Australia’s hospitality industry has been severely impacted by COVID-19. Griffith University researchers in a recent report revealed that 90% of hospitality businesses had experienced a reduction in sales and customer numbers as a result of COVID-19 restrictions.
Griffith’s Business School researchers together with the Restaurant & Catering Industry Association released the initial findings from their project to investigate how restaurants, cafes and bars impacted by COVID-19 attempt to recover and survive the pandemic. Dr Sara Ekberg, Dr Julienne Senyard, Dr Lili Mi and Dr Carla Riverola from the Department of Business Strategy and Innovation, along with Dr Shannon Colville from the University of Queensland and Dr Morag Kobez from the Queensland University of Technology make up the research team which aims to assist the firms in this industry on their path to recovery.
Prior to the shutdown in March 2020, Australia enjoyed a vibrant and diverse hospitality industry supporting hundreds of thousands of workers and it was an integral part of Australia’s tourism industry; as the cities’ food and drink scene offered an increasingly important element of destination marketing. Alongside economic benefits, the researchers highlighted the important cultural role played by restaurants, cafes, and bars – as a fundamental element of what makes Australian cities liveable, vibrant and diverse where people live and connect with one another.
Their report was released this month which details the findings of the initial survey conducted during July 2020, including demographic data and also data around the changes made to strategic decisions, business plans and operations, and the initial impact on expenses and sales. It also assessed and captured data on the future expectations of the firm and its predicted future viability over a five-year timeframe. The aggregated findings will uncover trends and challenges that restaurants, cafes, and bars face connected to COVID-19 and provide new insights on strategic changes. Ultimately, through their research, they seek to assist the firms in this vital industry on their path to recovery.
Some of the key findings from the analysis of the data are highlighted below.
A significant drop in sales and customer numbers
The hospitality industry experienced a dramatic shift in food provision towards online or in-house delivery platforms and takeaway options. Due to this shift in focus – an overwhelming 90% of businesses experienced a reduction in sales and customer numbers. However, there was a dramatic increase in customers picking up takeaway orders directly from hospitality venues during the initial COVID-19 restrictions, with 25.7% of respondents indicating that they relied on customer pickup for all of their sales, while pre-COVID, customer pick-ups accounted for only a small fraction (1.1%) of their total sales. Hospitality businesses moved quickly to make strategic changes, with 83% creating new product or service offerings to combat the reduction in sales and customer numbers.
A reduction in staffing was a common means by which businesses sought to cut costs during COVID-19 restrictions. Staffing changes predominantly involved permanent and temporary staff lay-offs and reductions or freezes of pay rates. The majority (77%) of businesses decreased working days and instigated temporary employee lay-offs (68.9%) while 42.2% of businesses dismissed staff permanently. More than half (55.4%) of management staff took a pay cut and many businesses (40.8%) also implemented a freeze in pay rates. Perhaps the most surprising result in this section of the survey was that almost a quarter (23%) of businesses hired new staff.
Strategic business changes
A high percentage (83%) of businesses created new product or service offerings in response to COVID-19 restrictions, with around a quarter (25.2%) of respondents indicating a copycat approach when implementing new practices and services. Introducing new products and services resulted in a major change to the primary focus of many of the businesses surveyed, with 76.6% stating that such changes created something they perceived as ‘unique through superior product features/customer service. Almost a quarter (23.1%) of businesses formed strategic alliances with other companies to offer joint products/services to consumers.
Greater social media presence
Results of the survey indicate increased attention on social media in their efforts to communicate with customers during COVID-19 restrictions. More than three-quarters (78.6%) of respondents increased their social media engagement during that time.
Many businesses also actively sought new ways of marketing through revising websites (69%), social media engagement (78.6%), and sought to expand to new market segments (56.9%). Much fewer businesses relied on increasing spending (27.3%) on advertising and creating loyalty programs (18.9%), with 41% decreasing their spending on advertising. Close to 40% of businesses sought customer feedback on their menu in order to determine what changes needed to be made to business operations during restrictions.
The research team is currently conducting the second phase of the project, including face-to-face interviews with restaurateurs and a second survey to be released in September 2021. By unpacking challenges and recovery strategies, this project will provide insight into resilience-building, the types of support hospitality businesses need during a crisis, and the innovative business-model changes required in order for them to survive.
The results and the ongoing study are expected to help businesses in this industry become more resilient for the future,
Dr. Sara Ekberg (lead investigator of the study) said.