There are those who predict that in an economic slow down, almost all businesses will suffer greatly. Those nay-sayers predict that in times of slow consumer spending, reduced consumer confidence, and diminishing corporate profits, the average small business, which includes hotels, inns, restaurants, and most of the hospitality industry, will be severely hurt. Reduced sales, the inability to raise prices to meet increased costs and other factors, they say, will put many of these businesses in such a bad position that most will not survive.
To these economic pundits, I say “Bull!” (referring, I hope, to the markets, not the the more traditional alternative). Businesses that fail do so not because less customers come in the door or spend less once in there. They fail because the proprietors have not taken the proper steps to ensure their survival in difficult times.
Many business operators find themselves in these times, having only run a business within an economic boom period. As a result, they become accustomed to spending carelessly and providing their customers with a product that is in some cases, excessive for the price charged to the customer.
In terms of restaurants, we find that the establishments most likely to be hurting in a downturn are those who provide huge portions without consideration to the cost in order to attract customers who like large portions. They presume that their customers will not accept higher prices or smaller portions so, they absorb the higher food costs incurred by inflation and maintain retail prices to keep traffic flowing. Some will go so far as to offer loss leaders where there is not simply a break even sale, but an actual, significant loss, in order to attract bar and other sales. It doesn’t really work.
A restaurant seeking to survive hard times should seek professional advice from a consultant or accountant. A professional economic advisor, experienced with the operation of a restaurant can and would help that operation to trim costs effectively. A restaurant consultant, such as Epicurus, could make the operation financially viable and actually increase revenues from existing, diminished sales. It is not impossible to make more money in an economic downturn than you did in the boom period preceeding.
For hotels, the issues are similar. Your customers are not traveling and when they are, bargains are sought. Even your most loyal patrons aren’t enough to sustain your operation without tourist or business traveler traffic. So how do you keep things ship shape? Again, bring in a consultant.
Hotel consultants would help you to develop cost effective means of providing your guests with amenities that are lower in cost, help you to maximize the spending of your existing guest base and lower costs of operations in areas such as food and beverage, traditionally high in the hotel environment.
Even small inns, bed and breakfasts or hospitals could have the same situations and could use the services of a consultant to assist. For example, if a small country inn has enjoyed a good, steady clientele for some years now, that clientele may opt to spend their vacation dollars in a less expensive location in a period of economic uncertainty. The inn must maximize its revenues from the existing client base and simultaneously lower costs of operations to keep the business trim. The simple fixes that an operator could take would needlessly result in diminished services and have a profoundly visible appearance of cost savings to the current guests who may not return or could even cut their trips short, if really dissatisfied with the level of service they became accustomed to over the years. Often, no matter which type of operation a business owner is in, he or she may not be able to see the most sound, fiscally viable means of changing the operation without altering the positive affects on customers. There, a consultant provides a fresh perspective and allows that clarity to cut through the myriad of potential errors an operator could make.
Hospitals could also benefit in such times. It becomes difficult to raise prices as insurance companies have set fees they pay hospitals for a room, including meals. Hospital food isn’t the best usually to begin with, but if inflation factors cut into the daily allowance each foodservice director has, then the foodservice director is compelled to reduce the quality of the food even further. A consultant could and would provide the hospital with altered means of preparation, changes in purchasing and product selection as well as cooking technique that would reduce costs and provide better, healthier food for the patients. Simultaneously, it would provide the hospital with a positive public relations point to use in attracting non-emergency patients, such as those going in for plastic surgery, where the patient has a choice of hospitals.
Effectively, the consultant is more than an expenditure, he or she is a valuable asset whose expense is more than offset by the lowered operating costs that result from the effort undertaken. If your business is not prepared to deal with inflation or economic variations, please contact our company for a free telephone consultation.
Robert Angelone, Ph.D. is our CEO, economist and specialist consultant in the area of restaurant and hospitality industry economics. His career, spanning more than twenty-four years has been filled with consulting projects providing clients with economic services and analysis. His insightful reviews of economic conditions have been published in the Times of London, New York Times, Wall Street Journal, Los Angeles Times and other major publications.
The Epicurus Group, owner of this website. was created by Mr. Angelone in 1978 during the time when he was working on his Master’s degree in International Economics at the London School of Economics.
His clients include major hotels, restaurant chains, independent restaurants and many four-star properties in the US, UK and France. Over the years, his services to clients have saved those businesses hundreds of millions. His specialty area of consulting is to identify those areas of income where profit can be managed.