Op-Ed: How venues are using data to cut down on food waste and improve profitability
Paul Hadida on the importance of reducing food waste in hospitality
For the embattled – but innovative and adaptable – hospitality industry, every dollar matters. Today, consumers are being more cautious in their discretionary spending, which leaves the hospitality industry vulnerable.
When cost-of-living pressures are high, it’s not always easy to incentivise guests to increase the volume of their visits or the value of their spend. There are, however, many ways that venues are using cutting-edge technology and data-driven strategies to improve their bottom-line profitability.
One of the key focus areas for venues is reducing food waste, which costs Australian hospitality businesses a staggering AUD$36.6 billion each year, according to End Food Waste Australia. Overcoming that is not just important for boosting a venue’s bottom line, but building relationships with conscious consumers who are increasingly holding brands to account when it comes to waste and sustainability.
So how are hospitality operators using pre-bookings, reservations data and AI to minimise food waste, improve sustainability and boost revenue and retention?
Reservations, pre-bookings and forecasting
The great news is, it doesn’t require a crystal ball to understand what produce you need and when. Many venues today are able to forecast their inventory needs through their reservations data and specifically, the strategic use of pre-paid upgrades and experiences. The intended, on-the-surface, benefit of pre-paid upgrades is improving guest experience, locking in revenue and minimising cancellations and no-shows. However, an essential – but often-overlooked – benefit is that it enables operators to forecast exactly what produce they need.
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For example, if a venue offers a chef’s set tasting menu or has specials like ‘Wing Wednesday’ or ‘Taco Tuesday’, it’s far easier to forecast the produce they need based on their reservations, compared to if they only offered walk-ins and an a la carte menu. This is a particularly big trend in Australia, where we’re seeing a huge number of SevenRooms customers use pre-bookings to not only increase revenue and improve guest experience, but inform their inventory and minimise waste. In fact, SevenRooms data shows that venues in Australia sell more than double the volume of pre-paid reservations than their counterparts in the United States and the United Kingdom.
There is an obvious financial benefit – with venues generating 35 percent more revenue with a reservation than those without – but an underappreciated benefit is the incremental gains that it provides by enabling venues to make more strategic, data-driven decisions regarding produce and inventory. They’re not just using reservations, though.
AI and automation
AI has become the defining innovation of our generation, with many anticipating it will have as big an impact on the way we live and work as the internet itself. Our industry is embracing AI in droves, with 85 percent of venues in Australia already deploying it within their business according to SevenRooms’ Restaurant Trends and Diner Expectations Report.
They’re doing so across their entire operation, but we’re seeing some fascinating trends when it comes to managing their produce. In fact, a third (36 percent) of venues are using AI to actively plan and manage their inventory. For example, by analysing historic patterns, upcoming reservations and external factors like weather or local events, they can predict what ingredients to purchase, when, and in what quantities. Or, if certain ingredients are running low or are in excess, AI can automatically re-order to prevent stockouts or adjust future orders so as not to purchase too much.
Over a quarter (29 percent) are even using AI to devise menu items too, which also enables venues to cut down on wastage. For example if a venue has an excess of perishable items such as specific meat, herbs and fresh vegetables, they’re using AI to create menu items that rely on those ingredients, thus using them up before they’re wasted.
Bottom line and brand building
Cutting down on food waste has a clear and obvious financial benefit, which is critical in today’s economic environment. But it’s far more than that – it’s about building relationships, too. Food waste contributes eight to 10 percent of greenhouse gas emissions in Australia. As conscious consumerism grows, meeting consumer demands for sustainable policies and practices will become a greater consideration.
Last month, for example, there was outrage when a national supermarket dumped thousands of dollars worth of perishable items. While the outrage was aimed at a supermarket rather than a hospitality brand (and while it was necessitated by a broken refrigeration system) the backlash showed how strongly consumers feel about food waste. For the supermarket, the financial loss of the food was a drop in the ocean, but the reputational damage is more significant.
So if a venue has a problem with food waste, it’s not outside the realm of possibility that it could become a reputational issue rather than just financial. Crucially, that means the opposite is also true. If a venue can successfully turn reservations data and AI into a platform to reduce waste and boost sustainability, the benefits aren’t just economic but building brand affinity and customer loyalty too. We’re seeing many venues in Australia promote their sustainable practices and produce as a means of building brand.
While these might not be as immediate a consideration as bottom line profitability, it’s important nonetheless. Today, venues are contending with a myriad of challenges, but there are numerous ways to tackle them. With economic pressures and sustainability high on the agenda in 2024, using reservations data and AI to cut down on food waste could have a sizable impact for venues.
By Paul Hadida, General Manager, APAC at SevenRooms, a data-driven guest experience and retention platform for the hospitality industry