8 key areas of focus for the Leisure & Hospitality sectorWednesday, 8 March 2023
Despite finding ourselves in a period of economic uncertainty, with consumer confidence lower than ever, the leisure and hospitality sector has shown real resilience in Q4, which has continued into the early stages of this year.
With distinctly unique circumstances in the aftermath of a global pandemic, and the chance to capitalise on under-performing areas across the sector, there are a range of important decisions businesses must make to successfully survive these turbulent times.
Having chaired two CEO Leisure roundtables, and spoken to several industry experts, we’ve collated a list of 8 important reflections for the sector:
1. There are significant signs of consumer pressure out there: this includes reduction of the everyday treats and occasions and greater focus on the special ones, peakier and often later commitment to spending, and some profound increase in pay day effects and ‘post-holiday’ belt tightening.
2. The averages conceal some big variances in segment level behaviour: there are huge differences in the lived experiences across consumer segments. The lower segments are struggling to deal with inflating costs in the non-discretionary areas and the ‘squeezed middle’ are starting to feel the increasing burden of higher mortgage rates play through. Meanwhile some of the better off segments are seeing wage inflation outpace inflation in non-discretionary budgets.
3. There are powerful counteracting forces: we shouldn’t forget that through Covid there was a massive increase in the savings rates for many households, and this accumulated saving (c. £200bn in the UK) is still largely sitting on household balance sheets providing substantial support for consumers to continue to spend on some of the big-ticket items that tend to suffer during downturns.
4. …and more consumers choosing to ‘live in the moment’: as well as retained savings, the consumer continues to be highly inclined to focus on there here and now. This could be anything from a treat box of donuts to the decision to book the foreign holiday despite the negative news flow. Tapping into this motivation is a powerful way to continue to entice consumers to spend; when they adopt this mindset, price sensitivity is typically low.
5. Service levels are poor, creating an opportunity for businesses to lead in this area: the ongoing squeeze on talent and team, exacerbated by lengthening NHS waiting lists and long-term sickness, has left many businesses struggling to deliver the service levels they aspired to pre-pandemic. The consumer is increasingly tired of the ‘bear with us, be patient’ message, and there is clear opportunity for service leaders to gain real advantage in a market where Net Promoter Score (NPS) overall has declined materially across the leisure industry.
6. The permacrisis has really taken its toll on teams: leaders have had to cope with 4 major crises in the last 6 years, meaning it’s been an incredibly tough time to pilot businesses through. This permacrisis has also taken its toll on the teams who are worn out and needing real motivation and support.
7. The ‘Joy Button’ can brighten all our days: random acts of kindness are an important counter to the service pressure and rampant price inflation seen across most businesses. Creating a structural way to deliver these (for example, the Krispy Kreme Joy Button) is a great way to embed these in the day to day, and the impact on team members as well as customers should not be underestimated.
8. Be smart about how to counter the inflationary effects (and properly stress test your cost base): while cost bases are inflating, you need to ‘look under every rock’ to check that this inflation is not simply poor sourcing, purchasing or wider business practice. Where it is necessary to pass this through to consumers, thinking carefully about how and when to do so can bring real benefits, for example dynamic pricing, restructuring price architecture, and achieving this through active trade up rather than forced mechanisms.
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