
Of course everyone wants to grow the top line but just as important is how you go about growing. Beware price cuts and two for one offers! This only reduces the true price point with the likely impact being eroding profit margins.
Focus on improving the quality of your offer instead by adding value. This is closely linked to point 2. Loyal, well trained staff will be in a good position to apply their new skills and aptitude to make the necessary changes, no matter how small, that can make a big difference to your product and the customer experience.
5. Repeat customers
The most important customers are the ones who repeatedly purchase from your establishment(s). Loyal customers are the holy grail of the trade. It is easier, and more cost effective, to get loyal customers to spend a little more than to attract new ones.
Remember to always innovate. This is in large part about management skills. Refresh the menu regularly, change the dining room set up, use technology to enhance the service, experience and processes. Don't be afraid to involve all your staff in brainstorming to seek out fresh ideas.
Remember if you're the best at what you do in your street, town, or city then you'll likely win through. There are likely enough customers willing to spend if you're seen as the best in class.
The content of this post is up to date and relevant as at 10/06/2019.
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