With energy costs set to rise significantly, there are new challenges on the horizon for hospitality businesses. One of the positives to come out of the COVID pandemic was business’ ability to pivot and consumers’ eagerness to support the venues that they value. We take a look at how those in the hospitality industry can help to overcome rising energy costs by diversifying their offering.
The challenge hospitality businesses face with energy costs
Many hospitality businesses will be forced to close due to soaring energy costs, increasing by as much as 300%. The monumental increase in energy bills has left many in the industry wondering where to turn.
Combined with customers wanting to reduce their spend, the hospitality industry faces an incredibly tough time, however, creativity has the potential to help alleviate some of the financial burden of ever-increasing costs.
In the same way that businesses rallied together and took time to deliver on their customers’ needs throughout the pandemic, the solution could lie in diversification.
Why diversify to overcome rising energy costs?
Businesses that are able to create a more diverse offering will be able to create additional revenue streams, helping to combat the rising energy costs in the months ahead. By offering something that their competitors do not, businesses will also be able to encourage custom wherever possible.
How can hospitality businesses boost business?
If you’re looking to offer more to your customers, here are some of the ideas that hospitality businesses can introduce.
1. Home delivery of food or drinks
Why not offer home delivery of your best-selling food or drinks? If it’s not possible to do this throughout the week, consider doing this at weekends.
2. Live entertainment
Tempt those that are cutting back on spending to visit your venue as a treat, by having live entertainment or events. Consider bands, quiz nights, pool competitions, networking mornings, or even comedy nights.
3. DIY recipe kits for customers
Something that skyrocketed in popularity during lockdown was the DIY recipe kit. While many have stopped offering these, they are an example of a great additional revenue stream, creating a memorable experience for customers that ties in with your brand. Dishoom is an example of a brand that has done this well, launching their own online store for customers to buy and make their own delicious classics at home.
4. Collaborating with local businesses
Working with other businesses offers support, as well as networking opportunities for ideas. As an example of how this can work, during lockdown, some pubs, such as The Old Pound Inn set up shops to sell other business’ produce in their premises. Ideas include making deals with local butchers or bakeries to sell their produce in your own premises, generating additional footfall while supporting the local community.
5. Gift sets and hampers
What do your customers love most about your business? Whether it’s your signature blend of coffee, delicious pub grub or homemade cider, it can be possible to brand these into gift sets or hampers.
6. Create a limited-time menu
If you’re looking to reinvigorate your offering, a limited-time menu can be a great hit. For example, you could collaborate with a street food business and launch a ‘Friday night takeaway’ menu where customers can collect their meals and have a drink while they wait, or even browse a range of local produce (if you choose to stock local business’ products in your premises!)
Market your new ideas to overcome energy costs
No great idea will be successful if you don’t tell people. Spread the word far and wide using any channels possible, including social media, local press, word of mouth and print advertising.
Before spending significant sums of money introducing a brand new addition to the business, take time to understand your customers. Ask them what they would like to see, how much they would be willing to pay for certain experiences and what they think of any ideas. By doing this, you can gain a greater understanding of demand, while also creating excitement around your venue.
Tried and tested: An example of how to overcome rising energy costs by diversifying
Peter Towler, owner of Tipton pub and restaurant, as well as Mad O’Rourke’s Pie Factory explains the benefits of having a diverse offering in hospitality. During lockdown, Peter expanded his business to launch Mad Pies Online; a home delivery service that delivers the pub’s famous pies across the mainland UK.
“We originally launched Mad Pies to give us a way to make sure that customers could still enjoy our products and to keep our brand on everyone’s radar even when lockdown forced us to close the restaurant. It’s a concept that’s proven to be very successful for us and something that we had always intended to continue once we were able to reopen.
“We, just like establishments up and down the UK are facing a monumental challenge in the form of rising energy costs and now more than ever, any way to bring extra income into the business is vital. Government support is urgently needed across the hospitality industry but as we have seen with our own business pivot, diversification could offer a welcome safety net that could help to save the pub industry.”
“Rising energy bills have come at a time when the number of pubs in England and Wales has fallen dramatically, with analysis in June estimated that numbers are at an all time low with just 39,970 pubs remaining – down 7,000 from 2012.
“The great British pub is an integral part of our culture and we’re already losing establishments at a rate of knots,” Peter added: “For centuries, pubs have been so much more than just somewhere to grab a drink, they are the heart of our communities and as pub owners, we need to lean into that philosophy before we see even more forced to close their doors.
“Whether that is using existing facilities to offer a take-away service, taking the business online as we have or offering a delivery service of some of your most popular items, playing to your strengths and creating multiple points of entry offers more opportunities to generate income.”
Diversification doesn’t come without its own challenges, Peter acknowledges: “Launching our own pies by post service has proven to be a success – in fact, we’ve just delivered our 10,000th pie having only launched in March 2021. But that’s not to say there weren’t challenges.
“We’re well known for our pies within the West Midlands with each and every one handmade in our production kitchen in Tipton. We already had the facilities and the know-how but one of the biggest challenges we faced when establishing Mad Pies Online was the packaging.
“We had to design the packaging and find a way to deliver our pies across long distances that wouldn’t compromise the quality while ensuring that customers could enjoy the same classic pies that we’re so well known for in the comfort of their own home. Ultimately, that’s a small challenge that we overcame and months later, it’s given us an additional income stream to bolster all aspects of the business.
“This isn’t a silver bullet and it’s something that may not be possible for businesses which we know are already under huge amounts of pressure, but for those that are able to expand into other areas, now is the time to branch out before we find ourselves in an even worse situation.”
Energy costs FAQ
What can hospitality businesses do about increasing energy costs?
As well as reducing energy usage and increasing efficiency, hospitality businesses such as restaurants, pubs, bars and coffee shops can try to reduce the financial strain by introducing new ideas that their customers will love. We recommend you do plenty of consumer research before committing to additional spend, to make sure your return on investment is a positive one.
Holly brings a wealth of experience in both print and digital publishing and is very passionate about the hospitality industry.