Advertisement
03/03/2021

Hospitality Technology is a Catalyst for Business Agility: Here’s How to Take Advantage

Last year was a testament to the fact that hospitality technology is a catalyst for operational excellence, as those who invested have surely reaped the benefits. As part of our 2020 CohnReznick Restaurant Technology (RestTech) webinar series, we surveyed a diverse group of over 500 restaurant companies operating throughout the U.S.[1] Our goal was to gain an understanding of their technology environment before the coronavirus pandemic, how technology adoption accelerated during the pandemic, and their forward-looking visions related to technology as a business enabler. Distillation of survey data produced the following key insight: Restaurant operators that viewed technology as business-critical prior to the pandemic were able to leverage technology capabilities to realize business agility. Those that were able to take advantage capitalized on unforeseen opportunities and realized an amount of resiliency needed to weather the storm.

There is no doubt that the industry as a whole has been devastated. However, the silver lining is that technology empowered and will continue to empower operators in their new business environment, allowing them to powerfully emerge ahead of late and non-adopters.

Technology Can Catalyze Business Agility

“Business agility” is a term used to explain a company’s ability to rapidly and systematically evolve and execute upon entrepreneurial initiatives, innovating in an iterative form. Agility at scale can positively impact business fundamentals, allowing companies to navigate market disruptions. With an agile operating model empowered by technology along with a clearly defined strategy, operators can scale up fast post-pandemic while continuing to profit from their differentiating capabilities.

Although the effects of the pandemic on restaurants have been for the most part devastating, many operators have enhanced their digital ordering and delivery capabilities, resulting in a substantial increase in off-premise sales. Restaurants that invested in technology solutions that enabled these operational capabilities prior to or during the pandemic have advantageously captured additional revenue creation opportunities. Of our RestTech survey participants, 74% said that digital ordering, delivery, and off-premise sales accounted for more than 50% of their revenue. However, not all operators were equally prepared at the onset of the pandemic; 84% of survey participants said that they had limited capabilities pre-pandemic to offer digital ordering, delivery, and off-premise options to their consumers.

Regardless of which side of the fence you were on, operators will need mature digital and customer engagement capabilities to sustain revenue thresholds post-pandemic and to stay ahead of the competition.

The Business Case for Integrated Business Planning

The most impactful way to leverage technology in your business model is to grow an essential and foundational business capability – your financial planning and analysis (FP&A) function. By doing so, you can improve your financial forecasting and scenario modeling capabilities. This helps with mitigating downside volatility and capitalizing on upside shifts in market conditions. An integrated business planning solution can better prepare you to react to market conditions and forecast for what is on the horizon.

A lack of business agility directly correlates with immature FP&A capabilities in hospitality businesses. Having worked with leading international restaurant groups, from fine-dining restaurants to fast casual concepts, we have often seen operators struggle to realize the full potential of a robust corporate FP&A function. From our experience, many have processes that are dated and bogged down with manual workarounds. Financial planning at the corporate and restaurant levels is often prepared using spreadsheets. This creates numerous inefficiencies with the potential for formulaic and input errors and operational risk exposures. The roadblocks and pain points often include difficulty scaling and administering FP&A capabilities, tedious manual processes to update or modify budgets, lack of integration with key operating systems like POS and ERP systems, and one-and-done budgeting with an inability to easily re-forecast when needed throughout the financial year.

A fully implemented integrated business planning solution can transform a restaurant operator’s FP&A function into a world-class corporate function. A mature and technology-enabled FP&A capability can enable operators to realize efficiencies such as enhanced analytical capabilities, optimized planning and forecasting, and automated key system integrations. It can also provide monthly and ad-hoc re-forecasting capabilities, self-serve scenario analysis, and increased back-office productivity, along with labor cost savings as well.

How to Make It Work

The Economic Aid Act has enhanced the Paycheck Protection Program (PPP) to allow borrowers to utilize their loan funds for “covered operations expenditures.” These are defined as payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records, and expenses. This added benefit will enable restaurant operators to take advantage of needed technology that can ultimately enhance both their current and future business.

In Conclusion…

To sustain a competitive advantage, restaurant operators must adapt quickly to changes in their competitive environment, in society, and in numerous other business areas. In today’s challenging and dynamic business environment, organizations need an agile business model to achieve future success. Unfortunately, not all those in the industry have that agility. Our RestTech survey revealed that 90% of participants said that their business was slow to adapt to COVID-19-related restrictions and regulations.

Although an organization can never be fully prepared for a disruption in the market, the most resilient ones have learned from past experiences and have incorporated agility into their business models. This has allowed them to mitigate risk and take advantage of both downside and upside volatility. An agile operating model with strong financial forecasting and scenario-modeling capabilities can enable restaurant companies to look out over the horizon and be prepared for what’s coming.

[1] Data was gathered from participants through in-session polling questions and/or through a registration survey. Note that not all participants responded to all questions; each result percentage was calculated based on the number who responded.

ABOUT THE AUTHORS

Stephanie O’Rourk, CPA, is a partner at CohnReznick who leads the Firm’s National Hospitality Emerging Concepts and Operational and Financial Consulting Divisions.

Stephen Mancini is a hospitality industry leader for CohnReznick’s Advisory practice and a member of the firm’s Strategy and Innovation Group.