The hospitality industry has long been known for its fast-paced, ever-evolving nature. Operators and managers are constantly having to stay flexible in order to meet the latest changes and demands, particularly in the aftermath of the pandemic, which wreaked havoc on many restaurants and hotels across the globe. 

While the industry has seen some recovery in the past few years, ongoing issues such as staffing shortages and other operational challenges persist. Addressing these issues will be critical for restaurants and hotels that want to deliver a high-quality experience for their customers—something that’s become even more crucial in today’s competitive landscape. Let’s explore some of the biggest hospitality challenges and how to address them in order to thrive in the years to come.

1. Ongoing Staffing Shortages

Ask any hotel or restaurant operator what their biggest hospitality challenge is, and their answer is likely to include something about labor: either recruiting or retaining enough experienced talent to meet demand. Though the rate of job openings for hotels and restaurants decreased from 9.6% in 2022 to 6.4% in 2023, it remains higher than almost any other industry—making it a constant headache for most hospitality businesses.

Being short-staffed can lead to service interruptions and have a negative impact on the customer experience. Recruiting and retaining enough talent to meet demand is crucial to solving virtually any other operational challenge you face. 

Solutions: 

• Offer schedule flexibility. Flexibility has become crucial to offer all of your employees—particularly younger team members. According to one survey, 33% of Gen Zers said they would never work for an employer who didn’t offer any flexibility or say in their work schedule. Opt for a scheduling software that makes it simple for staff to set their own hours or swap shifts on their own when needed.
• Start a referral program. If you haven’t already, start a referral program that rewards employees with bonuses or other incentives if they send quality applicants your way.
• Get creative with perks. Offering perks like flexible time off, same-day cashless tip payouts, and other incentives to improve your workers’ well-being can all go a long way in boosting workplace satisfaction and retention. 

2. Shifting Consumer Expectations 

Today’s travelers and restaurant patrons are increasingly looking for personalized experiences and customized offerings. Guests expect you to cater to more individual requests while simultaneously ensuring transactions are swift and seamless. If a lengthy process can be automated for your guest, all the better; consider the fact that consumer interest has risen sharply in self-serve kiosks for everything from quick-serve restaurants to hotel check-ins.

Restaurants and hotels must stay on top of consumer preferences and the latest innovations, using data and the latest technology to anticipate these ever-evolving demands. Failure to do so may result in loss of business or negative reviews, as consumers become even more vocal about unpleasant experiences online. 

Solutions:

• Ask for feedback. The easiest way to understand what your customers want? Ask, and then truly listen to what they say. A simple email survey might be overlooked, so get creative. Use fun quizzes, online polls, or other unique methods to collect data. Managers may also solicit more frequent verbal feedback from guests, asking them in-person what they liked or didn’t like about their experience.  Then, get to work testing these ideas.
• Prioritize personal touches.  Instead of just an online booking form that asks if there are any special requests when making a reservation, get specific in order to make sure that each guest feels valued. Ask restaurant guests about allergies, seating preferences, or even lighting preferences ahead of time. For hotels, this may look like asking for a guest’s preferred temperature setting or any other customizations that can make their stay more comfortable–think: special linens or scented candles. 
• Think mobile-first.  Adopting a mobile-first mindset is crucial, especially as more consumers use their phones as their first touchpoint with your business. (Did you know that 89% of dining research is conducted via mobile phone?) Make sure your website is optimized for a mobile-first experience and makes finding information like menus, reservations, and pricing information quick and easy.

3. Sky-High Operating Costs

Compared to other industries, profit margins are notoriously tight in hospitality, particularly the restaurant business. And with how much prices have risen in the past few years for everything from food to cleaning supplies, businesses have had to contend with higher inventory costs at every turn. 

Minimum wage requirements have also risen, signaling the need for restaurants and hotels to pay their staff competitively if they want to retain enough labor. Paying more for both talent and the everyday items needed to operate a business can take its toll, and many restaurants and hotels have had to limit service hours or close altogether because of these high operating costs. Fortunately, there are ways to be more cost-effective across the board, from reducing turnover to finding new revenue streams.

Solutions:

• Find new revenue streams. Find ways to add new revenue streams to your business. For restaurants, this might look like creating DIY meal kits or branded products. Hotels might consider offering add-on services like a personal concierge or dry cleaning for their guests. 
• Reduce turnover. Turnover isn’t just an inconvenience; it’s expensive. According to a study by Cornell University’s School of Hospitality Management, staff turnover can cost hospitality businesses an average of $5,864 per employee. If you’re looking for a way to save money, focus on your retention strategies. What are you offering employees to make sure they’re productive and engaged? Beyond paying them a competitive wage, are you paying them in a way that’s simple and easy? Fast, flexible pay options can go a long way in delivering a better day-to-day experience for your staff. 
• Streamline + optimize inventory. For restaurants, simplifying your menu to minimize the variety of ingredients required, or only buying in-season produce for example, may help trim high food costs. Hotels can implement these culinary strategies too, as well as find ways to optimize inventory items by monitoring usage patterns. Analyzing usage data can help you ensure you aren’t overstocking or overspending on anything.
  

4. Inefficient, Outdated Processes

Both restaurants and hotels typically use multiple third-party apps to get everything done; everything from front desk or reservation scheduling software to point of sale providers, and beyond. Unfortunately, having to use all of these ad hoc tools can eat into your budget. Not only is all of this admin costly, but it can be time-consuming too. You might be stuck with outdated manual processes like issuing paper checks or stuffing envelopes with cash tips that take up too much time—time that could be spent with your customers.

Solutions:

• Audit your software. Take stock of the software as a service (SaaS) fees you pay per month and compare it to your ROI. Is each solution delivering enough of an ROI to justify the spend? As you review budgets for the year ahead, make this a priority. 
• Bundle and consolidate when you can. Bundling can be a cost-effective strategy where it makes sense to do so. For example, some POS providers allow you to bundle online ordering + loyalty programs, allowing you to save money on two services at the same time. You may also consider adopting a platform that can streamline multiple needs, such as a workforce payments platform like Branch that can handle cashless tips, offer a pay card alternative, handle one-off-payments, bonuses, and other payment needs. 
• Automate manual processes. Are there any manual processes you currently use that could be automated to save time and money? Think of switching from paper check issuing to automated, digital payments. Or offering those self-serve kiosks consumers love these days. Hours saved each week can also be an ROI, especially if it helps managers and operators get back more hours in the day to interact with guests or directly support staff.

Address Hospitality Challenges with Fast, Flexible Pay

While we can’t wave a magic wand and make all of your hospitality headaches go away, there are a few issues we can help you solve today: your ability to recruit and retain employees, and the simplicity of your payment processes. 

Branch allows you to offer the fast, flexible pay that hospitality talent wants, whether it’s digital direct deposit or same-day cashless tips that are deposited right into their account after every shift. These seamless digital solutions not only save managers time but can keep your hospitality staff happier—leading to fewer labor and operational challenges for you. 

As you set your sights on planning for the year ahead, consider how fast, flexible pay can be a part of your strategy for success. 

‍Learn more about how Branch works for hospitality here. 

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