HR & Management

How hospitality firms can fight the January blues

9 min read

28 December 2016

For hospitality firms, December is a whirl of Christmas parties and festive excess – even if they’re the ones working hard to ensure everyone has a good time. But when the music stops in the New Year, the hangover hits pubs, hotels, and restaurants particularly hard with January blues.

A slew of bills, the need to pay for extra seasonal expenses, and a drop in customer numbers all mean the New Year can feel gloomy for SMEs in this industry. But the January blues lull should come as no surprise. And organised business owners can plan to ensure they start 2017 in a happy, hopeful, and productive mood.

January blues

SME owners in the hospitality field need a rest after the Christmas chaos, but the dramatic fall in trade in January still comes as a blow. Just as business dwindles, the accountant is likely to be in touch about the latest tax bill, with HMRC threatening penalties for those who don’t pay.

Businesses that don’t own their premises may be reeling from the last rent quarter day demand of 2016. Then, there’s the unpaid invoices for those extra costs over Christmas. These January blues can make for a stressful start to the year.

Even businesses that enjoyed a profitable festive period can struggle to cope. Perhaps it’s no coincidence the New Year is a busy time for insolvency professionals.

Prioritise payments

What needs addressing first? It’s a question your accountant can help to answer. If the business hasn’t got cash to cover immediate costs, identify what must be paid straightaway and in full. Next, weigh up if you can negotiate repayments.

Even the taxman is open to such discussions, thorough interest and late fees are likely to be charged on outstanding tax bills. Whatever you do, be careful not to become a so-called zombie company, one that is only able to pay interest on its debts, not the debt itself. Zombies are only a few steps away from not existing at all.

If bridging finance is needed, dipping into the company’s overdraft may be an option. However, banks and some other funders get nervous if they know borrowing is for outstanding tax. Plus, much conventional lending is slow to arrange.

Short-term, unsecured loans of the type we provide are designed for this type of scenario – fast, uncomplicated financial solutions for whatever business expense.

But there are so many funding choices for SMEs today, including invoice finance, which can be useful if a business is owed money. Perhaps this is less likely for hospitality firms, which tend to receive cash payments up-front, but it’s worth investigating.

Other innovative forms of alternative funding are tailored to specific business needs, so explore all options with the help of a commercial finance broker or by looking at online finance comparison platforms.

On the next page, find out how you can boost business when the January blues strike.

Boosting business

A slow trading period highlights the need to get money coming into the business as soon as possible. But, as consumers budget after overspending at Christmas, and many vow to eat and drink less, winning trade can be an uphill battle. How can you coax customers out of hibernation, then gently persuade them to spend more?

Sensible pub, bar, and restaurant owners will incentivise customers to make January bookings in December by offering money-off vouchers for New Year dining.

Hotels might devise enticing offers giving discounted room rates to those who book in advance for several nights, or for reservations paid in full ahead of time. It’s even possible to take advantage of customers’ desire to be healthy in January.

Hoteliers could promote their spa offering for those thinking about fitness and wellbeing, or restaurateurs might market a New Year belt-tightening menu – something that’s good value and healthy to boot.

Group bookings aren’t very likely early in the year, but those who also work in the hospitality trade often delay their celebrations until after Christmas. Why not pitch your party services to industry peers through mutual networks?

If people want value for money, give it to them through happy hour offers, two-for-one promotions, or by offering a free starter with every main course. Just getting tables to spend an extra £2 on average will have a big knock-on effect on the business’s monthly take.

Once you’ve devised the deals on offer, advertise promotions prominently, be it in your premises, by social media, via email marketing, or through your website. With January blues around, this is a time when embracing technology could really boost customer numbers.

Use technology

Promoting the business via Twitter, Facebook, and Instagram should be everyday behaviour for hospitality businesses by now.

These enterprises lend themselves well to such visual media, and many consumers seek information about where to eat, drink, and stay on the move using smartphones, so being available via the latest technological channels is a must.

But SMEs that go even further in their use of new digital tools could get ahead of rivals, especially at quieter times of year.

Make online booking easy, as knowing ahead of time how many customers to expect can help bosses judge the staff numbers for each day’s rota.

A business’s website should be enabled to take real-time bookings, and signing up to third-party reservation services of the likes of Open Table is also worthwhile.

Think about loyalty apps, such as Apple’s Wallet or flok, which reward regular visitors with ongoing benefits. And enabling electronic payments could appeal to tech-savvy punters, and speed up service.

Apps including Zapper, which allows customers to pay bills quickly, splitting the total and tip, are changing the way people pay in bars and restaurants, as well as freeing up staff time.

Keeping an eye on cashflow

Finally, never, ever forget cash is king. Keeping close control over the company’s cashflow is essential. Understanding these figures serves as an early warning system if things are really going wrong.

Ideally, a business should maintain a year-ahead cashflow forecast, but, at the very least, know what is likely to happen to incomings and outgoings over the next few months.

Establish KPIs – key performance indicators – whether it’s revenue targets per day or week, or increasing the average customer spend, then monitor whether they are being met.

Also, don’t forget to watch how well suppliers are doing, as if they’re showing signs of distress that could be bad news.

A key supplier going bust at short notice can have terrible knock-on effects, so check they’re viable, operating as usual, and financially stable. Industry gossip can prove useful at these times, so keep your ear to the ground.

If nothing else, when trade is quiet it’s an opportunity to make positive changes to the business without disrupting day-to-day operations. If you’ve got ambitions to revamp premises, train staff, or introduce new menus, this could be the moment.

Look at company finances, then consider whether making an investment early in the year could pay dividends later, even if it means borrowing to fund business growth. January may be the quietest month for the hospitality industry, but customers will soon return, and you want your business to be in the best shape to welcome them without the January blues lingering around.

Alex Littner is the MD of Boost Capital

Image: Shutterstock