This week, guest blogger, James Hacon, Managing Director of Think Hospitality, pulls out his top ten trends from this year’s Global Restaurant Investment Forum.
The recent Global Restaurant Investment Forum welcomed more than 400 industry professionals from 58 countries to Palazzo Versace, Dubai.
Several key trends dominated the conversation during the three-day event, including a changing investment landscape, resourcing challenges and changing consumer ideologies.
Here are the top ten key trends I identified when asked to make the closing remarks at the event;
1. Light through the darkness
From the US to the UK and Middle East, an overarching message from the event was it is tough for many hospitality businesses across the globe. While there are immediate challenges around saturation and an oversupply that is rebalancing, the long-term view is undoubtedly one of a sector that will continue to grow as dining out of home and ordering-in both increase in popularity.
2. Emotion trumps experience
For many years we’ve seen the experience economy overshadow consumer goods in popularity. We’re seeing yet further evolution of this trend, with consumers increasingly looking for experiences that trigger emotional responses and have deeper meaning than those that are overly superficial or commercialised. Brands need to consider how they are connecting with their customers on an emotional level, not just during their experience but during the entire customer journey, which means an increased importance on training and investment in the pre-experience remote touch points, whether that is in person, by phone or digitally.
3. Tangibility provides protection
When considering the tangible nature of food and beverage operations, anchored in the real world rather than online and the primal need for food as fuel, we are in a somewhat protected environment compared with many other retail industries. As more traditional retail moves online, there will be continued opportunities in terms of real estate and access to capital. When coupled with the relatively low barriers to entry as an entrepreneur, the likely outcome will be continued innovation and growth of the sector, with ever-increasing competition.
4. Challenge provides opportunity
The lack of investment transactions in recent months is associated with the short-term boom-and-bust nature of any consumer economy and sector. There are many investors waiting in the wings with money to back the right businesses. For brands that have grown sustainably, innovated and positioned themselves correctly in the market there is a great opportunity in terms of access to property. Many of the investors at the conference supported the idea there will always be funds for the right brands in the right market. This is an era of the innovative, smaller and more nimble operators. We were told to keep a watch out for increases in trade purchases of small operators by the largest companies, with legacy estates that will see acquisition as key to their innovation.
5. Short-term staff pressures, mid-term opportunity
People are central to hospitality, we’ve heard it a thousand times and the message was strong onstage at the event. There is deep-rooted concern in many global markets about availability of the right candidates. Many championed the idea for a more joined-up approach to building the reputation of hospitality careers and more responsibility from the biggest players to collaborate on industry-wide training initiatives. The attractiveness of the restaurant sector as a career option may gain a much-needed boost in the mid term through the sheer lack of options in other industries – with technological developments and automation in retail, transport and manufacturing reducing their labour needs.
6. Turning to technology
Technology is seen by many as the key to operational streamlining, improving guest experience and reducing costs in the sector. However integration, connectivity and a skills gap on boards means this is taking much longer than in other industries. There are outstanding examples of artificial intelligence driving better business planning and even considerably changing consumer behaviour through the automated triggering of sights, sounds and smells within a restaurant, yet these examples are few and far between. To fully embrace the opportunity, businesses will need to allocate much larger budgets to technology and concentrate on upskilling operators.
7. A new type of leader
Where operators used to rule in the boardroom, leaders of the future will need to have a much greater understanding of customers, occasions, the market place and technology to succeed. Being able to take actionable insights from data is becoming an important skill that will set apart the great from the good. Gone are the days intuition alone would drive a restaurant group forward. Investors are looking for visionaries, grounded in intelligence, to take restaurant groups to a scale that makes them truly interesting. Entrepreneurial types need to recognise and plan for the point they no longer add value and senior leaders need to realise growth can’t run on adrenalin alone.
8. Owning your customers
The delivery debate has been rife for the past two or three years and many have cashed in on this growing consumer trend, yet few have truly adapted their businesses quickly enough. The sector has let a few key players come between them and their customers, taking away the direct relationships and giving over the power to these third parties. Much like the hotel market and online travel agent relationship, investors continue to be concerned by this model, seeing a risk of these players continuing to erode margin and potentially diversifying their business models to directly compete with them or taking a cut of other activities in the future, whether it be table reservations or a percentage of in-house covers through payment solutions. Some of the most innovative operators are working hard to create technological solutions that abate the risk through direct takeaway and delivery ordering, as well as incentives and improved usability when guests transact or book directly.
9. Sustainable, controlled growth
The past few years saw a boom for casual and fast casual in the most mature markets, with the challenge of saturation now being felt. There is a feeling among operators that some of the blame sits at the feet of investors who were driving for short-term return over long-term success. Others argue that developers created a whirlwind effect that saw brands chasing properties, worried about being left behind in a quickly expanding market, resulting in them accelerating beyond a sensible, sustainable level in line with the constraints of their operational and financial infrastructure. Whatever the reasons, the rebalance is happening, with many larger companies restructuring to considerably reduce their estates. Investors say they are looking for operators that are thinking for the mid to long-term, growing in a controlled way. Operators say they are learning to push back on investors and ensure they are realistic with expectations.
10. Changing consumers
The continued generational shift – for a long time attributed to millennials – is a mindset that is spreading. We are seeing a wave of thinking moving across the world where people want equality, they want to be respected and make a difference. Understanding the challenges people are facing as well as our impact on the world is growing. People want to know practices are sustainable. Our sector takes extensively from the environment around it, whether from ocean or land, and consumers see that as meaning we have a responsibility to sustain it. We need to contribute as well as take. Movements surrounding the cutting of single-use plastics is a great start but it is just that, a start. We will be come under increasing pressure from consumers to think differently and take responsibility, putting food-sourcing, waste and sustainability at the centre of the agenda. It’s not just about being seen to be doing good any more, it’s about making it integral to your strategy. While consumers become more global in reach and understanding, they value “local” more than ever. Having a connection to place is likely to be more important to successful brands and businesses.