As July 2020 comes to an uneasy close, the Hospitality sector waits for the first financial reports of like-for-like sales and profitability data, before and after the dawn of Covid-19.
Many operators have reported early positive results, trading at around 70% of sales capacity due to social distancing. Reports of profitability have been less frequent with only a small number of operators reporting good conversion, resulting from simplification of the business model and enhanced business efficiencies.
But for some operators sales results have been disappointing. The rental issue shows little sign of abating, and it is only too tempting for underperforming venues to look for the next available scapegoat.
No shows are a consistent feature of the Hospitality sector, and naturally cause frustration for most operators. But to project those frustrations back on to the guest is counterproductive and flies in the face of good service. Operators must focus their efforts on attracting more guests to their businesses and not on driving them away.
The real cost of a no-show
Deposits don’t work in the casual dining sector: we know this and have known this for a long time. The dining experience offered to guests is, by its nature, casual and so are the terms upon which diners choose to visit its venues.
Recent claims that no shows are costing our sector billions of pounds in lost revenue per year are unsubstantiated. If operators were suffering such significant top line losses they would have gone out of business long ago citing no shows as the reason.
The often-heard complaints surrounding no shows, except in the case of restaurants falling within the fine-dining category, point more to lost costs than to lost revenue. And where there are lost costs, there are systems that can recover them.
‘I can’t forecast my sales accurately’
A good forecasting exercise uses like-for-like data to predict financial performance. In the case of no shows, all data is like-for-like. No shows are not a new phenomenon and their frequency hasn’t increased since the emergence of the coronavirus.
What has changed as a result of Covid-19 is the number of potential walk-ins and the ability to reallocate a no show’s table as part of the operational flow. Only a restaurant trading at full capacity might lose potential revenue – but how many venues are experiencing this level of demand?
For the few casual restaurants that are consistently fully booked, the impact of the no show can be absorbed through strategic overbookings and an effective waitlist.
‘No shows cause food wastage and impact my food cost’
The ingredients used in a casual dining menu have at least a day’s shelf-life and can be used in the following trading period. In the worst case scenario, where ingredients have gone to waste, the cost price of a no show’s mise-en-place is negligible.
Still, there is no need to accept even the most insignificant of losses. The average rate of no shows in a comparable period can be used as the likely rate of no shows in the current period. Sales and purchasing budgets that use historical data will preserve the cost of goods margins and protect the bottom line.
‘My labour cost will be too high with all these no shows’
The labour cost leaves little room for error and overspending will cause serious harm to profitability. Being understaffed is also a recipe for disaster, resulting in poor service and having a lasting negative impact on the guest.
These concerns can easily be mitigated. Unless a business is suffering more than 1 waiter’s entire personal capacity in no shows during a single trading period, the number of staff scheduled should not be affected by the number of guests failing to attend their reservation.
Additional labour tools can limit the potential cost of a no show, such as using a stand-by system for additional staff and relieving staff during service should the guest count fall below par.
The psychological effect of the no show can not be underestimated; the sense of rejection hangs in the air. But a wounded ego has no place in the service industry.
Businesses must direct their resources towards more adaptive and responsive sales strategies. Operational leaders must provide their teams with the tools that protect cost of goods margins and systems that limit labour expenditure in line with projected sales.
On the frontline, service staff deliver the guest experience that drives customer loyalty. Good leadership provides the tools for the team to succeed.
The only collective action required of our sector is to implement the full range of financial and operational tools that maximise revenue and reduce expenditure, without compromising on quality or passing the burden onto the guest, in the form of a price hike, mandatory deposits or otherwise.
If this expertise is outside of an operator’s own knowledge, it must invest in external support. The rewards are immediate, the guest experience is intact and our sector will thrive despite the challenges ahead.