Shaping the Future: Top 3 Takeaways from lunch! & Casual Dining 2024

Inspired by my recent visits to the lunch! and Casual Dining shows, this month’s newsletter looks at the Changing Shape of UK Hospitality. I’ve summarised my Top 3 takeaways from the keynote talks that I attended, adding in relevant perspectives from Hospitality Data Insights (HDI) data including a look at how customer spending in the UK Hospitality sector has changed over the last 5 years.

So without further ado, here’s my Top 3 takeaways from listening to many of the excellent keynote presentations:

1.????? Challenging Market Conditions, but Innovation in Abundance

2.????? Competition is Intensifying

3.????? Customer Understanding is Critical

Read on to find out more, where I’ll address each of the above takeaways in turn before looking ahead to what this all means for the hospitality sector in the months and years ahead.

Takeaway 1: Challenging Market Conditions, but Innovation in Abundance

Challenging Market Conditions was a key theme which came through loud and clear, with the opening keynote talks by Peter Martin and Simon Stenning each day both referencing many of the significant challenges facing our sector.

A key stat from Peter’s “The state we’re in…and what to do about it” talk was that there’s now under 100,000 licensed premises in Great Britain for the first time. This is a significant drop in outlet numbers; I remember the figure consistently being around the 120,000 venues mark pre-pandemic, with the loss of 1 in 6 venues highlighting just how much pressure the on-trade has been under in recent years. ???

Hospitality Data Insights (HDI) card spending data, which tracks the spending of 10.2 million people across 160,000 individual hospitality venues shows just how significant some of the changes have been in terms of where customers are now spending their money in the UK hospitality sector. ?The chart below shows how “Customer Share of Wallet” for 2024 year to date compares versus 2019, with Delivery being the standout performer over this period – we’re now spending ￡8.30 more on Delivery for every ￡100 spent on hospitality than we were in 2019, with Casual Dining and Pubs & Bars seeing a reduced proportion of our spend overall:

A look at year on year spend changes across the UK hospitality sector from the HDI Panel, again illustrates the point about challenging market conditions. We’ll soon be reporting on Q3 performance, but a look at data up to the end of Q2 2024 shows that Total UK Hospitality spend growth is slowing, with all sectors seeing softer performance and these numbers running below the levels of price inflation that we’re seeing across the market. The best performing sectors continue to be Delivery, Coffee & Sandwich Shops and Fastfood & Takeaways: ?

A look at the above numbers could give cause for pessimism, but I was really encouraged at the lunch! and Casual Dining shows by the positivity shown by so many operators, and by the innovation that is so abundant across the sector. From new brands and concepts emerging, to well established brands that are household names continuing to invest and ensure that their offer remains relevant to today’s customers, there’s no shortage of innovation present across the sector. Businesses need to continually adapt to meet the needs of their customers, and we’re seeing this happen right across the sector – the fact that we now have 2,000+ drive-thrus in Britain is itself a sign of how the market is moving on, delivering the speed and convenience that customers are often looking for.

We’re also seeing businesses embracing technology, with innovations in this space helping deliver more seamless customer and guest experiences (e.g., frictionless payments), as well as helping step-change back-office systems and processes such as workforce scheduling and supply chain forecasting. I enjoyed listening to David Campbell, Chairman of Rare Restaurants sharing his perspectives on how he’s a big fan of technology and an even bigger fan of AI – his point that hospitality is all about people, but that we can’t overlook the role of technology, is spot on, and I would see embracing data as being a key part of this. ?

Takeaway 2: Competition is Intensifying

Concluding that competition is intensifying could be something that some may find disheartening, but the world does not stand still. The view from Sohail Ali , founder of chaiiwala that “competition is the breakfast of champions” is a great attitude to adopt, and it’s clear that they will be continuing to evolve and develop at pace in the years ahead. It was notable that data is super important to them, as they focus on getting customers in more often, with their causal Indian street food proposition bringing something unique to the market which is providing an alternative to the likes of Greggs, Pret and Starbucks.

One of the key themes that I noted was the blurring of boundaries between sectors of hospitality, and more broadly, the blurring of boundaries between retail and hospitality. It makes sense to break markets down into relevant sectors, such as the UK Hospitality market breakdown shown in the Share of Wallet and Year on Year Spend Change charts earlier in this newsletter. However, the danger with looking at markets like this, is that we can sometimes overlook the fact that the same customer will spend across multiple channels at different times, dependent on their specific needs and requirements.

Great examples of the above from lunch! and Casual Dining included:

• 马莎百货 and their Café & Coffee Shop formats - Thomas Campbell-Rawlinson , Head of Hospitality Development at M&S shared how they’re treating Retail and Hospitality as One. Through focussing on shared customer missions, they’re developing their M&S Café offer to better meet the needs of those on a Clothing & Home mission, whilst their M&S Coffee Shop concept to cater to those on a Foods mission, whether that’s Food for Now or Food for Later. I visited their M&S Coffee Shop at Fosse Park last week, and it’s clear from how busy it was, that they’re absolutely competing squarely with well-established Coffee & Sandwich shops in the “hospitality” sector

• Quick Service Restaurants and their focus on the lunch occasion – Alasdair Murdoch , CEO of BURGER KING UK talked about how competitive the landscape is for food across dayparts, with the QSR market becoming more attractive for people due to its affordability. For example, providing a value offer which others don’t, such as Casual Dining where a main course will be c.￡15 because of their cost base. He also referenced competition across the worlds of retail and hospitality, with KFC’s lunch offer with a packet of crisps, mirroring the meal deals typically seen in supermarkets

• bp shaking up expectations of the food offer in forecourts – David Phillpot , bp Convenience Trading Director for Europe shared how bp will need to lead with food in future, as that will be their key entry point for consumers. They’re making a ￡15 billion investment in their convenience business by 2030 globally, and convenience is one of their 5 pillars of growth. An incredible stat which he shared was that already in the UK, over half of the occasions where people are visiting them are purely for the shop. They’re serious about food, and it’s clearly an area that will help them deliver on their “first choice for customers” agenda.

Takeaway 3: Customer Understanding is Critical

Hospitality businesses need to understand their customers – who they are, how they’re living their lives, how they are engaging with your business and where they’re spending when they’re not with you. This was a key theme that came up time and again in the keynote presentations, and there’s no doubt in my mind that customer understanding is critical, and something which is a source of competitive advantage and a key defining characteristic of the most successful businesses in our sector.

It was brilliant to hear Kay Bartlett , Chief Marketing Officer at wagamama talk about the reasons behind their decision to launch their first ever loyalty program, ‘soul club.’ wagamama are a business that are best in class when it comes to understanding their customers and turning insight into action, and they’ve clearly taken the time to ensure that the soul club loyalty app will resonate with their loyal fanbase, valuing their loyalty and giving them reasons to return. There was a nice shout out for Hospitality Data Insights (HDI) too in the Q&A, referencing how our data helps give them insight on customer behaviour and how they’re engaging with them.?

Summary: Looking Ahead for UK Hospitality

In summary, it may be a challenging period for the UK Hospitality sector, but my experiences from attending the lunch! and Casual Dining shows demonstrate that there’s a whole lot of life left in this sector! There’s an abundance of innovation, including new concepts and technological advancements; and I’ve no doubt that the sector will continue to show its resilience and ability to re-invent itself. Competition is undoubtedly intensifying, with blurring boundaries between hospitality sectors and retail, and blurring boundaries within the hospitality sector. Against this backdrop, we can see plenty of examples of successful businesses who are adapting to meet evolving customer needs, embracing technology, and focusing on really understanding their customers.

I'm Mark, Business Development Director of Hospitality Data Insights (HDI) , thanks for reading.

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