June, 2017 – AETHOS' Managing Director in London Thomas Mielke recently sat down with Mark Kuperman, Chief Operating Officer of Revenue Management Solutions, a company providing data-driven solutions to assist clients in better managing revenues and optimizing profit, to discuss tips to better operate with the living wage in the British hospitality sector without compromising on quality or service levels, nor increasing prices for the end-consumer/clients.
“Economic pressure and instability, from Brexit and new government policies, has placed undue stress on hotel and restaurant operators in the UK, and in turn has led to consequences for the bottom line,” says Kuperman when speaking with Mielke.
"Specific implications which have resulted from the Brexit discussion range from higher operating costs to increased difficulties in securing continued access to qualified and motivated labour," says Mielke.
Kuperman adds, "the current National Living Wage is £7.50 an hour and the government plans to increase the wage to £9 an hour by 2020. This increase in labour costs, coupled with additional increases in employer pension contributions, creates a challenging business environment for operators."
First instinct may be to raise menu prices and cut staff, however Kuperman provides five suggestions to navigate the challenging business environment without doing either:
- Consider peak versus off-peak hours to optimize labour costs;
- Take a demand-based approach in pricing by considering the customer’s willingness to spend;
- Utilize the power of technology as a silent partner in a customer’s journey, leaving experience delivery to staff;
- Create a long-term game plan to address the known raises in labour costs;
- Observe the operational impact of menu items to see how their preparation effects profitability and throughput.
AETHOS’ Thomas Mielke also spoke with Mike Williams, People Director at the British casual dining brand Byron. Says Williams, "when faced with unprecedented operating cost increases, it can put the squeeze on even the best organization."
Mielke and Williams concur with Kuperman that a vicious cycle of cost cutting is not the best of solutions. Instead, William suggests that "a blend of investment in technology, culture, service and consumer research can give the best of chances to take advantage of this shift in the sector. While competitors cut costs and deliver less for more, those who invest and who are proactive will gain market share and continued consumer support."
Mielke and Williams advise organizations to use the current market pressure to re-direct and focus efforts and energy because "remaining invested and staying proactive will sustain the consumer support of an organization" in the current business environment.
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