RANZ

Restaurant Association of New Zealand

Hospitality Businesses Look For Points Of Diversity Amid Challenging Conditions

Restaurants are feeling the squeeze according to the 2012 Hospitality Report just released by the Restaurant Association of New Zealand and AUT University.

The quivering global economy and Christchurchs earthquakes have had a big effect in the past year, and if they weren't enough, consumers are spending less on dining out. The report shows the restaurant sector is facing a flat period with little growth in revenues, outlets and employment numbers.

Sales Growth Slows But Some Regions Doing Well

Nationally the hospitality industry reported an increase in sales of just 1.1% from 2010 - 2011. This subdued performance is led by the restaurant and caf sector, which dominates the industrys market share. Half of the sales for the hospitality industry occur at these types of businesses however the sectors market share has recorded a decrease over the 5 year period 2007 - 2011.

When considering regional performance, overall, the best performing districts in terms of real sales growth were the main urban areas of Auckland, Canterbury and Otago.

The Auckland region has recorded significant sales growth over the past 10 years. In 2004 annual sales for the region were $1.6 billion and in 2011 they reached $2.3 billion - a significant increase. This region employs over a third of the industrys employees, has close to 40% of the countrys hospitality businesses and a 35% market share. Auckland has been consistent in its market domination.

The Otago region has also reported record growth recently, even while most of New Zealand was tolerating difficult trading conditions. From 2010 - 2011 sales increased in the region by 12.8% to reach $422.9 million. And even despite the impact that the earthquakes have had on the Canterbury region, real sales for that region still increased by 1.2% in 2011.

Remuneration Increases On Hold

As a result of the generally subdued economic conditions hospitality industry wage and salary rates are under tight control. In fact hourly wage rates have increased overall by just $0.01 over the past year. Salary rates have increased by slightly more, 2% higher on average in 2012 (vs 2011). The concern is that with a wage increase of just 1c in 2012, year by year remuneration growth is not keeping up with inflation. However, as labour is one of the largest costs to hospitality businesses, operators are wise to keep remuneration levels in check when faced with escalating rises in food and other costs and muted sales growth.

Gaining Competitive Advantage

Regardless of these challenges the outlook for restaurants is still cautiously optimistic. Despite consumers spending less on dining out, restaurant numbers grew by more than 1.6%, to 14,455 in 2011. Thats a sign that operators are confident about the future. As the market continues to expand, more businesses are fighting for the diminished customer spend. This means that in order to attract and retain customers smart operators are focusing on marketing strategies that could potentially set them apart from competitors. An organisation needs to communicate to its current and potential stakeholders the unique benefits that the business offers.

Social media marketing, sustainability and new technology trends are hot topics today.

Someone who is proficient in new marketing trends, in particular social media marketing, is restaurateur and hospitality personality, Luke Dallow. Luke is always keen to spot a marketing advantage and says one of the great things about social media is that it is free. Consequently, you can promote products and services without having to pay for advertisements. All you have to do is to learn how to use it, create your profile, and be active...but not wasteful. Social media is the easiest way to promote your business to a larger audience/ market segment he says.

The hospitality industry is also well placed to meet the sustainability challenge because without doubt, hospitality is hard on the planet; it is a consumption industry after all. Customers are becoming increasingly aware of the environment. They are looking to our industry to lead the way. Therefore now is the time to commit to sustainable practice; a large market segment exists who are keenly aware of environmental issues and are ready to support proactive businesses engaging it.

Forecast For The Upcoming Months

Restaurant Association CEO, Marisa Bidois, says of the coming year that we expect prices will remain steady and competitive. Eating out will continue to offer guests value for money as restaurateurs encourage public back in their eateries. Service levels will rise as business owners maximise their competitive points of difference.

More choice for diners is good for the industry. We have a highly competitive environment and one that may encourage a cautious diner to eat out more - exciting news for both the industry and the customer. Restaurants know what their customers want; food and beverage that reflects value for money, enhanced service levels, and more importantly customers want to know about their restaurants so communication on multiple levels to build loyal clientele will give consumers the incentives needed to eat out more.

The 2012 Hospitality Report Exectuive Summary is also available here for further overview.

More detailed analysis of the industry and tips for hospitality operators can be accessed from the Restaurant Association ( info@restaurantnz.co.nz); the 64 page 2012 Hospitality Report is available to Restaurant Association members electronically at no cost and the general industry, with no affiliations to AUT or the Restaurant Association, for $150.00.