Ray of light for hospitality: will 2024 see the next productivity boom?
Will 2024 provide a real opportunity for the next great productivity boom in hospitality sector?
With more and more innovative and intuitive technologies becoming available to the hospitality sector, there is a real opportunity for the next great productivity boom. While people shortages and rising costs remain a primary concern for business operating in the foodservice sector, lack of resource means technology is becoming an essential ingredient in the battle to free up staff and improve productivity.
I was fortunate to see Kate Nicholls, CEO of UK Hospitality, speak at a Prestige purchasing event in December last year. Interestingly, Kate highlighted that the UK hospitality vacancy rate had reduced from 12% to 8% in the last year. She also flagged that whilst this is positive news, it is worth considering that these statistics are made up of 99% SMEs and, that number is further tarnished by the sheer number of businesses that have had to close their doors due to the harsh economic environment.
However, I believe there is a ray of light for the hospitality industry as we move into another election year. During her presentation, Kate also shared that through UK Hospitality’s long-standing engagement with the labour party, the party sees the foundational economy as fundamental to their manifesto and hospitality being key to that.
From a cost perspective, food inflation is gradually decreasing. Inflation measured by the CGA Prestige Foodservice Price Index (FPI) fell once again in November to 15.0%, having fallen by 6.2% pts since its peak of 22.9% in December 2022, and is at its lowest level since July 2022 (source), compared to the Consumer Price Index at 8.5%. As we continue to navigate these challenges, the sector’s resilience and adaptability around embracing new technology remains key to thriving in this fast-paced landscape.
Progressive technology brings with it great opportunities for the next productivity boom. Many experts believe that hospitality is lagging behind the technology adoption curve. I raised this at an event back in November, you can watch the full recording of my talk here but, in the meantime, here’s a very high-level overview of what I spoke about:
Technology and the hospitality industry adoption curve
The traditional technology adoption curve shows how those who are earlier to buy into a new technology are more willing to take risk and pay for vision. Those later to adopt, are less willing and technology needs to improve, in terms of benefits and complexity, and become more cost effective to move along the curve.
In hospitality, the adoption curve – as you can see below - is slightly skewed to the right; whilst people within the sector are less willing to take risks and change how they do things, considering the constant pressure to meet at least three deadlines per day, technology is not evolving quickly enough to encourage the change needed. As such, hospitality technology is significantly underinvested compared with other sectors.
The difference between the investment levels across sectors is staggering as the chart above shows. But what is the comparative opportunity for investors and why the underinvestment in hospitality? Largely, it is due to the perception of the fragmented nature of the industry; the sector is very regional with SMEs, making it challenging to hit change at scale.
The chart shows just the 2022 figures. Yet, when you consider the accessibility of new technologies and the tools available to boost productivity in the previous year, (i.e., ChatGPT 3.5 was released in November 2022 and gained 100 million users in a few months), arguably now is as good a time as any to put that money to work for technology investment in hospitality. Hospitality tech events, like the one I attended in November, have made it easier for people to interact with computers in a natural and more intuitive way, build greater confidence in purchasing decision-making, which will have direct and indirect impacts on the sector, including on how operators interact more productively with technology.
To make the most of this opportunity, relationships between technology providers and operators need to evolve and become more partnership- focused rather than transactional. Operators need to understand that technology providers must be supported to build products that are accessible and inclusive to all within the sector, and in doing so they, and the wider sector, will achieve greater outcomes in terms of productivity.
In summary, for technology adoption to flourish and lead to greater innovation across the hospitality industry, businesses need to be more open minded, less risk-averse and more accepting of how it can change many of the day-to-day challenges. Technology providers must also become more accessible and inclusive to ensure product design efforts move the hospitality industry along the adoption curve. The next productivity boom in around the corner - bring on 2024 and beyond!
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