Why the hospitality sector has no choice but to innovate


Tsewang Wangkang, co-founder and CEO of Embargo, explores the outdated approach of loyalty schemes with a look to the future.

There is no denying that COVID-19 has shaken the UK economy. And while all businesses have been affected, the hospitality industry has suffered one of the greatest blows. 

When the UK went into lockdown in mid-March, revenue streams for hospitality businesses dried up overnight. Indeed, the financial implications were severe, with the sector reporting combined sales of just £4.6 billion from April to June; a decrease of almost £30 billion when compared to 2019’s figures for the same period.  

Those numbers are, of course, a concern for concern. Given the hospitality sector employs approximately three million people – or nine per cent of the UK’s workforce – many will be feeling concerned about their future employment prospects. 

The government has sought to stimulate the revival of the hospitality sector through a combination of targeted reforms. Business rates relief, VAT cuts and the introduction of the Eat Out to Help Out scheme are all offering businesses some form of financial relief. The question is whether these policies go far enough in providing the support needed for restaurants, bars and coffee shops to overcome the challenges brought on by the pandemic. 

In short, the answer is no; state support will not be enough. If the hospitality industry is to remain afloat in the long-term, it must thoroughly review and innovate its current business practices. Doing so will ensure it is adequately prepared to meet changing consumer demands as a result of the “new normal”.

Overcoming immediate challenges

The pandemic has caused a seismic shift in consumer behaviours; more localised travel patterns, greater dependence on online shopping, social distancing, to name but a few examples. Naturally, this requires businesses to also adapt. 

So, what does this mean for restaurants, bars and cafés? 

In the immediate future, one of the main concerns must be ensuring social distancing can be effectively maintained. In July, the Government issued guidelines, which provided a useful starting point for venues. 

Many hospitality businesses have rejigged their premises in a bid to extend health and safety measures. These include removing tables and chairs, implementing one-way systems, investing in copious amounts of hand sanitiser, and installing plastic screens between tables. 

In addition to physical changes, hospitality businesses are also becoming more reliant on technology to uphold health and safety measures. Contactless payments are an obvious example, with businesses promoting online transactions and payments instead of physically handling cash.  Additionally, online booking systems have made it possible for consumers to reserve spaces in establishments which are no longer able to run at full capacity. 

Loyalty schemes are another interest case – the days of paper loyalty cards, which are stamped on every visit, are a thing of the past. Now venues are investing digital solutions for their loyalty programmes; not only is this safer, but it presents many other benefits to both consumer and business. But more on that later. 

Technology has also made it easier for hospitality venues to comply with the government’s Track and Trace efforts so that customers can be contacted if someone at the same venue at the same time contracts COVID-19. Databases and customer relationship management (CRM) systems now make storage of customer data far more efficient. 

Encouragingly, these changes are appreciated by customers. Indeed, 96 per cent of people who  returned to restaurants in July said they were satisfied with the extended health and safety policies put in place. 

However, to ensure their long-term survival, businesses look beyond short-term challenges. They must overcome a greater challenge which has perplexed the hospitality industry for decades: building customer loyalty.

Outdated approaches

It has become increasingly apparent that restaurants, bars and coffee shops simply do not know who their customers are. Even loyal customers, who are responsible for providing the majority of their revenue, are rarely recognised by their establishment. Why is this the case?  

Put simply, the hospitality sector is reliant on outdated approaches when it comes to understanding their customers and consequently, effectively marketing to them. They mostly rely on passing footfall, staff to recognise their ‘regulars’, or online booking systems to capture data. Paper loyalty cards are also a common method of encouraging repeat business. As stated above, their days are numbered.

With COVID-19 making many consumers wary of venturing to restaurants, bars and cafes, business owners face the monumental task of essentially rebuilding their customer-base – and when faced with a crisis, businesses are forced to abandon old practices and look to effective solutions that they might not be familiar with. 

The future of loyalty programmes

Consequently, we are gradually seeing more and more hospitality firms looking to technology to provide more efficient and cost-effective methods of tracking customer activity and incentivising repeat custom. 

For example, contactless loyalty apps offer a range of helpful tools. They can link to CRM tools to enable hospitality businesses to monitor who is visiting their premises, identify loyal customers and, consequently, offer them rewards.

Paper loyalty cards can often be counterproductive, as they can be easily lost or damaged. Apps on mobile phones, on the other hand, can “pop up” and remind users that they are due a reward; prompting repeat custom and ultimately enabling customer loyalty. 

It is all about creating a personalised and unique experience for each individual customer to encourage repeat business. Customer loyalty apps are naturally positioned to provide this bespoke experience, opening a clear line of active communication with the customer. Moreover, they empower the business with genuine insight regarding who their customers are and how they can be effectively incentivised to come back.

The future presents many challenges for hospitality businesses, so it is vital that they adapt accordingly and take full advantage of all the tools they have at their disposal. Restaurants, coffee shops, bars and pubs will only survive if they take a step back and look at the bigger picture, rather than focusing on short-term solutions. This means changing the way they engage with customers and ensuring they are prepared to operate in the “new normal”. 

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