Driving sustainable revenue growth

A new era is beginning for commercial leaders across the restaurant and hospitality industry. A pandemic yielded cost inflation not seen in decades and forced most brands to increase prices out of necessity. Those price actions successfully drove short-term revenue growth but often proved to be unsustainable over time. Companies are now seeking out more sustainable pricing strategies that can help drive profitability and help them gain an edge over the competition.

Today’s consumer is challenged by income not keeping pace with the rate of price inflation, and consequently is experiencing a disconnect between price and value perception. Many restaurant and hospitality brands are finding it harder to achieve sustainable gains with across-the-board price actions—the easy gains have passed. Commercial leaders now confront a more complex environment in which a more holistic approach to revenue growth management is required to deliver profitable growth.

Succeeding in this environment requires establishing a more complete and coordinated set of revenue growth management initiatives—a holistic approach to front-office transformation that restaurant groups aren’t often accustomed to or organized well for. The challenge for today’s commercial leaders is to set the right vision for those efforts by aligning leadership, choosing the right collection of value levers, and focusing day-to-day activity and investment accordingly. Doing so can drive competitive advantage, as well as significant value, contributing to both top and bottom-line growth at a time when neither is easy to come by.

Modern revenue growth levers

Today, revenue growth management constitutes traditional value drivers like pricing and promotion, but also extends to digitally enabled capabilities like loyalty and rewards programs. Expansion of the breadth and depth of levers increases the complexity associated with getting commercial strategy right, and further necessitates a holistic approach. From boosting sales strategies to refining customer experiences, companies should consider how they can advance a comprehensive commercial function transformation. Here's a summary of five key value levers in the restaurant and hospitality space:

A more holistic commercial strategy

An important aspect to succeeding in activation of a more holistic revenue growth management strategy in the restaurant and hospitality industry is the need to address silos and competing incentives in an organization. Recent experience has highlighted this as the most important organizational hurdle for commercial leaders to overcome.

Behind this challenge is the fact that many modern commercial leaders have not had to apply interdisciplinary strategy and thinking given the relative “ease” of taking more siloed actions recently (as with pricing). Additionally, brand team structures have historically placed revenue growth levers in disparate parts of an organization. A fundamental rethinking of team structure, resourcing, and ways of working is often required to overcome historical gaps.

To help overcome such shortcomings, successful companies may consider taking a targeted approach to commercial transformation—one that proactively identifies and emphasizes overlapping (or competing) priorities across functional areas that touch commercial strategy. In doing so, they focus on answering several key questions that begins to shape the right go-forward and holistic decision-making:

• What are common questions being explored across disparate parts of the organization?
• Where can insights be democratized for application in a variety of commercial functions?
• What are the inherent tradeoffs or shortcomings in not looking at opportunities cross-functionally?
• Where are incentives aligned to tackle challenges/opportunities collaboratively?

Revenue growth management continues to lie at the intersection of strategy and execution, giving it (when done well) the opportunity to disproportionately drive impact in the restaurant and hospitality industry. The right priorities and a data-driven organization aligned top-to-bottom to meet today’s new moment in the restaurant space provides opportunity to leverage more than just price for delivering profitable growth and long-term value-creation.

By leveraging Deloitte's IndustryAdvantage approach, which integrates deep industry insights with advanced analytics, businesses can align their priorities and create a data-driven organization from top to bottom. This alignment can be crucial to meet today’s new moment in the restaurant space. It can provide the opportunity to leverage more than just price to help deliver profitable growth, long-term value creation, and a competitive advantage in an ever-evolving market landscape.