Restaurants must start to wean customers off discount vouchers

2nd October 2009, 10:56am

Hospitality firms such as pubs, restaurants and hotels that currently offer discount vouchers are being advised to start weaning customers off them to prevent profit margin erosion.

Deloitte, the business advisory firm, said that promotional offers and discount vouchers, mostly available via voucher websites, had helped sustain good levels of footfall for the industry.

However, they warned strategies that have proved successful in the downturn could still present challenges for the industry as it seeks to take advantage of improved economic conditions.

Glyn Bunting, partner in the Hospitality & Leisure team at Deloitte, said: "Operators need to use such promotions wisely, to ensure that their initiatives genuinely increase sale rather than cannibalising profit margins on business they would have anyway.

"As the economy begins to emerge from the recession, a key challenge for operators will be to wean consumers off these discount deals. The deals clearly help to buoy up trade whilst customers focus on 'value for money', but continuous discounting tends to undermine long term value creation from brand building.

"Although there have been hundreds of pub closures across the UK, pubs and restaurants that have improved their product offering have done much better than the dire predictions put forward by analysts when the smoking ban was introduced in 2007. Dining out and socialising may well be near the top of the list of activities people cut back on when times are hard, but they are the first to come back on the agenda when there is more disposable income."

Glyn added: "The key challenges facing all businesses in the sector are how to adapt to changing lifestyles and shifts in consumer demand, how to appeal to a new generation of customer and how to bring the smoker back."

In the current economic climate, consumers are focused on the 'value' of the offering, creating challenging conditions in which to grow like-for-like revenues.

The analysis highlighted how, in the long term, operators will want to build a brand that stands for more than simply 'being cheap'.

Jon Lake, Director in the Hospitality & Leisure team at Deloitte, concluded: "Although few things are recession-proof, we do know that people still want to eat and drink out regularly, to socialise and to celebrate.

"Those outlets that can offer a differentiated drinking and dining experience combined with real value for money will continue to show sustainable growth but, in the short term, it is likely that growth will be attributable to a combination of new site openings, the maturing of recently opened sites and the closure of underperforming sites."

Related Articles:

• 10 Nov 2009 - Over 520 restaurant operators will finish 2009 in financial difficulty
• 30 Sep 2009 - Restaurant vouchers are impacting on net margins, says Clapham House
• 27 Aug 2009 - 'No shame in using restaurant vouchers'
• 18 Aug 2009 - Web searches for restaurant vouchers increase 226%
• 29 Jul 2009 - US tourists waste money when eating out in the UK
• 06 Jul 2009 - Posh nosh falls victim to voucher discounts

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