UK hospitality businesses are grappling with a challenging landscape. The combination of inflation, escalating energy prices, and soaring supply costs has pushed operational expenses to new heights. According to UKHospitality, operating costs in the industry rose by 18% in 2023 alone, driven by inflation and energy prices. For many, these added pressures leave two main options: raise prices (risking customer loss) or find efficiencies within the organisation.
Rather than pass on all these costs to customers, hospitality businesses can take steps to manage rising expenses effectively. Below, we explore five actionable strategies for improving operational efficiency and maintaining profitability despite the pressures of increased costs.
1. Monitor and Optimise Energy Usage
Energy costs have surged, with the UK’s hospitality sector particularly impacted by fluctuating energy prices. A report from the British Hospitality Association (BHA) found that the average pub now spends around 5% of its annual turnover on energy bills. For hotels, this figure can be even higher.
One way to manage this is by investing in energy-efficient technologies. This can range from installing LED lighting and energy-efficient heating and cooling systems to using smart energy management software that monitors energy use in real-time. For example, many hotels and restaurants have started using tools like Carbon Trust’s Energy Efficiency Calculator, which helps identify energy savings tailored to specific business operations.
2. Reassess Your Supplier Relationships
As supply costs continue to climb, now is the time to evaluate your suppliers and renegotiate contracts where possible. According to the Office for National Statistics, supply chain issues have led to a 17% increase in food and beverage costs, putting particular pressure on restaurant margins. Working closely with suppliers to adjust minimum order quantities or switching to local suppliers where feasible can often reduce costs while supporting local businesses.
If certain items are consistently priced high, consider menu engineering by adjusting portions or substituting high-cost ingredients with locally sourced or seasonal items. By implementing seasonal, localised menus, some restaurants have been able to lower their food costs by up to 10% without sacrificing quality.
3. Streamline Your Menu and Reduce Waste
Inventory management and menu simplification can also be powerful tools to control costs. According to WRAP (Waste and Resources Action Programme), hospitality waste costs the sector over £3.2 billion per year, a significant part of which comes from food waste. Simplifying the menu can reduce the complexity of ingredients, lowering waste and improving stock management.
Use technology like inventory tracking systems to monitor stock levels accurately. Software tools, such as Fourth and MarketMan, offer real-time inventory tracking, helping reduce waste by preventing over-ordering and highlighting popular menu items that contribute to profitability. Simplifying your menu not only helps manage costs but also improves kitchen efficiency and consistency.
4. Embrace Digital Solutions for Operations and Workforce Management
Labour costs represent a large portion of expenses in hospitality, and effective workforce management can significantly impact the bottom line. Automating certain back-of-house operations – such as payroll, scheduling, and time tracking – can improve efficiency and reduce errors. According to a study by Fourth Analytics, hospitality businesses that used workforce management software saved up to 5% on labour costs annually by optimising shifts and reducing unnecessary overtime.
Additionally, self-service ordering systems or QR code menus reduce staff workload, allowing employees to focus on high-value tasks that enhance the guest experience. These tools have also been shown to increase table turnover rates, contributing to revenue while keeping staffing needs manageable.
5. Review Pricing and Add Value Where Possible
While raising prices is often unavoidable, this should be done thoughtfully. A transparent pricing approach that communicates value to customers can make price increases more palatable. According to Deloitte, 55% of consumers are more accepting of price hikes if they understand the reasons behind them, such as sourcing higher-quality ingredients or covering rising energy costs.
Another approach is to offer tiered pricing or “premium” options, adding value through experiences that feel special to guests, like personalised service touches or exclusive menu items. This can generate additional revenue without the need to increase prices across the board. Upselling techniques, such as offering drink pairings with meals or special event packages, can also enhance revenue without detracting from the customer experience.
Maintaining Profitability Amid Rising Costs
Rising operational costs in UK hospitality present a real challenge, but with a mix of strategic adjustments and technology adoption, businesses can manage these pressures effectively. By optimising energy use, re-evaluating supplier relationships, reducing waste, leveraging digital tools, and adding value through thoughtful pricing, hospitality leaders can safeguard their bottom line while continuing to deliver great experiences to their guests.
For more practical tips on navigating the current hospitality landscape, explore our resources at Talking Hospitality. It’s possible to navigate the rising cost landscape with resilience and creativity, setting the foundation for a stronger, more efficient operation.
