Business Optimization

Identifying Opportunity for Hotel Revenue Amidst COVID-19 Challenges

Business Optimization, Pricing and Revenue Management

by Stephen Davis, VP of Pricing and Revenue Services, Integrated Insight

The total economic impact of COVID-19 on the travel and leisure industry led many hotels and resorts to experience one of the softest summers in recent history. Grand Traverse Resort and Spa in Traverse City, Michigan, was not immune from the impact as groups and conventions were cancelled and some families chose to pass on their summer vacation.

Grand Traverse Resort and Spa engaged Integrated Insight in late 2019 to identify revenue opportunities. The resort is a beautiful property with excellent service, world-class convention facilities and a strong EBITDA – the dream scenario for many hoteliers across the country. But we saw opportunity for even stronger revenue and profit.

Grand Traverse Resort faced ongoing revenue management challenges that many resorts wrestle with: balancing group and leisure bookings to achieve the highest profitability. There were difficult questions to answer. What base volume of group bookings achieves the highest profitability, while complementing leisure demand? And how do you get confident turning down groups during periods in which leisure business would be more profitable?

When the demand for group bookings was compromised due to COVID-19, the resort had little risk shifting its revenue management strategy and decided to get creative. Fortunately, because of the resort’s location in the northwestern part of Michigan’s Lower Peninsula, it was among the first in the state to be able to re-open.  With groups and conventions canceling, the resort had more capacity for the summer than ever before.

Integrated Insight worked with leadership to launch a successful room promotion when the resort reopened at limited capacity. We helped the resort strategize a marketing campaign to make consumers feel safe and excited for outdoor recreation.  As it turned out, that’s exactly what Michigan residents wanted to hear. Pretty soon the resort was seeing the remaining summer weekends book up with leisure business at rates well above prior years.

In spite of COVID-19, Grand Traverse Resort achieved its highest ever average summer weekend rates and had near sell-outs during July, August, and early September weekends. It was fulfilling to see Grand Traverse Resort and Spa have enough success to remain open for the summer. It was also strong confirmation that they were limiting leisure business in prior summers by booking too many convention room nights at rates well below leisure business.

Typically, changes to revenue management strategies take incremental steps for clients to execute. We saw the opportunity to move towards more leisure business and higher rates, but doing quickly is often easier said than done. COVID-19 forced them to book more leisure and proved their rates could be higher. It was a beautiful silver lining, really.

In 2021, Grand Traverse Resort is highlighting the safety of its convention facilities and the steps they are taking to allow socially distanced gatherings - balancing both leisure and groups to yield optimal revenue. When faced with uncertainty, we are often willing to take more risk. In doing so, Grand Traverse Resort and Spa discovered confidence moving forward about their business, value, and future opportunities.

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The Temptation and Risk of Discounting in a Covid-19 World

Business Optimization, Pricing and Revenue Management

by Scott Sanders, President, Integrated Insight

As businesses reopen, many are grappling with the need to discount to generate demand. While it may seem like the right thing to do, will discounting really help generate profitable demand?

The tourism industry has been impacted significantly by the current pandemic. Companies are gathering insights to understand how individual consumers and families have been impacted, and specifically, when consumers will begin to travel again. Published research reveals some interesting insights.

- COVID-19 is the number one barrier to travel. Health and safety is critical to getting consumers traveling again.

- Price, often a top barrier in leisure experiences, has fallen much lower in the rank order. As a result, lowering price alone is not likely to get consumers back in the game.

- Most consumers have been impacted by the pandemic and expect to spend less on out-of-home entertainment this year.

As consumers adopt new spending habits, organizations need to evaluate their pricing strategies.  Promotions can be a great way to generate new customers and drive growth.  However, discounting tends to be a short-term solution. You’ve heard the old adage, “too much of a good thing can hurt you.”

The same holds true for discounts, if not done correctly.  Frequent discounting can have unwanted consequences, such as devaluing your product or degrading price integrity. And once consumers are trained to wait for the next offer, frequent discounting will erode base profits.

Before deciding whether to implement discounts, ensure your company has created a holistic pricing strategy. If your organization doesn’t have a holistic pricing strategy, now is the time to craft one.  Learn more in our article: How to Develop a Successful Pricing Strategy.

Discounts and promotions have a key role to play in every organization’s pricing toolbox and strategy.  Effective promotions typically deliver on all of the following:

- Lend themselves to compelling marketing messages.

- Target specific audiences and time periods.

- Are fenced to avoid dilution.

- Have a strong sense of urgency.

- Can be yield managed.

When evaluating discounts especially in today’s environment, consider offers that encourage higher than average spend in lieu of discounting core products.  Also ensure sufficient marketing and sales budget is available to create demand for the offer and focus on communicating value over price.  Leverage the pricing structure to pull consumers into higher yielding products.

It is also critical to measure promotions to determine if they deliver on established goals. Do the math to understand cost versus benefit and develop a “test and adjust” culture to continue building on what works.

Let’s look at a couple of recent promotional offers and contrast differences.

Universal Orlando Resort just released a Florida Resident offer to increase in-market demand: “Buy a Day, Visit Every Day Thru Dec. 24 For Free.”

the risk of discounting in a covid 19 world

Rather than discounting the base 1-day 1-park ticket, the offer is providing a buy-up opportunity. If guests upgrade to a 1-day 2-park ticket, they can receive admission for the rest of the year for free.

The promotion is set up for success for several reasons.

- It is fenced to Florida Residents.

- It offers value and has a strong marketing message.

- The finite booking window creates a sense of urgency to purchase.

- It is structured to avoid dilution of the base business.

- It has a clear usage window.

- Revenue improvement doesn’t rely on incremental sales.

- It incentivizes repeat visits and in turn increases in-park spending.

Now let’s look at a different kind of offer: a single day discount offer. A good example is a recent offer by a regional amusement park for a 1-day discount in collaboration with Coca-Cola: “Buy your tickets here and save up to $30.”

the risk of discounting in a covid 19 world

This promotion is structured to attract visitors with a deep discount message on the core single day ticket. Rather than speaking to a specific market, the offer is available to anyone online.

This offer might be compelling, but it carries a higher risk than the previous offer because it:

- Devalues the core ticket product.

- Is available to anyone who buys online versus a specific audience.

- Relies on driving incremental sales to be successful.

- Has no booking window or usage window to create urgency.

Both of these offers could generate value, but each carries risk. When compared, the buy up offer carries less risk than the discounted single day offer because it drives positive revenue improvement with minimal buy up and no incremental demand, even after accounting for buy down from higher yielding tickets.

Let’s compare the two with a couple hypothetical scenarios.

The goal of the buy up offer is to pull visitors up the price curve by providing the opportunity to visit multiple days for the price of a 1-day 2-park ticket. We can assume some modest buy up from the 1-day 1-park ticket ($119) to the 1-day 2-park ticket ($164) and slight buy down from the 2 day 2-park ticket ($223). In addition, there will likely be no volume loss since the core ticket price hasn’t increased. This promotion does not require incremental sales volume to drive revenue improvement or break even, which reduces risk.

The “$30 off” offer is designed to drive incremental attendance by discounting the base single-day ticket. Because the offer discounts the base ticket, some individuals who would have paid full price are now able to pay less. We refer to this buy-down behavior as dilution. Because of the dilution in the base ticket price, a 10% increase in visitors is needed for the offer to break even. Broad offers like this can be risky, especially when park capacity is limited.

Learn more about our guiding promotion principles to help you understand whether discounting will work best to increase demand while preventing downside risk.

While these are unprecedented and trying times, now is the time rethink pricing and come out stronger on the other side.  Below are some closing recommendations for discounting in today’s world.

Keep the customer front and center.

Play your own game.

- Have confidence in your product or service.

- Lead; don’t follow

- Don’t assume your competition is right.

Develop different playbooks for specific segments or markets.

- Not all customers are created equal.

- Individual wants and needs are different.

- Plan potential promotions months in advance.

Establish a test and adjust culture and build on what works.

- Do the math to understand cost benefit.

- Measure, measure, and then measure.

Lastly, make "Pricing" a core competency in your organization.

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Optimizing Restaurant Space To Increase Sales Post-COVID-19

Optimizing Restaurant Space To Increase Sales During COVID-19

Agent-Based Simulation, Business Optimization, Capacity Planning

by Susan Dekker, Director, Integrated Insight

Space management strategies inside restaurants look very different in a post-Covid-19 world. Regulations for social distancing have put restraints on restaurants that have limited party sizes, total dining capacity, and number of guests allowed per square foot. Additional space is needed to increase distance between dining tables, employees in the kitchen, FOH check-in, and waiting areas.

With capacity constraints and space limitations, restaurants need to optimize the utilization of space available to increase daily sales.

Maximize Existing Space
In order to increase space utilization, restaurant operators need to evaluate existing space. A few options to explore include:

- POS Stations: Guest expectations for safety are morphing, and many guests will expect contactless payment options. Consider switching to mobile tablets for both point of ordering and sales. There are plenty of off-the-shelf solutions available. This may reduce the need for the POS nooks currently dispersed throughout many restaurants in the front-of-house space.

- Storage Areas: Evaluate order quantities to reduce the area taken up for storage. The “Pre-Covid” order quantities and frequencies are no longer applicable in today’s operation. Consider ordering lower supply amounts on a more frequent basis to keep only the needed stock on hand. Restaurant operators can convert previously used storage space into guest-facing areas or increase square footage available for social distancing in the kitchen.

- Take Advantage of Available Outdoor Space: Many consumers will feel more comfortable eating outdoors because of the open space. Restaurants can get creative with utilizing outdoor space by converting parking and landscaping space into dining areas to maximize the available outdoor seating. As the weather gets colder, consider adding guest comfort measures such as tents and heaters.

 

Designate Space According to Guest Groups
Guest expectations and desires for the dining experience have changed drastically since the coronavirus outbreak. In order to optimize fulfillment space, restaurants need to identify the volume of dine-in versus carry-out orders. There are likely many more “dine-out” guests that prefer the drive-through, curbside pick-up, delivery fulfilled in-house, or delivery through third party apps.

Each one of these guest types interacts with the restaurant slightly differently upon arrival. Thus, be sure to consider each guest group and account for shifting guest behaviors when re-designing restaurant space.

Dine-In vs. Carry-Out
Restaurants should physically separate dine-in and carry-out guests since they require very different means of fulfillment. If possible, designate an entrance for dine-in and an entrance for dine-out guests. Consider retrofitting an area near an existing door to act as a dine-out counter. Conduct take-out as an independent operation from dine-in.

As an alternative, especially if separate entrances aren’t possible, consider implementing curbside pick-up for carry-out orders. Guests do not have to enter the restaurant which can free up space for a waiting area. Identify a few parking spots as “curbside pick-up.” A sign should clearly state directions and include key information like a phone number and parking spot number so the guest knows what to do upon arrival.

Reservation vs. Walk-Ups
For guests that are dining inside the restaurant, consider how to handle guests with reservations versus walk-ups. Operating by reservation-only gives restaurants the greatest ability to manage guest arrivals. However, be sure to understand the no-show rate, since you can’t fill in no-shows with walk-ins in a reservation-only operation.

If you do accept walk-in guests, look into off-the-shelf apps to utilize a mobile queue where you can text a guest when their table is ready. This allows the guest to wait in their car or other off-site location. You can also utilize apps like Yelp’s waitlist to allow guests to get in line prior to arrival.

Plan for Excess Demand
As more consumers begin to feel comfortable venturing out, demand could begin to outpace capacity and space limitations.  If venues fail to plan for this scenario, it could lead to crowds of people waiting to enter without a way to properly distance themselves.  The two most effective ways to prepare for this demand is to design a socially distanced queue or to utilize a virtual queuing system so guests can wait in their cars.

The video below shows the benefit of providing enough space to allow guests to properly distance themselves while remaining in order of arrival to promote fairness.  Many venues are attempting to do this but provide too few queuing locations and the structure breaks down with excess demand.  Providing ample queuing locations (even with masking tape!) will provide structure for the guests and prevent a dangerous situation from developing.

Virtual queuing is another great option for venues with ample parking.  Many products exist to provide automatic text messaging to guests to inform them when their tables are ready.  This allows guests to wait in their cars out of the elements and eliminates potential crowds.  Some locations are avoiding the software costs by approximating a virtual queue using a host to text guests manually when their table becomes available.

Other Considerations

Inside the restaurant, seating rearrangements will be mostly dictated by regulations, but be sure to understand both employee and customer usage. Does the route to the bathroom require guests to get uncomfortably close to an occupied table? Are there any pinch points where a server must squeeze by a table? Modify seating layouts as needed.

The back-of-house space may need to change. If delivery or take-out continue to be a large portion of sales, you may need to dedicate kitchen space to this operation. Also consider designating space to distribute dine-out orders, which can help reduce errors. Dedicate a leader with responsibility purely for delivery and take-out guests.

Always Provide Excellent Customer Services
Regardless of what changes you make to your restaurant’s physical space, guests should always receive  excellent service. Guests waiting to pick up food still deserve the level of customer experience that dine-in guests experience. Even though they may not be sitting at a table, they are still forming an impression of your business.

A great way to elevate the customer experience is to provide coverings, fans, heaters, or water to outside queues based on the conditions. Adding an entertainment factor to queues and waiting areas can also elevate the experience.

Ultimately, be sure that the operational process is clear to the guest. Customers are likely already stressed given the current outside conditions, and clearly communicating the process can relieve anxiety. Continually update all guest communication channels with the latest policies and procedures. This includes social media, website, physical signs at restaurants, and instructions on Google business listings and third-party apps.

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solving elevator high rise transportation with social distancing

Solving Elevator Transportation During COVID-19 With Simulation Modeling

Business Optimization, Capacity Planning

by Ben Dubiel, VP,  Integrated Insight

Elevators are part of many people’s daily lives – apartments where we live, offices where we work, and hotels where we travel. However, CDC guidelines for elevator operation during and after the pandemic are causing new concern among landlords on what elevator capacity might look like with social distancing.

Social distancing has turned the service world upside down as the industry went from maximizing the number of guests within a space to needing to maximize space between guests. As mentioned in Marketplace, some building operators are putting in social distancing measures, but how many know the implications downstream? In locations that depend on elevators for vertical transportation, decreased elevator capacity will quickly become a bottleneck that could cause dangerous crowding if not accounted for. In our experience, we’ve found that agent-based simulation is the best option for understanding and mitigating elevator operation with social distancing.

Risks Involved in Reopening a High-Rise

As with all situations that involve potential crowds, there are added risks with reopening during and after the pandemic.  Not addressing these risks could lead to tenant dissatisfaction and a potential spike in vacancies as companies begin to adopt a work-from-home culture or residents flee from high-rise housing.

The most common risk we’ve observed is tenants congregating in lobbies due to reduced elevator capacity. Individuals will usually adhere to social distancing guidelines if they are given markers on where to stand.  If these markers are not provided, the group will begin to crowd around the door to ensure they make it into the establishment as soon as possible.

Assuming an intuitive, clearly marked queue is planned, this can then lead to a secondary risk: limited space within lobbies.  We’ve found that socially distancing a queue can require three to six times more space and landlords will find the limited space they have disappears quick during periods of high demand.

The final risks are a product of the long waits that could develop if demand is not properly planned for: lower productivity and frustration.  Waiting 5-20 minutes each time a tenant calls an elevator will add up quickly. The resulting dissatisfaction will result in higher vacancies as people are forced to make a change.

Capacity Depends on Many Compounding Variables

Elevator throughput is a complex equation that depends on many variables within the infrastructure and operation.  Only some of these variables are controllable by the building operator.

- Elevator operating methods (e.g. door close delay and operational methodology) are usually variable and can be controlled systematically. Understanding the proper settings in your environment can be difficult if the rest of the equation is unknown.

- The building and lobby layout are typically limited by the physical infrastructure and need to be worked around to determine the most efficient operation.

- Volume of demand will depend on the size and operation of the building. This can be controlled by working with tenants to reduce access to the building to only necessary activity.

- Arrival rate varies widely by the operation of each tenant in the building. Each operation or tenant will have a unique arrival rate. Combining all arrival rates along with the associated volume of demand will add up to a larger arrival curve that will ultimately determine the periods of peak demand.

- The destination of tenants complicates the equation immensely. If tenants arriving at similar times have significant variations in destination floor, the elevator travel time will grow and thus the resulting elevator capacity will shrink.

Using Simulation to Model Operation Scenarios
Because each operation is unique and the solution can be difficult to determine, we recommend agent-based simulation to find the optimal solution through experimentation.  Using simulation, we can model the base scenario to determine the extent of the concern given the expected demand upon reopening.  In the movie below, an example of a base scenario for a nine-story office building is shown:

After the base analysis is complete, the model can then be modified with the help of building operators to evaluate different mitigation techniques and remove the uncertainty from the reopening plan.

A few mitigation techniques that are being used in the industry include:

- Technology: Elevator timing and logic can be adjusted to operate more effectively with smaller groups riding.

- Manual demand management: Hosts can be used to manually sort riders to make the trips as efficient as possible resulting in increased elevator throughput.

- Demand mitigation: Solutions like dedicated floor service, assigning days and times for elevator use, and incentivizing stair use can increase capacity in certain scenarios.

These scenarios can be modeled before reopening to evaluate their effectiveness safely in a risk-free environment.

Results Provide Details on the Safest Operational Plan
Metrics are used to evaluate each scenario during modeling and experimentation.  Elevator capacity, queue size, wait times, and required operators are a few of the metrics we use to ensure we identify the optimal scenario. The final step in the process would be to justify any recommended changes, infrastructure or otherwise, with the potential avoidance of revenue loss that would come from a decrease in move-outs or safety hazards.

The movie below shows an analysis of a museum operation that depends on elevators for vertical transportation. This analysis helped the operators understand the resulting elevator capacity, which was reduced significantly (up to 70%). This information provided the needed insight for the number of tickets they could sell for a specific time period to provide a safe and fun environment for their guests.

Museum Elevator Simulation Model

Mote Marine Event Space

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optimize restaurants coronavirus increase table turn time

How To Maximize Restaurant Throughput By Minimizing Table Turn Time

How can food and beverage locations maximize throughput given that they can’t serve as many people in the dining room at once?

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5 Cost-Effective Restaurant Marketing Strategies during the Coronavirus Era

Business Optimization, Marketing

by Jessica Dreiling, Senior Consultant, Integrated Insight

While Germany and the United Kingdom are showing pent-up restaurant demand as bookings have already returned to pre-COVID levels after reopening, it is uncertain how the U.S. market will respond.  There is a lot for restaurant owners to consider regarding space optimization, cost savings, and safety requirements when reopening for dine-in guests, but it is also important for them to reassess marketing strategies with the new 2020 conditions.

Proactive marketing can be an effective tool for restaurants, but with limited cash flow, how should restaurants be advertising, and how should marketing priorities change?

Here are 5 Cost-Effective Marketing Strategies that Restaurants Can Implement to Increase Foot Traffic:

1. Proactively communicate safety precautions
2. Communicate support for the community
3. Increase repeatvisitation by enhancing the guest experience
4. Increase word of mouth marketing with product innovation
5. Assess pricing and promotional strategies
1. Proactively Communicate Safety Precautions

Today, more than ever, when choosing where and what to eat, safety is paramount. In fact, search interest for “is food delivery safe” has increased 650% across the U.S. since the beginning of March. Reassuring customers that you understand the concerns for safety and are taking important steps to address the current situation is key.

In addition, a research study by Market Force Information shows that 80% of consumers will be visiting brands that they trust.1 In order to re-establish trust with customers, restaurants will need to look for ways to communicate that they’re taking health and safety seriously.

Communicating the new operational procedures through organic social channels will help customers feel comfortable. However, restaurant operators should focus less on talking about the frequency of cleaning since customers may feel that should have been the standard pre-COVID. Rather, talking about contactless payment, mobile menu ordering, virtual wait lines, and table spacing is a better option.

2. Communicate Support for the Community

Customers with emotional relationships with a brand have a  lifetime value of more than 300% and will recommend the company at a rate of 71%, rather than the average rate of 45%. And a Mintel study shows that a company’s charitable giving affects over 70% of Americans’ purchase decisions, while 8 in 10 consumers say it’s important that a company supports a charitable cause.

Companies that make sincere efforts to be part of communities will receive customer loyalty.2   Right now, the communities in need are front-line workers in health care and the black community. With limited cash flow, restaurants can still show support through non-monetary efforts. Examples include social media posts, lighting up store-front signs with support messages, and stating a pledge to uphold safety precautions.

Americans have been living in isolation for months, and on top of that, the current social climate has left them frustrated, sad, and drained. Restaurants that show authentic support for their community will reap the rewards with increased referrals and organic social media reach.

3. Increase Repeat Visitation by Enhancing the Guest Experience

Instead of spending hours creating online content for potential customers to see, restaurants that focus on enhancing the guest experience for their current customers will see the most repeat business in 2020. Cost per Acquisition (CPA) is lower for repeat customers than trying to acquire new leads. And we all know word of mouth marketing is the most cost-effective acquisition strategy.

Rather than spending money on ad campaigns, retraining staff to treat each customer as a valued guest will go farther. Lee Cockerell, former Executive VP of Operations for the Walt Disney World Resort, recommends implementing the Guest Experience Cycle to increase repeat business in one week. This is a tool to ensure every guest is treated like a “VIP” from the first contact with the restaurant until departure.

In our article regarding space optimization for restaurants, we recommend a few ways to elevate the customer experience when wait times will increase due to social distancing requirements. This can include adding an option for virtual queuing and providing for spaced-out waiting areas or outdoor queues.

4. Increase Word of Mouth Marketing with Product Innovation

We all know that Word of Mouth Marketing (WOMM) is the most effective customer acquisition strategy, but what are the steps for restaurants to achieve it? Customers will do the talking for you when a product or experience is unique and different. “Purple Cow”  is a marketing concept developed by entrepreneur Seth Godin that states that companies must build things worth noticing right into their products or services in order to sell.

Rather than relying on creative advertising and content production, only to spend money to be placed in a crowded media landscape, restaurants should focus on creating a great product and experience. When these elements provide significant value, restaurant goers will tell their friends.

Seito Sushi, a local Japanese restaurant, created a “build your own” sushi platter for take-out customers when the quarantine started in March. The product went viral on social media and it sold out nearly every day. It may have been the saving grace for the restaurant during the quarantine – all with $0 advertising cost, no additional food cost, and reduced labor cost.

Restaurant innovation does not need to be food-related to gain traction. Adding a surprise-and-delight element such as live entertainment, socially-distanced mobile trivia, and themed beverages can also be effective.

seito sushi is a great example of product innovation to help restaurants with marketing during coronavirus
5. Assess Pricing and Promotional Strategies

While all of these strategies can increase foot traffic to your restaurant, focusing on pricing strategies can increase sales of profitable items. In our recent article on menu engineering, we provide a guide on how restaurants can design their menu to improve profitability during these harsh times. Taking a slight price increase on very popular and profitable items will be advantageous to restaurants, as it will all fall straight to the bottom line.

Promotional strategies can improve restaurant sales by attracting new customers. Partnerships with local social media influencers can be a powerful promotional tool when customers are spending so much time online. In addition, providing a coupon in delivery and pickup orders can prompt future visits.

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optimize restaurants coronavirus increase table turn time

How To Maximize Restaurant Throughput By Minimizing Table Turn Time

Business Optimization, Operational Efficiency

by Susan Dekker, Sr. Consultant, Integrated Insight

The restaurant industry is beginning to open back up to dine-in guests with social distancing restrictions in place. This results in a limit to the total number of customers that can be inside the facility at one time.

How can food and beverage locations maximize throughput given that they can’t serve as many people in the dining room at once? A restaurant should evaluate many different options, such as initiatives to fully develop the takeout and delivery experience. Another option may be to expand the typical meal periods to spread demand throughout the day. Still other possibilities include focusing on family meals, gift cards, or mobile apps.  Here we will focus on the most effective way to increase dine-in capacity in a space-constrained environment by minimizing table turn time to make the most of customers already at your door.

Here are the three steps to optimize table turn time:

1. Measure Your Baseline
2. Optimize What You Can
3. Standardize, Train, and Sustain Your Employees
1. Measure Your Baseline

Total meals served is a function of the number of people in the dining room and how long it takes them to eat. Government regulations are still very much in flux, and the number of people in the dining room will likely be influenced by these rules. New sanitization procedures and changing guest behaviors may cause your table turn time to increase. Restaurant owners now more than ever need to be even more savvy to maximize total meals served.

increasing table turn time restaurant

The first step before making any changes is to understand your baseline. Map out each step of the process and time how long each of the steps take. If you’re unable to directly measure the process, consult with operators and servers to estimate these times. Some of these aspects are dependent on the guest (e.g., how long it takes to eat), but most are within direct control of the restaurant (e.g., how long until a busser arrives at a table after the party leaves). A process may look like this (a shortened version of the many steps involved in food service).

table turn time graphic
2. Optimize what you can

After measuring your baseline, sit down with key team members to discuss what you see. Identify which areas you think you can influence without impacting guest experience or quality of service. The process may look something like this:

Pre-Meal
There are many best practices you can use even before a guest sits down. Reservations are always tricky, and may be a necessity in the post-coronavirus-outbreak world to manage guest arrivals. However, reservations can mean you’re holding an empty table for a party who shows up late, if at all. Don’t seat incomplete parties – this extends table turn time as it is longer until the guests place their entrée order. Balance new tables across sections to not overwhelm a single server with many new tables at once. Did section four just get the last three new tables? If so, maybe put the next party in section two.

Now is a great time to evaluate your menu and remove items that are complicated to cook. Streamlining the menu has many benefits including reduced inventory and food waste, and also can improve table turn time. Optimizing the menu can both reduce the decision time for a customer prior to order, and shorten the cook time by eliminating complex meals.

restaurant-waiter-standing-near-two-customers-vector-17099437 copy

During Meal
After the guests are seated, understand their expectations for the meal early on. Some customers are seeking an expedited experience, and will be pleased with quicker service rather than feel rushed. Consider asking questions like:

- “Is this your first time here?” – If they’re a repeat customer, they don’t need the typical run-down of the menu. You can just highlight key changes. They also will probably be ready to order quicker.

- “What brings you in?” – Do they have another commitment immediately after? Then they may be in a rush to finish.

restaurant-waiter-standing-near-two-customers-vector-17099437

Ensure an up-to-date menu is online. You can direct guests to view this menu on their mobile device as they are seated. This not only eliminates a contact point, but may also reduce decision-making time as a guest does not have to wait for a menu (and may even make a decision prior to arrival).

While making rounds across tables, consolidate trips as much as possible. For example, bring waters when you walk to the table to take drink orders. While this tip sounds obvious, actually observe server trips. Spend an hour on a busy night timing how long a server spends walking back and forth. Specifically look for wasted trips or wasted motion. A few extra seconds to pick up a straw doesn’t sound like a big deal, but this time adds up when multiplied over hundreds of parties.

Especially during non-peak periods, a server may have small downtimes with a few minutes of idle time. Have a list of non-time-sensitive tasks for servers, such as filling sauce containers or rolling napkins.

Finally, consumer demand in the midst of the covid-19 outbreak may exceed the limited dining room capacity due to social distancing regulations. If so, consider fully eliminating steps from your table turn time. An example of this would be to only offer dessert to-go.

After meal

Paying the check is often one of the longest parts of the dinner experience, and for guests in a hurry, can be one of the most frustrating. Guest expectations are also changing because of coronavirus, so consider mobile payment terminals that can accept contactless payment. If you continue to use a traditional POS station, consider pre-printing guest checks to immediately hand over when appropriate.

Reset tables as quickly as possible. Ensure each person understands their responsibility and leverage communication best practices to alert when a step is complete (e.g., who clears plates, wipes down, sanitizes, etc).

Simulation

We built a quick simulation to illustrate the impact of reducing table turn time on the number of parties a restaurant can serve.  If the peak dinner operation is assumed to be four hours, reducing the table turn time from 1 hour to 46 minutes (24%), allowed for a 28% increase in the number of tables served, or 21 more parties.  This change should allow the restaurant to increase their profits by more than 28% given the overhead of staff and facilities are held constant.

how to increase table turn time in restaurants
3. Standardize, Train and Sustain Employees

Making lasting change needs buy-in from the staff. There is an easy value statement: More guests coming through in the same time period means more opportunity for tips. Increase buy-in by having the staff brainstorm and share their own tactics.

Create a training plan to roll-out any standardized procedure changes, and include best practices that can be used at the server’s discretion. Make sure each person recognizes how their role contributes to the greater goal, and how roles interact.

Set targets for how long certain steps should take, and regularly evaluate if you are hitting your table turn time goals. For example, track ticket times to see if servers are meeting the target time. If not, evaluate why and brainstorm actions.

If you are the manager, be present during busiest times. The dinner rush is not the time to be doing paperwork in the back office. This gives you credibility among your employees that you actually understand the operation. You can also lend a helping hand to support if needed.

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Menu Engineering Strategies for Restaurants to Optimize Revenue

Business Optimization, Pricing and Revenue Management

by Stephen Davis, VP, Integrated Insight

The restaurant industry should be bracing for significant economic challenges in the next twelve months. During the last recession in 2009, it took more than three years for sales at restaurants to return to pre-recession levels. The dramatic drop in sales at restaurants over the last two months is now roughly ten times the total decline seen during the Great Recession.

In order to survive the upcoming economic challenges, restaurants need to implement smart pricing strategies. One of the most powerful pricing tools restaurants can implement right now is menu engineering.

For many restaurant operators, menu engineering is a familiar concept but often disregarded in practice. The concept is simple: the restaurant menu should feature the most profitable and popular items to sell more plates that earn high contribution margins.

How Restaurants Can Engineer Menus to Optimize Profit:

1. Assess the costs and popularity for each menu item
2. Optimize the menu to feature items with higher contribution margins

Let’s take a deeper look at how to implement menu engineering strategies.

1. Examine costs and popularity for each menu item.

How to Determine Costs
In order to understand the most profitable dishes on the menu, restaurant operators need to start with understanding their costs. Taking the time to examine the cost of each menu item can be tedious, but it will produce significant payoff in the months to come.

Item profitability can be looked at on a food cost basis to keep it simple. The total food cost is found by adding up the individual costs of each ingredient on a per-item basis.

Gross profit is then calculated by taking the food cost per serving and subtracting from the sales price.

Sales Price - Menu Item Food Cost = Item Gross Profit

Taking item gross profit divided by the base of sales price provides a contribution margin for each item that does not include labor and other overhead.

How to Determine Popularity
Determining the popularity of menu items may be simple for a food operator managing the business day to day. However, to identify a more reliable answer, operators can simply pull the frequency of purchases for each food item from their POS system.

To determine each menu item’s popularity, compare the sales of each menu item on a base of daily number of customers for several months to estimate the item capture. Comparing item captures across the menu gives a measure of popularity for each item.

2. Optimize the Menu

Once contribution margin and popularity have been determined for each menu item, you can categorize them based on the matrix below.

Menu Engineering Matrix

When designing the menu, feature items with higher contribution margins such as stars and puzzles, and eliminate unprofitable ones.

Dogs: Items with low profitability and low volume. Remove them from menus.

Puzzles: Items with high profitability and low volume. Feature them more prominently on the menu and encourage wait staff to push them at table service locations.

Stars: Popular items with high profit margins. Look for opportunities to take marginal price increases on most popular items.

Work Horses: Items that are popular but not particularly profitable. Move work horse items to areas of the menu that are less prominent and don’t encourage wait staff to sell them at table service locations.

By categorizing each menu item, restaurant operators can see which items are best suited for price increases, cut from the menu, or get more prominent placement. Profitable items should be featured more clearly in the menu, and unprofitable ones should be removed. Let's look at a simple example of menu engineering with a short case study.

Dan's Diner Case Study

Dan’s Diner is just scraping by after re-opening with reduced dine-in capacity and curbside takeout. Dan is looking to optimize his menu in order to increase profitability. For each entrée, he identifies the profit margin and the number of dishes sold per customer.

Here is an example of four dishes Dan categorizes using the matrix to understand where he needs to make changes. Let’s look at an entrée from each quadrant.

Menu Engineering Matrix

The Dog: Country Fried Steak
The Country Fried Steak is the least profitable entrée and hardly anyone buys it. In order to reduce food costs and leaking profitability, Dan removes this item from the menu. Assuming that Dan’s Diner brings in $45,000 in revenue each month, a 1% decrease in food costs by cutting this menu item is worth $450 per month. These cost savings can pay an employee’s week of labor at roughly $10/hr or go towards advertising to increase demand.

When menu engineering during the current coronavirus crisis, it may be necessary to remove all "Dogs" from the menu without replacement temporarily to save costs.

The Puzzle: Dan's Gyro
The Gyro has a very high contribution margin but does not sell well. In order to encourage customers to purchase the profitable entrée, a Gyro combo special is added to the menu with a savings message and featured during happy hour.

"Puzzle" items are good candidates for discounts and deals. Their low volume means purchases are more likely to be incremental and the higher margin covers some of the discount without hurting the bottom line.

The Star: Baked Chicken
The baked chicken has the highest popularity and profitability. Dan’s baked chicken is known all over town. Customers love it for the price and quality. Dan loves it for the great margin. Dan takes a $0.20 price increase on the Baked Chicken Plate, which falls straight to the bottom line.

If Dan can identify a few star items to take minimal pricing on, the value falls straight to profit.

The Work Horse: Cheeseburger
Guests love Dan’s cheeseburger and waiters often push it as their personal favorite. The problem is that the profit margins are slim. Dan tells wait staff to stop promoting the item and instead push the Baked Chicken when asked for recommendations. Beyond steering the focus to "Stars," price increases can be leveraged to turn highly popular "Work Horses" into "Stars."

Each of these menu engineering strategies improves the bottom line by eliminating costly products and increasing the sales of profitable ones. The goal is to drive higher revenue, but more importantly, higher profits.

For more information on pricing strategy and how we partner with brands across the globe, please contact us at info@integratedinsight.com

How Can We Help?

Schedule a free consultation to discuss your business needs.

Schedule Consultation

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how companies can understand capacity with social distancing guidelines

How to Determine Operational Capacity in a Covid-19 World

Business Optimization, Capacity Planning, New Business Strategy

by Ben Dubiel, VP,  Integrated Insight

Published June 4, 2020

Now that businesses are re-opening, owners and operators are asking, “Now what?” The safety of patrons and employees is paramount. But mandates to open at 25% to 50% of capacity without specific operational guidelines are perplexing.

Determining the right capacity for your establishment will require attention to four key components:

  1. Physical space: The amount of space you have at your disposal.
  2. Customer density: How close to each other are customers willing to be.
  3. Operational flow: How customers and employees flow through the operation.
  4. Process time: How long it takes to service a customer and how variable it is.

Determining operational capacity can be difficult as it is necessary to understand how all of the disparate parts of the operation interact together. It can also be an iterative process when done in real time. Alternatively, agent-based simulation modeling can help operators view the overall process to determine bottlenecks before a negative impact on guest safety or experience occurs.

Let's look at a case study of a museum to identify opportunities for each key component when determining capacity.

1. Physical space: Beware of changing constraints.

The first instinct when thinking about reduced capacity for a museum is to consider how many guests can be allowed to view exhibits at one time. However, you can see in the  simulation video below that the vertical transport to move from floor to floor is the more limiting factor. The operator is required to reserve one elevator for guests with mobility issues. The remaining elevators can only allow one group per trip to maintain social distancing. These constraints reduce the throughput by almost 70%, restricting capacity to the point that the space available in the attraction is not an issue.

Elevator Queue Line Before and After Social Distancing

Elevators will be one of the most difficult processes to manage as social distancing of six feet inside is almost impossible. However, there is a big difference between an office building, where most arrivals are parties of one, versus an attraction, where people visit in a cohesive group.

Another constraint is the space required for the elevator queue. Most elevator lobbies have limited space. Queue lines will need to be laid out to indicate specifically where to stand and could require 3 to 4 times more space than before. It is possible the queue may extend outdoors and reservations only (no walk-ups) could be the future.

2. Customer density: Everyone has to be somewhere.

Understanding individual components of an experience is a good place to start. But eventually, it all has to work together. Everyone has to be somewhere at any given point in time. Alleviating a crowd in one place may create one in another.

For the museum, elevator queueing space will need to be extended to accompany any excess demand, since this is the bottleneck in the operation. As a perspective, view this articulated density chart that explains the level of comfort people will have in crowded situations.

In the Covid-19 world, customers may want to avoid anything in red.  The clip of the simulation below shows a heat map that measures the average density of guests over time.  The new operation and the limited elevator throughput creates a safe environment in the venue by providing at least 10 square feet per guest around exhibits.

Museum Exhibit Heat Map

3. Operational flow: Some restrictions may apply.

In our example, guests used to be able to flow freely throughout the museum, bouncing from one exhibit to another. However, this flow created cross-traffic where guests were in close contact. In today's operations, this needs to be fixed in order to maintain social distancing guidelines.

Many grocery stores implemented one-way aisles specifically for this reason. It eliminated shoppers facing one another in a confined space. Otherwise, carts make for a good six foot distance barrier when lined up one behind another.

In order to maintain social distancing, the museum needs to transition to one-way traffic. By erecting a barrier that starts at the elevators and continues across the floor, all guests enter one way and experience the museum in a linear direction. The result is a safer experience, but at reduced capacity. As one guest slows down, so do the parties behind them. Passing lanes could be implemented to help guests flow through at their own pace. Interestingly, in the case of the museum, even though capacity on the upper exhibit floors is reduced, the bottleneck that occurs at the elevators actually helps manage exhibit space.

Museum Exhibit Simulation Model

4. Process time: Look for opportunities to offset longer waits.

With social distancing guidelines in place, experiences are going to take longer. The number of people that can fit in an elevator at one time will create longer waits. The number of guests that can use a vehicle in an amusement park may make the queue (real or virtual) longer. The number of visitors that can view an art exhibit at the same time while maintaining safe space will increase the time it takes to see it all. Understanding how long it takes to process one patron, and the variability in that timing, will help determine the capacity limits for each attraction.

Additionally, operators need to look at ways to speed up processes in the system. For example, if food and beverage locations are a potential bottleneck, a "grab and go" system may help alleviate some of the pain.

Here are some ideas to think about: Will adding another show time help spread demand and lower the process time for any one performance? Can extended operating hours better manage overall demand, while being profitable for the business?

Regardless of the business, an operation needs to be viewed holistically. Continuously monitoring the system will ensure that new processes don't revert back to old ones. This amount of focus and attention to detail will serve businesses well as safety is the top concern for today's consumers.

For more information on agent-based simulation and how we partner with brands across the globe, please contact us at info@integratedinsight.com

loyalty program to help businesses during coronavirus

How Loyalty Programs Can Help Businesses in Post-Covid Economy

Business Optimization, Marketing, Pricing and Revenue Management

by Stephen Davis, VP, Integrated Insight

Published May 12, 2020

Businesses will face monumental challenges in the coming year as a result of the coronavirus outbreak. For many, this is their first time operating in an economic crisis. Unfortunately for some, it will also be their last and only.

The United States’ economy slumped in the first quarter of 2020. The economy will likely  be in a recession through the end of the year. Over 30 million Americans have filed for unemployment benefits since the start of the coronavirus pandemic. Historic double-digit unemployment rates are expected in the months to come. Economic uncertainty is spreading, and consumers are worried about short-term job prospects and financial security.

As Americans tighten their belts, competition for wallet share will intensify. Current business strategies need to focus on customer retention and low customer acquisition costs. This can be achieved through a customer loyalty program. Loyalty programs also increase customer engagement, frequency of engagement, and spending - all of which improves the bottom line.

For businesses without a rewards program in place, now is the time for action. For those with an existing program, now is the time to fortify the use of best practices and dive into customer loyalty program insights.

Successful loyalty programs do three things:

  1. Create a relationship.
  2. Engage with customers.
  3. Reward loyalty.

To implement these three strategies, businesses need to know the loyalty member, engage them, and reward them.

 

Let’s take a deeper look at how customer loyalty programs can help businesses in the Post-COVID economy.

1. Create a relationship.

Most businesses understand the importance of customer relationships. A loyalty program can deepen the relationship and provide a direct connection to customers. The relationship starts with a strategic membership sign-up process. Here is an example.

- Dan’s Diner has five restaurants and has been hit hard by social distancing restrictions. Dan’s is popular among locals and has a solid existing customer base. However, the current climate has the restaurant owners worried about losing share to other local restaurants. They know competition for takeout is tough. Reopening at reduced capacity may not be enough to sustain the business.

To help retain customers and promote brand loyalty, Dan’s Diner implements a rewards program where members can earn points to redeem on future purchases. Members use their e-mail and provide basic information to sign-up. During the process there are a few questions that help the restaurant get to know the customer. This creates a direct line of communication to loyal customers and a tool to incent repeat visits.

2. Engage with customers.

Creating the relationship is just the first step towards a successful loyalty program. Next, companies need to engage with customers by leveraging the sign-up information to personalize messages. Consumers are bombarded with emails and notifications from businesses. In order to be engaging, companies need to personalize communication to stand out from the noise.

-  Dan’s Diner wants to find ways to announce their re-opening without spending more dollars on advertising. They decide to engage with their most loyal customers first. The diner provides tailored information to members with details on new operating hours and social distancing guidelines for their nearest location.

To engage the loyalty members further, the diner holds a contest among members with a prize. Loyalty program members who post the re-opening announcement have a chance to be the first patrons back at Dan’s. To spice it up, the winners also receive a free meal for them and three guests.

3. Reward loyalty.

The end goal of reward programs is to encourage customers to make incremental purchases. Creating incentives that reward loyalty without diluting current business requires a strategic approach.

-  Dan’s Diner has re-opened and is making ends meet but could use extra business. Their customer loyalty program has been popular, and they now have 2,000 members. Repeat customers show a high affinity for the program. Based on past purchase behavior, Dan’s finds that Tuesday through Thursday afternoons between 1 p.m. and 4 p.m. are the slowest periods that have the least amount of member purchases. Conversely, on Friday and Saturday nights the restaurant is constrained due to social distancing guidelines. On these nights, members make up the majority of customers.

Dan’s customer loyalty program is a tool the diner can use to shift member demand away from weekend nights and into weekday afternoons. In order to do this, the diner offers double reward points for members that visit from Tuesday through Thursday in the low-demand periods. On Friday and Saturday nights, Dan’s offers a free appetizer for members when purchasing a to-go or delivery order. By offering these bonus rewards to members, Dan’s Diner can free up capacity on the weekends and encourage purchases during the week.

Once businesses create customer loyalty programs, the work doesn’t stop there. Successful loyalty programs are dynamic. They continuously monitor usage and adjust reward structures to optimize behavior. Businesses that can execute effective loyalty programs will have a competitive advantage in the upcoming months of economic uncertainty.

For more information on pricing strategy and how we partner with brands across the globe, please contact us at info@integratedinsight.com

 

faucet is leaking with cash because company is cutting way to profitability with their revenue strategy

You Can’t Cut Your Way To Profitability – Rethink Your Revenue Strategy

Business Optimization, Pricing and Revenue Management

by Joni Newkirk, CEO, Integrated Insight

Published April 20, 2020

Some cost cutting is good, especially if it is part of an operational efficiency, continuous improvement effort. But in a downturn, many companies turn to more severe cost cuts to manage cash flows. The risk is cutting costs to the point of sacrificing total revenue and profit margin.

 

To avoid profit eroding cost cuts, consider these four steps:

  1. Know your target market.
  2. Understand your target market’s value proposition and willingness to pay.
  3. Know your variable operating costs.
  4. Calculate the impact of proposed changes, accounting for both cost savings and reduced revenue.

A recent visit to urgent care was eye opening. We visited late afternoon and I was stunned to find we just made it before closing. Previously, they were open later in the evening. My impression has always been that urgent care typically stayed open when doctors were not, as an alternative to the hospital emergency room. As it turned out, the six facilities for this particular group – all located within 20 minutes of each other – were more likely to mirror primary care practice hours than complement them:

- 2 were opened 8 am to 8 pm, seven days a week

- 2 were opened 7 am to 5 pm weekdays, and 8 am to 5 pm on weekends

- 2 were opened 7 am to 5 pm weekdays, and closed on weekends. In total, the practice is open 404 hours per week across the six locations.

Looking forward to the need for testing, treatment and vaccines for coronavirus, this urgent care group has a number of options to rethink their operating and pricing strategies to maximize profit.

1. Know your target market.

Knowing your target audience starts with understanding why they chose you versus other options. For urgent care, it may be they do not have a primary care physician. Or perhaps they couldn’t get an appointment with their regular doctor fast enough. Some want to avoid the more costly hospital emergency room. Still others have a difficult time taking off work.

At least two of those reasons speak to evening and weekend operating hours. Being open when your target market wants to do business is critical for higher profits. For this particular practice, converting just one facility to a 24/7 operation could be a strong marketing strategy.

Staggering the hours of the other facilities may also have benefit. The alternative schedule provides more coverage for just two more hours per week. Arguably, it better meets potential client needs. Two facilities are always open in the early morning, and 2 in late evening. If demand warrants more daytime hours, adjust accordingly. But first, let consumers sort where they may. Some may be forced to come during daytime, even though that is not preferred. And even others may not have considered this urgent care practice, but will now.

This is an example schedule that facilities could implement to maximize profit:

- Facility A: 24/7; never closed.

- Facility B: 5 am - 1 pm; 7 days

- Facility C: 11 am - 5 pm; 7 days[

- Facility D: 11 am - 5 pm; 7 days

- Facility E: 11 am - 5 pm; 7 days

- Facility F: 4 pm - midnight; 7 days

2. Understand the Value Proposition and Willingness to Pay

Understanding the target market’s value proposition and willingness to pay will also inform pricing strategy. Now may be the time to enter the market for Direct Primary Care (DPC) or Concierge Care. One or two facilities could be converted for a DPC practice. Or, the urgent care practice could provide direct/concierge care as a tele-medicine or at home service.

It is likely many consumers will want to be tested multiple times over the next two years. Many will be lining up for vaccines once available. DPC and Concierge Care patients pay a monthly fee for direct access to a physician, relieving stress and anxiety.

A recent article in Forbes magazine cites the pandemic “…has forced healthcare to evolve more rapidly over the last few months than it has over the past 30 years, in terms of embracing new forms of patient engagement and care delivery.”

As cited in WebMd, more patients are turning to DPC physicians for both convenience and to reduce costs associated with emergency room visits. While health care may just be catching up to other industries that recognize the value of segmenting audiences, the coronavirus wave of need may be just the one to surf into a new business model. It is possible to have both economy prices and higher priced services at the same time. The psychology of pricing is the same either way: know your customer’s value proposition.

3. Know your variable costs.

Knowing your variable operating costs will further inform net income. The urgent care facility will likely pay a premium for a nurse practitioner or physician assistant on night shift. Having physicians on call for tele-medicine visits will also come at a cost. The cost of Covid-19 tests and vaccines will be additional expenses. Accounting for all incremental costs will help inform pricing methods.

Competitive pricing is important, but covering variable costs is a necessity. What is most important is for the urgent care practice to view the business holistically. The goal is not for each facility to turn a profit on their own. Or for each DPC to be profitable on day one.

The ecosystem of “something for everyone” is meant to work in concert. There may be lost leaders and some facilities or DPC doctors will be power horses. But each has a role to play and is integral to the operation as a whole. Providing service where, when and how consumers want to engage is the end game.

4.Calculate the impact.

The final step is calculating the impact of proposed changes. What do you have to believe in terms of additional facility visits? It may not be much given the number of operating hours stayed the same. What should your penetration of the DPC or Concierge care market be? The practice could do a quick research study among consumers in the area, but there is little risk of just trying something new. If the new operating model doesn’t work, the facilities can always revert back. And the urgent care practice may be able to step their way into DPC, scaling up as popularity of the service takes off.

 

Bottom line, offering less seldom results in growth. More is better, so long as it is taken on with calculated risk. Lead with the consumer and let your strategy evolve to meet their needs.

For more information on revenue strategy and how we partner with brands across the globe, please contact us at info@integratedinsight.com

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