The pressures the already notoriously volatile hospitality sector is currently facing are unprecedented. From rising inflation to National Minimum Wage increases, business rate rises and staffing challenges, the list goes on.  

“Hospitality also requires labour-heavy outsourced services such as cleaning, security and waste management services, so the impact of all these cost pressures flow all the way through the profit and loss statement,” says Alison Wong ACA, CFO of House of Gods Hotel Group. 

At the same time, consumer confidence is currently fragile, and consumers are being more careful with their money. All this is creating two-fold pressure, with the sector being squeezed at both ends from increased costs and more competition for consumer spend.

Kate Nicholls, Chair of UKHospitality, warns these challenges are forcing hospitality businesses to make difficult decisions, affecting jobs, investment and long-term viability.

“As a result, financial planning across the sector is increasingly focused on short-term cashflow, tighter cost control and scenario planning, often at the expense of longer-term growth,” she says.

Dave Nelson is Founder of Truffle & Thyme, a small wedding and catering event company. “The last six months have been dreadful,” he says. “Things have not picked up in spring as they would normally. There’s been a huge decline in catering and event enquiries. It’s much quieter than during the last three years."

He says these ongoing challenges make it much harder to do financial projections or financial business planning. Yet he’s hopeful he can weather the storm, not least because his lean operations will allow him to pivot quickly in response to market changes. 

The need for real-time analytics

The House of Gods Hotel Group, like others in the sector, are finding that software – existing and emerging – is helping them adapt. Wong explains that hospitality businesses are looking to get more from inventory and cost management systems to access more data and insight, due to the increased need to make weekly or even daily decisions. 

Like many large hospitality businesses, Wong and her team use inventory management systems to track stock and expected costs to improve operational efficiency and reduce wastage. For example, Mews, is a hospitality management system which provides point-of-sale and an inventory management module within it. It analyses invoices, deliveries, sales and recipes, and flags up mismatches.

“For burgers, for example, it tracks every item which makes up that recipe and compares sales. If actual costs differ significantly, the system identifies the mismatch, making it easier to spot issues such as over-portioning by chefs, excessive wastage or theft.” 

Data-led transformation across hospitality

The data-tracking technology available to businesses is transforming the hospitality sector, according to Wong. 

For example, Wong recommends Tenzo, a restaurant management and sales forecasting app, which uses machine learning algorithms, based on historical sales data and external factors such as the weather, to predict future sales and provide bespoke insights. For rooftop bars, the system might flag when it’s going to be particularly sunny and suggest putting on more staff members on the rota. 

“It will look at historic trends and identify that revenue spikes between the hours of say, 5pm and 8pm on a weekday during sunny weather. It might also suggest using this as an opportunity to upsell cold drinks,” says Wong.

Ultimately, she says, the aim is to maximise revenue whenever you have the chance. Wong points to Nory, a restaurant management system for business intelligence, forecasting and rota management which she says could be transformative for the right type of business. 

Inventory management systems can now include predictive ordering, sales forecasts and updates, gross profit and waste analysis, and enhanced HR operations and productivity insights. This data can be delivered in real time.

Jelly, another example, automates invoices, helps businesses control food costs and automates real-time margin tracking. It utilises an ingredient price index to provide live UK wholesale prices. 

AI-powered scenario planning

“The most exciting aspect is using AI for advanced scenario planning,” says Wong. “I’ve been using it to run multiple scenarios around key investments. It’s helped the business make much more informed decisions.”

As she explains, businesses considering investing huge amounts of money into a new venue or initiatives would previously need to run several different revenue-based forecasts and stress testing scenarios to identify different outcomes. 

There would, she says, be a ‘considerable time cost’ to the process. But AI-powered technology can potentially speed up the process, as long as businesses are aware of the risks associated with AI and how to mitigate them.  “AI enables complex modelling, so you can even do it for small size investments because you would have the time,” she adds.

Embracing real-time analytics and AI technology has resulted in huge improvements compared to 18 months ago, says Wong. “The ability for strategic investment and forecasting using complex modelling and granular planning is going to be a game changer.”