The hospitality industry is fast approaching oblivion. COVID 19 is turning into the straw that will break the camel’s back, but it’s by no means the root cause of the problem. Any business owner in the hospitality industry is well aware of the causes of the problem, because those causes have been around for at least two decades if not longer, so there’s no need to go on about them.
It’s natural to focus more attention on the larger causes of the problem because solving them will reduce the strain more than solving smaller individual causes. However, it takes a lot more time and effort to solve the larger causes (business rates, premise rent, staff wages), so the problem is still around rearing its ugly head forcing businesses to close down.
Here’s a hypothetical pie chart outlining some of the costs a hospitality business has. Not all costs are included, and the percentages are approximate to make a point.
There are three large costs shown in the diagram above as you can see. Business rates, premise rent and staff wages can be and are big killers for hospitality. To make any real headway in solving these three causes of the problem, the hospitality industry, and the wider national community has to go through central government and endlessly lobby it for reform.
This takes a lot of time. There’s no guarantee that any changes will ever be made. Even if changes are made, there’s no guarantee that they will be positive for the industry, or make enough difference to solve the problem.
Focus on the little things
In the diagram above we saw a number of smaller costs. It is easy to think of them as individual costs for a couple of reasons. Firstly, they are all individual costs for different services that a business needs. Secondly, they are generally all provided by different service providers.
The first step to solving those causes of the problem is to group them together. You might reach for the term miscellaneous, since none of them are relevant to the big 3 causes, but why not call them what they really are in the 21st century… Digital.
When we group all digital costs together into a lump cost we realise it is as big a cause of the problem as the other three causes are. The opportunity with the digital cost is that it can be solved by the hospitality industry itself without needing to lobby central government for intervention or reform.
Why digital costs are high
There are two reasons why digital costs are high. Let’s start with the obvious one. The service providers for those digital costs are businesses in their own right, and no business in the history of the world has ever been setup with the express purpose of losing money. The owners of the service providers have shareholders to appease, holiday homes to buy and children to put through education just like the rest of us.
The second reason for the high cost is the nature of the modern digital industry. The most recent drive has been towards utilising APIs and allowing lots of small microservices integrate with each other. This leads to paying a lot of different people for individual services, and as we saw from the first reason, you’re never going to get a wholesale price.
Digital costs for a business do not have to be as high as they currently are. The problem most businesses have is that they’re essentially paying a middleperson to do something for them, which tacks on a cost. Cut out the middleperson and you’d be surprised how cheap it can actually be.
While we’re waiting for a bureaucratic organisation (central government) to come to the rescue, why don’t we think about how we can rescue ourselves at the same time. There are costs that we as a community can manipulate and reduce to stem the tide while the larger costs are being discussed.
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