Hospitality Needs To Follow Retail And Raise Prices
SMEs in the hospitality sector should consider following the New Zealand retail sector's example and increase prices, advisors urge.
Business conditions aren't going to get any easier after Covid-19 fundamentally changed the business landscape, says BetterCo director Justin Keen. Geographic changes brought about by so many consumers abandoning the CBD in favour of suburbs, as well as shrinking supply – due to restaurants and food outlets shutting shop – will make for a tough 2021.
"My advice to hospitality businesses is that they need to get competitive. Businesses that get more strategic, improve their customer experience and put up their prices are more likely to have a better year.
"The casual approach adopted by some hospitality businesses in the past won't wash anymore. It remains a concern when we see so many hospitality SMEs that don't know what they're earning week to week, or even what they need to earn."
Keen says that businesses that are not getting the foot traffic and find themselves just limping along each week, living hand to mouth, would be better off closing.
"If, however, you're in a good location and you have a handle on your finances, you may stand to benefit from having fewer competitors."
Steps to increasing prices:
- Calculate what you want to earn
Understand how much you currently earn, what you want to make and what you need to achieve and work backwards from there.
"Once you have a desirable turnover number, factor in your costs like staff, food, drink and rent. Then calculate how many customers, and at what price, you need through the door each day, week and month," Keen says.
- Maintain financial visibility
Put in place cash flow forecasting and monthly financial reporting and keep a close eye on the numbers.
"Monitor your financials closely. Know what you are earning and be in a position to notice changes sooner rather than later."
- Get strategic
In tough times it pays to get strategic with your business by improving the customer experience – small changes can make all the difference – and step up your marketing.
"You can't rest on your laurels in this environment if you want to get paid," says Keen.
For more information: https://www.betterco.nz