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Morning Briefing Strap Line
Fri 29th Jan 2021 - Friday Opinion
Subjects: Four themes operators must adapt to, you say it best when you say nothing at all, needs of the sector are disparate, four ways loyalty schemes will change in 2021, plan your digital return
Authors: Graeme Smith, Mark Wingett, Ann Elliott, Alison Vasey, Dan Brookman

Four themes operators must adapt to by Graeme Smith

There is light at the end of the tunnel. With a vaccine programme being rolled out and news that investment vehicles and experienced operators, including ex-Greene King chief executive Rooney Anand, are circling the sector, thoughts have turned to how businesses will bounce back. Of course, there will be further bumps in the road to contend with. Our latest Market Recovery Monitor, in partnership with CGA, shows almost 6,000 sites permanently closed their doors last year. Without further substantive government support, particularly on the issue of rent debt and the continuation of current support measures such as furlough and rates and VAT relief, this figure may well be the tip of the iceberg. But hospitality will reopen with a great deal of pent-up demand and there will be opportunities for ambitious operators through the freeing up of property and labour, and reduced competition. 
Throughout the pandemic, we have seen the acceleration of a number of existing trends, from the explosion of new sales channels to technology becoming moving higher up the agenda. Here we touch on four key themes operators must adapt to:
Omni-channel strategy
Diversity of sales channels has been a key lever in enabling operators to battle through the crisis and could be crucial in providing much-needed momentum as the sector starts the long road to recovery. From Pizza Pilgrims to Cote, and Dishoom to Greene King, companies have moved into the delivery and at-home market for the first time or with renewed vigour. The question they have to answer is how much will these play a part going forward? The pandemic has brought a heightened sense of needing to be where the consumer is. When the public is finally set free from lockdown, operators will need to assess what level of focus and investment is appropriate for these new revenue streams in the future. But what is clear is that delivery is now established in the lives of customers and operators need to determine their strategy to make the most of it. 
Managing cost has become a crucial daily battle, bringing a renewed focus on the digitalisation of the sector. Trading under specific restrictions has underpinned this, with a sprint toward order and pay solutions, kiosk ordering, online booking and cashless payments. These all bring efficiencies and ability to drive sales growth, meaning they are very much here to stay. The next stage is likely to feature further automation with a number of operators, particularly in the QSR and fast-casual segments, already exploring how to make the consumer journey more frictionless, typically through pre-order, collection points or digital screens. Others are investing in automation back of house, with tech development focused on putting together multiple orders at high speed. We’re also seeing a rise in drive-thrus as a location type, plus the likes of Five Guys and TGI Friday’s adding the option of “curbside” pick-up to their offer, bringing another layer of personalisation.
Experiential focus
Absence, they say, makes the heart grow fonder. The conviviality and social experience provided by hospitality can’t be recreated online despite the best efforts of the tech titans. We can expect a huge uptick in trade when restrictions are lifted and positive sentiment toward the sector should be at an all-time high. But the landscape will, of course, look very different as operators respond to the number of people that continue to work from home, perhaps targeting residential-led areas over retail-led ones. With many traditional bricks and mortar retailers set to only have an online presence, it’s worth noting how many experiential brands have already started to secure these sites, including Gravity, set to make its London debut in the summer at Southside Shopping Centre, Wandsworth, with an 80,000 square foot entertainment venue in the former Debenhams. Leisure is an increasingly important component of a complete destination and more landlords will be looking at these types of models as part of a blended approach to reimagine their property portfolios. 
Staying authentic
How your business behaves during times of crisis sticks long in the memory of customers and your teams. Companies across all sectors have had to put their best foot forward in the past year and authentic leaders have been able to strengthen these bonds and their corporate reputation, whereas others have been shown-up. This materially impacts brand perception and value so cannot be overlooked. Employees, future recruits, potential investors and customers will scrutinise how you acted during and coming out of the crisis, and make choices based on that.
It’s hard to imagine an immediate return to business as usual for the sector but, then again, when consumers do finally come back, they will find comfort in the familiar and a new-found appreciation of eating and drinking out. 
While elements of the hospitality landscape will have changed forever, in many cases this will make for a more efficient and more resilient industry for years to come. 
Graeme Smith is a managing director and head of hospitality and leisure at AlixPartners
AlixPartners is a Propel BeatTheVirus campaign member

You say it best when you say nothing at all by Mark Wingett

Since the advent of US new channel CNN in 1980, the debate over the pros and cons of the 24-hour news cycle has been waged. Prior to this phenomenon, people were accustomed to getting their news typically at the start and end of their days, through newspapers, radio and televised evening news. Throw in the advent of social media, and news is now an all-encompassing part of our lives. According to estimates by eMarketer, total media time (online, social and print) increased by almost 5% in 2020 as we sought out the latest information and updates on the pandemic. I can only imagine this has further increased during the past month, as we again find ourselves in lockdown. How many people across the sector used to watch Prime Minister’s Questions so avidly as they do now to find any signs of news connected to the sector? The boredom, frustration, anger, uncertainty and lack of sense of purpose is hitting the hospitality sector harder now than at any time in the whole of the crisis. Many businesses remain in hibernation, all cash burn stripped down to a minimum. Many are being run on skeleton staff. Anxiety levels are peaking, so the thirst for news – especially any positive signs – has never been greater. Conversely, the hit that negative news brings, is also felt more acutely. Psychologically, we are all over the place. And for the next month in the run-up to the Budget on 3 March that roller coaster ride could get even more extreme.
When the crisis began back in March last year, like the rest of us, I wanted the prime minister to be out front and centre most days showing leadership, providing clear and calm messaging, and showing us the way forward. These were new waters to navigate for everyone, so like everyone else I was behind them; I desperately wanted the government to succeed and was prepared to give a lot of leeway to any initial mistakes made. That is the nature of crises and making decisions in real time. Nearly a year on, however, that leeway has evaporated (it was used up long ago), especially as the same old mistakes on messaging continue.
Yes, the constant leaking of stories is one thing, but it’s the flip-flopping that is even worse. We are all struggling much more now than last year, and the impact on our mental health of this should not be underestimated. The constant throwing out of possible strategy and restrictions changes to see what opinion is like, without thought of how they impact people’s livelihoods also continues. I now dread seeing the words “Boris Johnson is to hold a press conference at 5pm”. It has got to a point that nine times out of ten, what he says, or doesn’t say, implies, or doesn’t imply, makes things worse/more fraught/more confusing. Although he has, at least, tried to rein in the optimism bias in his most recent updates. Journalists, with 24 hours of news to fill, are desperate to find new angles and, unsurprisingly, I can’t blame them for that. Thankfully, they have an almost limitless supply of ministers and scientists (how many members of Sage are there?) to quench that thirst. Each one adds to a merry-go-round of opinion, a cocktail of negative and positive news that we have all become addicted to, complete with the extreme highs and lows that brings. The fact some scientists are now saying – what we all kept pointing out – is that pubs, restaurants and cafes have never been coronavirus hot spots, and that there is no “hard evidence” the 10pm curfew worked, adds to the growing frustration across the sector.
Of course, the flipside of that is what if nothing is said? A vacuum is created and speculation, correct or incorrect, will begin appearing in that space. You could argue the government can’t win, but it can be better, a lot better, at reading the field of play. We had a classic example of this week. To help the sector bounce back, the government will need to extend the VAT cut and business rates relief until, at the least, the end of the year – that is the minimum requirement to keep hospitality viable and provide hope that many can be there to lead the recovery. The majority of the industry has been closed (or massively restricted on trade via tier two status and upwards) for most of the time in which the VAT reduction has existed, so this “support” has yet to have any significant impact. The message on these two points is being made to the government daily, from sector leaders and associations, behind the scenes and in public.
So, it was no surprise that when Treasury minister Jesse Norman said this week the government has “no plans” to extend the cut to VAT, it would create an outpouring of anger and frustration (I admit to sharing the story on Twitter such was my incredulity at what I read had been said). So, some context... firstly, it is very hard for a minister/politician to say “no comment”, they will be accused of not being on top of things or being evasive. Secondly, as Kate Nicholls, UKHospitality chief executive and always a calm reference point in any storm, pointed out, “no plans to” is a standard response to any speculation in advance of a Budget statement on 3 March. In the same debate, Kemi Badenoch, exchequer secretary to the Treasury, said business rates plans would be outlined soon, which hardly got a mention. It is also worth remembering that, with this government especially, “no plans” does not mean it will not happen.
On the same day, chancellor Rishi Sunak warned Tory MPs the cost of the new coronavirus bailouts they are demanding could reach £30bn, and urged patience among backbenchers, stating that additional measures would be unveiled in the Budget on 3 March. Sunak was faced with calls to approve a range of new measures, as well as extensions to existing schemes in order to support both businesses and families, including the continuation of the cut in VAT and an extension to business rates relief. Sunak said he would review all economic support schemes at the Budget. “I have put in place a series of measures but I have always said that we cannot protect or save every job and every business,” he said. With every week that goes by – and with the lack of confirmation of support and growing uncertainty, not to mention dwindling cash reserves, it feels like he and the government have accepted many more businesses will perish. How much collateral damage are they willing to accept? He has a month, give or take a few days, to come up with a Budget to give hope to a sector and save as many jobs and businesses as possible. It looks like he will take all of that time to do that. There doesn’t seem like there will be any earlier bones thrown out to ease the tension and frustration mounting across the sector, apart from the expected number of leaks the day before.
On Wednesday (27 January), the prime minister said he hoped easing of covid-19 restrictions could begin in early March through a “gradual and phased” process. Johnson had been under pressure to release a date when lockdown would end yesterday and said he would give specific details on how and when it will take place in the final week of February. Factors will include death and hospitalisation numbers, progress of vaccinations and virus changes. As expected, this confirms hospitality is unlikely to open before the end of March and, if another leak to the national papers is to be believed, pubs and restaurants will remain shut until May, which is probably a more logical timeline. We need them to get this right because no one wants to go back into lockdown, this must be the last one. As Nicholls said: “Priority must be to ensure all are capable of trading and restrictions are proportionate, pragmatic and focused on maximum health benefits and minimum economic harm with support.” The government needs to let us understand the conditions that need to be met in order for the easing of lockdown to commence. Let us understand the roadmap to restriction-free trading. Let us help.
Of course, an opening date would, for many, become sadly irrelevant unless support is forthcoming in the Budget. It is going to be a long five weeks ahead but maybe, for that period, we need to cut out the white noise of speculation, government leaks and U-turns, and keep our eyes on the prize. The government must be applauded for its handling of the vaccine rollout, it is almost like Boris sees the success of this as his last-minute winner, hoping it will help brush over the other 89 minutes of delayed decisions and wrong steps. Faith in how this crisis has been handled has slowly been eroded over the past few months but we must hope that having brought us this far, the government will shut up, front up and put up. They will have seen the unemployment figures, increasing levels of business closures and impact on GDP, to know that the alternative of not going the extra yard now isn’t worth considering.
Mark Wingett is Propel insights editor. This article first appeared as a Premium Opinion

Needs of the sector are disparate by Ann Elliott

I don’t envy Kate Nicholls’ job as chief executive at UKHospitality. If it was difficult before, it’s really challenging now. In lockdown one, there was real clarity and focus on what all operators wanted. Now, in lockdown three, there is far less cohesion and agreement over what different operators need, largely due to disparities in performance.
For instance, quick service restaurant (QSR) brands have performed well over the past 12 months (McDonald’s UK results on Thursday, 28 January, would bear witness to this) as have brands that have become more heavily out-of-restaurant-focused, including click and collect, delivery and drive-thru. Potential “dine-in restaurant” sales have been replaced by “eat at home” sales. While these QSR brands would undoubtedly want restaurant sales to return, their financial situation is better than many other sector members. Of course, they would like the government to continue to support them with an extension of the VAT cut and rent relief but they are doing OK, generally. It is difficult for them to speak about the situation from the same page as the rest of the market.
Pubs are in a very interesting space right now. It’s tough to argue that it is a sector in difficulties (which it patently is) when there is so much interest in buying distressed assets. While pub sites might be closed and teams currently furloughed, there is every indication good sites will be bought and reopened and teams re-employed. Of course, the issue here is cash burn. Again, VAT and rent relief are critical but not as critical as the reopening of pubs, in general. And doing this only once. Everyone I have spoken to would prefer to open later, in one go and under one set of rules rather than earlier with a complicated tier system and the possibility of quick closure. Under-promise and over-deliver on openings please Boris.
Contrast their position with that of contract caterers who used to have significant revenues generated by the business and industry segment (employee dining) or the sports and leisure segment (customer dining). There is precious little business to be had here, especially in city centres, and no immediate return to working from offices or going to sports events, on the horizon. While they may still be providing services to the armed forces, judiciary, prisons, education and healthcare – it’s often low-margin business and any growth here does not counterbalance the sales and profit decline in their other divisions. What they need is not only continued government support on VAT, rates and furlough but life back to normal – something the government simply cannot promise at the moment.
The casual dining sector has had mixed fortunes in UK hospitality at present. Many have undergone some form of financial restructuring and have rents sorted, leases agreed and poor sites sold. Some have moved successfully into new business areas. There may be some cash burn but they can mostly struggle through until May. Others are not in this situation with rent debt being a huge unsolved issue – one that will see many go to the wall in the next few months. It is difficult to have a unified message on rent debt when not everyone is in the same position.
And then, of course, there are coffee shops, motorway service stations, experiential sites, bowling alleys, holiday parks, caravan sites, hotels, bed and breakfasts and tourist attractions. All of which have slightly different demands of their industry body and the government.
Ann Elliott is a hospitality strategist, connector and adviser

Four ways loyalty schemes will change in 2021 by Alison Vasey 

Perhaps you think the pandemic has put paid to loyalty schemes, at least for the foreseeable future. Loyalty schemes are, after all, about making customers feel special – hard to do when the doors are closed; they cost money to run at a time when cash is a more precious commodity than usual, and uncertainty reigns over when customers might be able to redeem any accrued rewards.
However, findings published in our latest GO Technology report, in partnership with CGA, tell a different story. With consumers eager to support their favourite businesses and get back into venues in 2021, this year could, in fact, be a prime opportunity to launch a new loyalty programme. With the pandemic having changed consumer behaviours though, a successful loyalty scheme will need to look a little different from anything offered pre-pandemic. Here’s four ways to make a success of a loyalty scheme in 2021:
1. Apps not cards 
A mere 35% of hospitality operators surveyed said that their current loyalty scheme was card-based, with more than half (52%) adopting loyalty schemes powered by apps. This is borne out by our own experience in recent times – over the past 18 months, we’ve not had a single enquiry from operators wanting to implement a card-based system, indeed all of the loyalty schemes we have delivered in that time have been digital.
This shift to digital loyalty solutions is very likely to continue in our opinion, a result of increased consumer uptake and comfort with order and pay apps and online ordering during the pandemic. Not only does this offer customer convenience but could drive sign-ups and repeat orders. By having applications integrated into one platform, the operational burden of linking the solutions and data together is removed because the technology is doing the hard work for you.
2. Discounts will drive downloads
For the majority of people, discounts on food and drink are the main driver for using a loyalty app, with 48% looking for a percentage off their bill, 45% wanting a cash benefit, while 37% would like free food and drink after reaching a set spend. Non-monetary perks are relevant too (14% like a loyalty scheme to give them preferential booking and 11% want to be given queue jumping privileges) but with the economic outlook looking far from positive, unemployment on the rise and job security a concern for many, it seems clear that, in the future, more sophisticated programmes will take a back seat to discount-driven rewards – at least in the short to medium term.
3. Integrate to generate profit
Once consumers start to use a loyalty scheme, they tend to make good use of it – about half say they do so almost or every time they visit a venue, so it makes sense to ensure your scheme is integrated with other digital products. Investing in a loyalty solution that integrates with your EPOS and booking functions, for example, will reap many benefits, not least that members will be visible to staff at every point of the customer journey.
Further integration with your existing channels, such as with an order and pay app, offers further benefits. Giving delivery customers access to loyalty benefits as trading restrictions continue, for example, and then, when we can finally open our doors again, making it simple and easy for those downloading an order and pay app to join your loyalty scheme as part of the sign-up process.
4. Powering insight
A major advantage of the shift to digital for operators is the valuable insights that can be gained from harvesting the available data. Visiting patterns, purchasing habits and general consumer behaviour can be collected and collated. This can be used to inform and deliver tailored deals and rewards to each customer, driving engagement and sales directly from the loyalty scheme, with the data then used to deliver more engaging and more targeted marketing campaigns. Using the insights alongside other customer data can also result in more informed longer-term strategy and planning to help future-proof your business.
Alison Vasey is group product director at Zonal
Zonal in a Propel BeatTheVirus campaign member

Plan your digital return by Dan Brookman

I think we all might have hoped 2021 was going to start a little differently. The pre-Christmas news of vaccines was quickly overtaken by the new variant and lockdowns. Any optimism for launching into a new year with renewed vigour has quickly been forgotten. 
We must now, with the vaccinations under way (and seemingly going well), look toward spring/summer and prepare to maximise the forthcoming opportunities. 
Covid has been about survival. It’s been about being entrepreneurial; it’s been about riding out multiple back-to-back storms, continually rolling over the waves and taking a big breath as you go back under, praying that you get another chance. It’s been, and continues to be, exhausting. 
Without a doubt, behaviour has changed, both with consumers and for operators:
● Brands have had to evolve and we’ve seen some great things. There’s a much bigger sense of community, there’s been more giving and support both internally within businesses and locally. More empathy. There’s going to be many people to thank after this, from within the industry and outside. Those on the front line who have continued to sacrifice so much. 
Hospitality can and should lead the way to reward, and to bring the nation together in saying thanks. We’ve been the most vocal from all the sectors (thanks Kate and UKHospitality and the Night Time Industries Association) and it’s almost time to change the rhetoric to back up the assertion hospitality is central to the culture and well-being of the UK.
● New channels of revenue have emerged, with delivery, delivery-only kitchens, cook-at-home kits, retail, subscriptions and product lines. The sector needed new revenue, now it just needs to retain them. I, for one, would be disappointed if I can’t buy a box from Hickory’s at Home, pizza in the post from Rudy’s or Dishoom bacon naan in a year’s time. 
● Technology adoption has leapt forward, pay-at-table, “curbside” collection, click and collect and digital gift cards are now the norm in most businesses. This, in turn, provides us even further insight into habits as well as building data.
● The boom as we come out will be considerable. By Easter, the government has indicated everyone aged over 65 could be vaccinated against the virus. The government worries, in fact, the public will be far less inclined to follow the lockdown rules once vaccinated so the tiers may be back sooner than we think.
The adoption of technology is important, not only to engage consumers open to change, but there has also been a void in new data gathered during this period from Wi-Fi, booking, loyalty apps and feedback.
So how can you prepare for the strongest possible digital return?
1. Re-engaging customers: engagement rates will have taken a bit of a hit over the past 12 months; journeys have been turned off and on and, in some cases, sequences shortened. You will need to start working on re-engagement campaigns to bring your customers back into your brand fold. 
There’s going to be a deluge of activity to try to lure customers to brands. Those returning to offices are likely to be doing so slightly differently, maybe for fewer days a week. The urge to eat on the run may reduce, in favour of catching up with friends and colleagues that they haven’t seen for a year. Competition will be fierce. 
2. Review customer journeys: now’s the time to think like an e-commerce business and build out more triggered journeys. You have new technology that can be marketed to customers within the journeys. For instance, think about serving a journey that can only be redeemed through your click-and-collect or order-and-pay solution. You’ve invested in this new technology and, hopefully, it’s proven that it can help you grow sales (if it’s not, then you might want to look at a different solution).
3. Build a new customer base: back to the earlier point about decimated databases – now would be a good time to plan in a data boost. During the years, campaigns to recruit new customers have become less important with digital engagement growing, however, with the lack of channels this year, that’s not been the case. 
4. There’s probably never been a better time to introduce loyalty: with such a pause in consumer engagement, there’s never been a better time to think about delivering a simple loyalty scheme that drives up a frequency of visit. Many companies fail to implement loyalty because it ends up being too complex – keep it simple, steer clear of apps, make sure that it is accessible and dead easy for your customers and team to understand.
The past year has been extreme. We can only be grateful that if (when) it happens again, the world will be more prepared.
Dan Brookman is chief executive of Airship and Toggle
Toggle is a Propel BeatTheVirus campaign member

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