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Morning Briefing for pub, restaurant and food wervice operators

Fri 11th Sep 2020 - Friday Opinion
Subjects: Ensure the curtain doesn’t fall – lessons from the panto sector, landlords must be willing to flex, marketers’ time to deal with rich data deposits, grasping the omni-channel opportunity 
Authors: Philip Kolvin, Glynn Davis, Ann Elliott, David Charlton

Ensure the curtain doesn’t fall – lessons from the panto sector by Philip Kolvin

The government is facing two conflicting narratives. First, saving the cultural sector and town centres. Second, heading off a second wave of the virus. These came to the fore in a meeting between culture industry leaders and the Department for Culture, Media and Sport (DCMS) select committee last week. The story from the world of theatre reflects and reinforces the challenges of the hospitality industry. A concerted approach is imperative.
Top cat Lord Lloyd Webber said the key ask was for a reopening date. He said this had come too late for this year’s pantomimes, which represented 80% of the annual income for many regional theatres. He said it takes eight months to get a musical on, the reality being that if he cannot stage productions in the UK, he would need to look elsewhere. If the theatre industry is lost, the country and its tourism suffers and one million people are out of work. 
He stressed that theatre could not operate with social distancing. He explained that, for large shows, the investment is such that, even at full capacity, they could not break even for at least two years. He had run Phantom of the Opera to full houses in South Korea during the pandemic and proposed to the secretary of state and Public Health England a pilot at the London Palladium to show that safe measures could equally be implemented there. These would include contactless ticketing, timed entry, thermal imaging, one way systems, face masks, sitting facing one direction (as in aeroplanes), in-seat service, increased cleaning regimes, air-handling systems and fogging. However, rather than a full capacity test, this translated into a social distanced pilot that simply proved such operation was economically unviable. 
He expressed consternation that, in terms of social distancing, theatres are treated differently from aeroplanes with the government encouraging the latter but not the former. He had never been given an explanation for the rationale.

Lord Lloyd Webber was critical of aid systems that paid for buildings to stay closed. What was needed were stimulus payments enabling them to reopen safely and put on productions. He emphasised that theatre is crucial to the tourism reputation of the UK and employed one million people, but the industry was now at the point of no return.
Watching it, the parallels with the pub and nightclub industry are plain, with the former open with strict social distancing and the latter not open at all. If nightclubs cannot open at full capacity in the key Christmas period, the impact will be swift, brutal and permanent. Like the theatre industry, they have commissioned scientific work, in their case from the Institute of Occupational Medicine, showing they can reopen safely using a hierarchy of measures and are begging the government to grasp the nettle.
The simple truth is that while there is a single case of coronavirus in the country, assembling a crowd carries a risk. If the response to the risk is to shut the economy entirely, sector after sector will fold. Therefore, we have to move from risk avoidance to risk control. That has been the government’s response in the case of offices, retail and transportation. The question must now become what practical measures are needed to respond to the risk to enable full capacity reopening. The time to answer this question is right now. 
Philip Kolvin QC is a licensing barrister who is working with the nightclub industry on its response to the coronavirus.

Landlords must be willing to flex by Glynn Davis

Chatting to leading property player Roger Madelin recently, it was clear he was proud of the fact that in the early 1990s, when he was running property developer Argent, the company’s Brindleyplace project in Birmingham had been the first mixed-use site to introduce turnover-based rentals for retailers and hospitality companies.
He went on to use this innovative form of rental on the King’s Cross development and it will also play a major role in the Canada Water redevelopment that he now heads up for British Land. But although such forms of rental have been around for some time, they are hardly commonplace because landlords have tended to view them negatively.
Not only does it expose them to any downside in tenants’ trading but the uncertainty of this income makes it tougher for them to then value their properties and for the pricing of their debt obligations. It also strips away the comfort of the traditional long-term, upward-only rent review to that landlords have become far too wedded over the years.
The current circumstances have ridden a coach and horses through this scenario and retailers, along with leisure and hospitality companies, are now demanding changes to their lease arrangements. A survey undertaken in early July by Barclays found that among the leaders in the leisure and hospitality sector, 26% stated they would be having conversations with their landlords. Almost a fifth were looking to move to a turnover-based rental model and 15% wanted to move away from upwards-only rent reviews. 
Interestingly, 13% were looking to offer landlords shares in their businesses in exchange for rent. It is just this sort of innovative solution that Madelin expects to see more of in the industry as rent agreements become much more personalised to the individual tenants. This would follow what is much more standard practice for office tenants. 
The major property landlords have come to recognise the game is up for the present situation with historical lease arrangements. The likes of Landsec, Shaftesbury, Capco, Cadogan, Hammerson and The Crown Estate all intend to either include elements of turnover-based calculations in their rental agreements or introduce it on a case-by-case basis. 
Mark Bourgeois, managing director of UK & Ireland at Hammerson, neatly encapsulates the current thinking: “The traditional approach of basing rent on historical market evidence rather than long-term affordability has created tension between property owners and retailers at a time when partnership and collaboration is needed more than ever.”
Sadly this message has failed to get through to certain landlords. David Page, chairman of Fulham Shore – which operates the Real Greek and Franco Manca chains – reckons 85% of property owners are being “reasonable” while the remaining 15% are being “stupid and nasty”. The worry with this last grouping is not about any reluctance to introduce turnover-based rentals but is about their unwillingness to offer some sort of waiver, relief or lower rentals in relation to the backlog of unpaid rent that has built up over the period when many outlets have been closed.
Milk & Honey is one such business that is suffering from its landlord being in the unbending 15%. Despite its founder Jonathan Downey having paid the landlord almost £4m in rent over the 18-year lifetime of the bar, the property owner is unwilling to offer any relief on the unpaid rent and this is forcing the closure of the award-winning Soho bar.
It is clear the transition of the property industry to a more widespread use of turnover-based rentals will give operators the greater flexibility that their businesses have long required. This will represent a major help when times are tough and, for landlords, it will ensure they share in the upside when their tenants go through good trading times. 
Such an arrangement proved to be a success many years ago for Madelin and the Brindleyplace development but far too often the property is incredibly slow to make changes and adapt its models. It will literally take a pandemic.
Glynn Davis is a leading commentator on retail trends

Marketers’ time to deal with rich data deposits by Ann Elliott

I remember talking about a future “customer digital journey” with senior marketers absolutely years ago when we wouldn’t only be considering a customer’s physical journey (parking their cars, walking to the restaurant, being welcomed and seated, ordering, being served, paying the bill and leaving) but also their digital one too. That time has now come with a speed and intensity that no one would have dreamed of then. 
The sector has moved from a situation where, less than 12 months ago, maybe only 20% of customers might have booked a table (and then only on a busy Friday/Saturday/Sunday lunch) to one where every customer could be asked to book for every daypart in order to comply with test and trace and avoid customers coming up to a bar. One operator I spoke to has moved from 10% of covers being booked pre-covid to 90% being booked last week.
Customers are now being asked to book online for every bit of space – inside/outside/balconies/on the pavement/in beer gardens/in the bar/in booths. You name it, they have to book it. Reservation systems now have to be incredibly flexible to handle the variety of scenarios offered by operators.
This means that databases are growing exponentially, not only in terms of numbers of people, but also if operators have something like Wireless Social in their sites, in terms of the information they can collect via social on their customers. This is an absolute dream for marketers. 
This richness of data allows operators to really drill down into the detail, to segment their customer base to the nth degree and then to micro target their social campaigns to these very specific segments. This can all be automated and measured. It is incredibly cost-effective marketing.
QR codes and order and pay at table apps help streamline the customer’s digital journey even further. No printed menus, shorter menus, no table service and saved labour costs for the operator and, potentially, even more customer information. 
Customers can now (theoretically, perhaps) book ahead, scan themselves in and on to their table, receive a voucher, order their food and drink, pay for their food and drink, review their experience and order the same food again via Deliveroo, all on their phone. They may only ever, in the future, see the person who brings food and drink to their table.
This might not be the hospitality we all love and want but this might be the hospitality scenario that many customers would like. It may prompt some of them to consider the value equation though – what are they really getting for the premium commanded by eating out of home?
I think everything is up for grabs at the moment. The old world has disappeared and its gone much quicker than many of us would have thought or wished for.
The risk of course is that, with marketing departments being significantly slimmed down, there is little resource to analyse, understand and react to this amount of data. They have to find a way though. Marketers are in charge of the real customer journey because they now have the information that they always dreamed of having. It’s theirs and they have to use it wisely.
Of course, there are many operators and brands out there that have collected test-and-trace data by hand, do take walk-ins, don’t have customer Wi-Fi, still have printed menus, haven’t yet adopted order-and-pay technology, don’t deliver and don’t offer click and collect or any combination of these. They may have taken a very conscious decision not to build a customer database or to communicate with digitally with their customers. 
Undoubtedly, there will be a place for these in the near future. Before too long though, most customers will be demanding (and expecting) that operators have thought through their end-to-end digital journey and made it work for both parties. We ignore their voice at our peril.
Ann Elliott is a hospitality strategist, connector and adviser

Grasping the omni-channel opportunity by David Charlton

Remember the days when customers strolled through the door into your venue and ordered or purchased in person? Those were simple times. Now, the world is far more complicated. Now, customers want to engage with your business from anywhere, at any time and via any device. Not only that, they expect the process to be frictionless across all these different channels. Given the challenging operating climate we all face, hospitality businesses are under pressure to get this right – and fast.
It pays, in the long run, to be where your customers are. Conceptually, an “omni-channel” approach is straightforward – the whole is greater than the sum of its parts. It involves removing any barriers a customer may have to ordering so you can give them exactly what they need, regardless of time, location and device. In essence, it’s all about making customers’ lives as easy as possible.
While an omni-channel approach has been a reality in other sectors for many years, hospitality has lagged behind. As an example, when I want to book a hotel somewhere, I usually try and use because I’m a big fan of the experience and loyalty scheme. It’s my preferred channel for completing the transaction. If a hotel isn’t listed on the platform and not visible to me, they are likely to have missed out my reservation. Taking it from the other side, if I was a hotel revenue manager selling rooms, why wouldn’t I want to be listed on every available channel, with maximum visibility to potential guests to increase the possibility of a booking? So, as well as, I’d make sure I was on Trivago, Expedia, TripAdvisor… you name it. If that’s where my customers are, that’s where I need to be. And then I’d look at which channel is delivering the most for my business and optimise my approach based on that data.
This mentality is slowly creeping into our sector, or at least it has done for delivery, where it’s no surprise to see a restaurant listed on at least two of Just Eat, Deliveroo or UberEats. My overarching point is that consumers are in charge of their own experience and operators should realise the need to take a consumer-centric approach in order to encourage brand loyalty.
During the lock-down period, we saw businesses pivot to delivery or click-and-collect services and in the run-up to reopening, a mobile order and payment solution became an absolute necessity. Consumers have become far more comfortable engaging with restaurant brands in multiple ways and across multiple channels. This shift in behaviour is likely to remain for the long term, meaning it’s critical that customers enjoy a slick, personalised and feature-rich experience regardless of which channel they use.
This new landscape offers the opportunity for a fresh look at the relationship between operators and technology. While the ability of a mobile order and payment solution to facilitate venues in operating safely and within social distancing guidelines has been obvious, as we move forward, it then becomes a question of evaluating how technology (and we as suppliers) can drive top-line sales as well identifying the channels that offer the most return on investment and reduce the cost of customer acquisition.
My view is that there is real momentum gathering across the sector as operators understand the benefits of switching on as many ordering channels as possible. The key to this is putting your customer at the centre, which means working with more than one solution provider for features like order and pay, click and collect, order management and delivery. The push back in the past from operators has been that it was labour-intensive and took significant management to switch on these channels. However, with EPOS integration now built into so many products, that needn’t be the case and should, over time, become the norm rather than having to place your bets with a single solution.
In the past, there was something of an industry-wide phobia around using apps; the very suggestion of introducing an “app” immediately caused some managers and licensees to recoil. People doubted whether an app would even work, or that it was a “nice to have” rather than a necessity. And they may even have been correct. However, apps are no longer solely the preserve of the bravest of the brave, who can afford to lose custom should the technology not take off. Creating a new behaviour is no mean feat but the reality is that, as an industry, we have now been presented with an opportunity to rise together – the proverbial “new normal” has made it a necessity, and most operators who have been fast to adopt the technology are already benefiting from increased spend and operational efficiency, while resolving a pain that they didn’t want to accept that they had, or simply never knew existed. 
Recent evidence has countered the common pushback that it’s too costly to take the “omni-channel” approach. A study by Google found customers who buy through multiple channels have a 30% higher lifetime value than others, good news for operators who choose to remove barriers and make ordering easier and more engaging. Plus, giving customers multiple ways to order offers multiple opportunities to build your brand, a greater degree of visibility among various demographics and improved analytics to better understand customer preferences and behaviour.
It then becomes a play for the consumer and how rich and engaging an experience a particular platform provides. As a technology supplier, our goal is to be in a place where we offer our community a number of useful and enhanced features they can’t access elsewhere – and which encourage repeat ordering and higher spend per visit.
As we all learn more about running our businesses as the sector “copes with covid”, the battle for the customer will increasingly be driven by technology. Those operators that move quickly to switch on multiple channels in the right way will be the ones who capture next generation loyalty and achieve a competitive edge.
David Charlton is chief commercial officer at OrderPay

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