Jonathan Doughty, the “RLI Food Guy” is a “C level” executive in the foodservice and leisure industry with 45 years of experience and leadership in restaurants, hotels and global consulting. In this month’s column he looks ahead to 2024 and all that it has to offer.
We are now fast approaching the end of 2023, a year which has seen so much turmoil and upheaval around the world. With great sadness we have watched events unfold in Ukraine and Gaza, we have witnessed the severe impact of climate change and at the same time we have weathered the economic storms that have swept through so many countries with rampant inflation, huge utility costs increases, raw materials shortages and an ever changing and hugely challenging labour pool.
As an operator of a hospitality business you would have been forgiven if you had just shut up shop, gone home and accepted that it was all just too hard and there was little end in sight. It is true that in the UK, one small but important market, restaurant closures in 2023 reached a decade high level. The news is similar in the US with attention grabbing headlines pointing to mass closures of some of the nation’s big brands, including Applebee’s, Boston Market, Burger King, IHOP and Ruby Tuesday. It is easy to jump on the bandwagon and believe that the end of the foodservice world is upon us, but the reality is quite different, even for those brands.
Covid-19 has had a massive impact, initially by simply not allowing guests to use the premises. It drained companies of guests, it suspended operations and emptied bank accounts as funds were diverted to keeping businesses existing without their lifeblood, the paying guest. In some countries the governments and administrations stepped in to help and slowly but surely businesses emerged from those dark times, first serving delivery or takeaway only and then reopening fully. A lot did not make it, but many did and they were better and fitter afterwards.
Why is this important? It is important because Covid-19 has forced the hospitality industry to review everything that it does, to “deep dive” into their operations and costs, site strategy and procurement, technology and staffing. Everything, every day, every way. Nothing has been left untouched and the reality is that we are better for it, much better. The tragedy and the loss of life that the virus caused was appalling and its personal and social impact will go on for an awfully long time, but the impact that it has had economically and operationally is not all bad. We have learned to find more cost savings, better ways of interacting with guests, better staffing, much improved use of technology and a greater connection with our guest. In short, we had got to be quite lazy and conditions allowed us to make money quite easily, but Covid-19 brought with it a rude awakening.
So, looking at the last 12 months, it is impossible to be optimistic about the next 12 months right? WRONG…
I drew a lot of attention immediately after the world lockdowns were lifted for saying that people were going to come out and enjoy themselves and we were going to experience a prolonged period of high demand for leisure and pleasure.
I was right.
What I did not see was the cost pressures, labour shortages, supply chain disruption and the impact that these things would have. Prices have risen substantially, but I was right. Despite these cost increases, people have still gone out, still booked the holiday, still visited the leisure locations. Some countries around the world have seen menu price inflation over the last year in excess of 17 per cent, but still they come…
The changing work habits of the world, the home office, the local and low impact travel, rather than the major commute, have all had their impacts, but still they come…
In the “big 5” European countries spend levels on hospitality are back above 2019 levels, the highest before Covid-19. Monthly consumer spend is up, over four per cent on 2019 levels. The amazing thing is that this spend is coming from fewer people with fewer visits but spending more money. I think this is clearly pointing to a focus on “having a good time” and not just going out.
Globally there is a lot going on. The balance is shifting as countries emerge from Covid-19 and set out their stalls on their ambitions, focus and game plans. Saudi Arabia has a well-publicized 2030 plan to replace oil revenues with tourism and it is forward thinking, strongly supported and moving forward with huge momentum with numerous giga-projects and new ones being announced every day. This is ambition put into context, but at a time when the world is also looking for new locations, places to visit and more importantly new cultures, histories and cuisines to explore. Airports are refurbishing, extending and all around the world money is being invested in improving facilities and infrastructure.
So, to the outlook for 2024… I think it is quite simple but caveated with a clear statement that the world conflicts do not deteriorate further and we are all hoping and praying that they will end peacefully soon. We are going to see a lot of growth in 2024 and a return to higher profitability. Prices are up, volumes are up and “desire levels” are up. Costs are slowly coming down; inflation is beginning to behave itself and investment and development is returning. The labour market is still challenging, but we are working around that in many ways.
As an industry, we have learned how to find profit in hugely difficult economic and socio-political times and 2024 should be the year when the hard work starts to pay off. I believe the demand will still be there, with an acceptance of higher prices for the right quality and service leading to a POSITIVE outlook for 2024.
Here’s to 2024, may it be a happy New Year…
