Revenue | KRG Hospitality

November 8, 2024by David Klemt David Klemt No Comments

Understanding TAM, SAM, and SOM

Unlocking Growth Potential: Understanding TAM, SAM, and SOM

by Doug Radkey

After working through this with a client the other day, we thought it would be a good opportunity to explain the acronyms of TAM, SAM, and SOM.

These concepts can help your business start, stabilize, or scale.

Let’s be real: in the hospitality industry, understanding your market and its potential is paramount for sustainable growth and profitability. This is where the concepts of TAM (Total Addressable Market), SAM (Serviceable Addressable Market), and SOM (Serviceable Obtainable Market) come into play.

For bars, restaurants, and hotels, these metrics aren’t just marketing or financial jargon. Each provides critical insights that inform feasibility studies, shape marketing strategies, and guide business decisions.

Below, we’ll break down each of these concepts, illustrate how to calculate them, and explain their role in building effective strategies for your hospitality business.

The Definitions

TAM (Total Addressable Market)

TAM represents the overall revenue opportunity available if your business held 100 percent of the market share. It is the entire potential market size without any constraints like geography, budget, sociographics, or operational limits.

Example: For a new bar, the TAM would represent the total annual spend of all consumers in your market who drink out, regardless of their preferences, location within a region, or budget.

SAM (Serviceable Addressable Market)

SAM is the portion of TAM that your business can reach realistically, given practical limitations like geographic location, regulatory constraints, more targeted sociographics, and operational scope. Going further, SAM also considers factors that make a portion of the TAM unfeasible for your business to serve.

Example: Using the same bar concept, SAM would represent all the people within a certain radius who are willing to visit a bar with a similar concept, who can afford your menu, and who are within your reach given your physical location.

SOM (Serviceable Obtainable Market)

SOM is the segment of the SAM that your business can capture. This metric accounts for your competitors, market share estimates, and your unique ability to attract your ideal guests within your SAM.

Example: For the bar, SOM would be the percentage of patrons within your SAM that you expect, realistically, to convert into regular guests, taking into account competition, unique value proposition, and brand positioning.

Why These Metrics Matter

Each of these metrics provides a progressively more realistic picture of your business’ revenue potential.

Your business plan cannot be “targeting males and females between 25 to 45 years old.” You have to go much deeper than that to be successful.

TAM shows you the broadest possible opportunity, but SAM narrows it down based on serviceable factors. SOM gives you a realistic goal to aim for based on your most targeted factors.

Their Role in Feasibility Studies and Marketing Plans

In hospitality, feasibility studies are essential for understanding whether a business idea is viable.

When you’re assessing the potential of a new bar, restaurant, or hotel, the TAM, SAM, and SOM calculations give you quantitative data that can help you avoid common mistakes such as overestimating your market potential, or failing to identify target demographics accurately.

Feasibility Studies

TAM Analysis: Helps validate whether there’s a broad demand for your concept.
SAM Analysis: Identifies a focused portion of the market that fits within your operational range.
SOM Analysis: Helps set realistic revenue goals by factoring in competition and market positioning.

When preparing a feasibility study, using TAM, SAM, and SOM ensures that your projections are grounded in reality, giving potential investors or stakeholders confidence in your plan.

Marketing Plans

Once you’ve established a feasible market, TAM, SAM, and SOM inform your marketing strategies.

TAM helps you understand the entire universe of potential guests, useful for broader brand awareness campaigns.
SAM directs you to specific geographic or demographic segments for targeted campaigns.
SOM guides the creation of highly focused, competitive strategies to capture and retain market share in a specific segment.

By utilizing TAM, SAM, and SOM, your marketing plan becomes tailored, efficient, and likely to generate a higher return on investment.

How to Calculate TAM, SAM, and SOM for Your Hospitality Business

Step 1: Define Your Target Market

Before calculating TAM, SAM, and SOM, it’s essential to understand and define your target market. This includes analyzing demographics (age, income, education) and psychographics or sociographics (lifestyle, preferences, values).

For a local bar, restaurant, or hotel, understanding these details about your audience is crucial because your business’ reach will likely be local or regional.

If, for example, you’re opening an elevated cocktail bar, you might define your target market as:

Travelers aged 30 to 50 with disposable income between $70,000 and $90,000 per year.
Downtown business professionals who are interested in after-office food and beverages.
Individuals and tourists seeking upscale F&B and unique guest experiences.

Did you know? In Canada and the US specifically, there are over 65 sociographic or “tapestry” profiles that make up the fabric of our neighborhoods.

Step 2: Calculate TAM

To calculate TAM, consider the total market demand for your type of service.

Formula: TAM = (Total number of potential customers) × (Average annual spend per customer)
Example for a Bar: If the estimated number of people in your city who visit bars is 200,000, and the average spend per person is $500 annually ($41.67 per month), the TAM would be 200,000 × $500 = $100 million.

Step 3: Calculate SAM

To calculate SAM, refine TAM by narrowing down to the guests you could reach realistically based on your location, budget, and other factors. Use your sociographic/tapestry profiles to help.

Formula: SAM = (Total number of reachable guests within your service area) × (Average spend)
Example for a Bar: Out of 200,000 potential guests, suppose only 50,000 are within a 10-mile radius who are between 25 and 45 years old, who drink, and who make between $50,000 and $70,000 per year. SAM would be 50,000 × $500 = $25 million.

Step 4: Calculate SOM

Finally, to determine SOM, evaluate how much of the SAM you believe you can capture realistically. This often depends on your competitive positioning, your marketing effectiveness, and operational capacity.

Formula: SOM = (Total number of targeted guests you can convert realistically) × (Average spend)
Example for a Bar: If you believe you can capture 10 percent of your SAM, SOM would be 5,000 guests × $500 = $2.5 million.
Now, compare that to your daily, weekly, and monthly traffic projections and your daily, weekly, and monthly revenue projections. How close are you?

Sample Calculations for a Boutique Hotel Business

To illustrate these calculations, let’s imagine a boutique hotel in a medium-sized city:

TAM Calculation:
- Target market: All tourists visiting the city annually.
- Estimated annual visitors: One million.
- Average annual spend per tourist on accommodations: $1,000.
- TAM = 1 million × $1,000 = $1 billion.
SAM Calculation:
- Focused market: Visitors who prefer boutique hotels versus chain flags who are between 22 and 42 years old.
- Estimated visitors who prefer boutique hotels: 20 percent of TAM (200,000).
- SAM = 200,000 × $1,000 = $200 million.
SOM Calculation:
- Realistically, the hotel expects to capture five percent of SAM based on its operations, the number of rooms, its daily rates, and expected occupancy rates.
- SOM = 10,000 guests × $1,000 = $10 million.

Why Defining Your Target Market is Crucial

All that said, calculating TAM, SAM, and SOM is only effective if you have a clearly defined target market. Hospitality businesses must understand their audience’s demographic and sociographic details, which is why initial market research is so essential.

For instance, if a new restaurant targets health-conscious millennials, knowing their spending patterns, dining preferences, and local competition will make the calculations more accurate.

With detailed sociodemographic insights, you can more precisely estimate TAM, SAM, and SOM, creating a feasibility study that reflects realistic market conditions.

The Benefits of Using TAM, SAM, and SOM in Your Business Planning

By incorporating TAM, SAM, and SOM into your feasibility studies and marketing plans, you can make data-driven decisions that increase your business’ chances of success.

Here’s how each metric adds value for you and your business:

Informed Decision-Making: These metrics offer clarity for market potential, helping you avoid costly mistakes.
Financial Confidence: TAM, SAM, and SOM provide stakeholders with measurable data, increasing confidence among investors or lenders.
Efficient Marketing: Focusing on SOM in marketing efforts allows you to deploy resources effectively, targeting guests you are most likely to convert.
Adaptability: These metrics aren’t static; you can adjust TAM, SAM, and SOM as market dynamics change, ensuring your business stays relevant.

Why Now is the Time to Embrace TAM, SAM, and SOM

In a competitive hospitality landscape, using TAM, SAM, and SOM can provide a strategic advantage. By understanding your true market potential, you can design a feasibility study and marketing plan that align with realistic growth goals.

While TAM shows you the big picture, SAM and SOM bring clarity to your specific opportunities, helping you prioritize resources and strategies that will yield the best return.

As you move forward with planning, remember: calculating TAM, SAM, and SOM is not a one-time task. Updating these metrics regularly as your business and the market evolve can provide insights that will keep your brand relevant and profitable.

My final thoughts: Before you dive into launching a new bar, restaurant, or hotel, take the time to do a deep dive into TAM, SAM, and SOM. It’s not just about understanding your market; it’s about maximizing your opportunity to stabilize and then scale within it.

By leveraging TAM, SAM, and SOM, you’ll be equipped to create a hospitality concept that doesn’t just survive but sets a new standard for success.

Image: Canva

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An AI-generated hotel bar area with seating next to large windows, with numbers superimposed over the image

September 10, 2024by David Klemt David Klemt No Comments

Modern Day Revenue Management for Hotels

Modern Day Revenue Management for Hotels

by Doug Radkey

Note: Image generated by artificial intelligence.

The landscape of hotel revenue management has evolved significantly in recent years, driven by both tech advancements and changing consumer behaviors.

With this in mind, I think now would be a good time to explore these current trends, tools, and strategies in hotel revenue management.

Below, I outline the importance of data analytics, dynamic pricing, and AI in maximizing revenue today, and as we move forward in this industry.

The Evolution of Revenue Management

In the early days of the hotel industry, revenue management was a relatively straightforward affair.

While the overall concept of revenue management originated in the airline industry in the 1980s, it was later adapted by hotels. Traditional practices relied primarily on static pricing models, where room rates were set based on the season, room type, and booking lead time. Rates were adjusted infrequently (often just a few times per year), and they were influenced mainly by historical data documented internally, and the intuition of revenue managers.

Hotels used simple tools such as spreadsheets and reservation logs to track bookings and manage their inventory. The focus was on achieving high occupancy rates rather than maximizing revenue per available room (RevPAR) and the other key metrics that we follow today.

Discounts and promotions were applied sporadically, without a deep understanding of market segments or consumer behavior, to help drive revenue during off-season periods. Group rates and corporate contracts were negotiated based on fixed rates, with little consideration for fluctuating market conditions.

From Static Pricing to Dynamic, Data-Driven Strategies

The transition from those early days to modern revenue management practices began in the late 1990s and early 2000s, driven by tech advancements and increased competition in the accommodation space.

The advent of online travel agencies (OTAs), real-time booking systems, and sophisticated data analytic tools transformed how hotels approached their pricing and inventory management.

So, what’s the modern approach?

Data-Driven Decision Making: The incorporation of advanced data analytics revolutionized revenue management. Hotels began leveraging large datasets from various sources, such as reservation systems, customer relationship management (CRM) software, and market intelligence platforms. This data-driven approach enabled more accurate forecasting, segmentation, and pricing strategies. Revenue managers could now analyze booking patterns, guest preferences, and demand fluctuations to make informed decisions.
Dynamic Pricing Models: Dynamic pricing involves adjusting room rates continuously based on real-time market demand, competitor pricing, and other external factors. This approach allows hotels to maximize revenue by selling the right room to the right guest at the right time and price. Dynamic pricing models consider various data points, including booking pace, market trends, weather, and special events, to optimize their recommended rates.
Automation and Real-Time Adjustments: Modern revenue management systems (RMS) introduced automation, allowing hotels to implement real-time rate adjustments. These systems use algorithms and machine learning to analyze data and update rates across all distribution channels automatically. This automation minimizes manual errors, and ensures consistent pricing across platforms, enhancing the hotel’s ability to respond to market changes quickly.
Focus on Total Revenue Management: While traditional revenue management focused primarily on room revenue, modern practices embrace a more holistic view known as total revenue management. This approach considers all revenue streams, including food and beverage, spa services, and other on-property offerings. By optimizing pricing and promotions across all areas, hotels can now maximize total revenue and profitability.

The Importance of Data Analytics

Data analytics involves the systematic analysis of data to uncover patterns, correlations, and trends that inform strategic decisions.

Sounds fairly important, right? In the hospitality industry, data analytics helps you understand market dynamics, predict demand, and tailor your hotel’s offering to meet guest needs. This level of analysis is paramount for developing effective revenue management strategies that maximize profitability.

One of the primary functions of data analytics in hotel revenue management is demand forecasting. By analyzing historical booking data, seasonal trends, and external factors such as local events, weather, or economic conditions, hotels can predict future demand accurately. This forecasting through data analytics enables hotels to adjust room rates more dynamically, optimize inventory allocation more efficiently, and implement targeted marketing campaigns that drive results.

Modern analytics platforms have revolutionized hotel revenue management by providing sophisticated tools for data analysis, strategic planning, and dynamic pricing. Atomize RMS stands out as a prime example of an advanced analytics tool that leverages data-driven decision-making to optimize hotel performance through dynamic pricing. This cloud-based revenue management system (RMS) uses sophisticated algorithms and machine learning to provide real-time pricing recommendations, as well as market insights.

Atomize enables hotels to make informed decisions based on real-time market conditions and predictive analytics by leveraging machine learning and big data. This data-driven approach leads to more precise pricing strategies, optimized inventory management, and improved profitability.

Moreover, the system’s ability to automate and streamline revenue management processes reduces the risk of human error, and frees up time for hotel staff to focus on other critical aspects of operations, such as providing a memorable guest experience, and elevating service quality.

The Role of Artificial Intelligence (AI)

Artificial Intelligence (AI) has further revolutionized the field of revenue management in the hotel industry, offering advanced capabilities that enhance both efficiency and profitability. Another AI-powered RMS provider is Duetto Cloud’s Game Changer, designed to analyze large datasets, identify patterns, and make real-time decisions.

One of the key capabilities of an AI-powered RMS is the automated pricing optimization. The system monitors market conditions continuously and adjusts room rates based on real-time data, with limited rules in the back-end. This dynamic pricing approach allows hotels to capitalize on fluctuations in demand, ensuring that they are charging the optimal rate at any given time.

These accurate forecasts can enable hotels to plan more effectively, manage inventory, and allocate resources more efficiently.

For example, AI can help predict when a hotel is likely to experience high demand and adjust staffing levels accordingly, ensuring optimal service quality. Additionally, accurate forecasting helps in identifying potential periods of low occupancy, allowing hotels to implement targeted marketing campaigns and promotional offers to boost bookings.

Beyond pricing and forecasting, AI-powered RMS can also enhance the guest experience through personalization. By analyzing guest data such as booking history, preferences, and feedback, AI systems can tailor offers and recommendations to individual guests.

For instance, an advanced RMS can identify a guest’s preference for specific room types, amenities, or dining options and use this information to provide personalized packages or upsell relevant services.

As AI technology continues to evolve, its role in revenue management is expected to grow, offering even more sophisticated capabilities and insights for hotels. Embracing AI-powered RMS now is going to be essential for hotel operators who are looking to compete and win in today’s fast-paced and data-driven market.

Integrating Revenue Management with Other Hotel Operations

As mentioned above, modern hotel revenue management is moving away from the siloed approach of focusing solely on room-based revenue. Increasingly, that outdated method is being replaced by a more holistic perspective that encompasses the entire guest experience.

This shift necessitates cross-department collaboration, aligning revenue management with sales, marketing, and operations to create cohesive strategies that optimize total revenue. Integrating efforts across departments means hotels can enhance their revenue streams and also provide a seamless and enriching experience for their guests.

To maximize total revenue, hotels must look beyond room revenue to optimize ancillary revenue streams, such as food and beverage (F&B), spa services, events, and so much more. This approach, known as total revenue management (TRM), involves a comprehensive strategy that considers all aspects of the guest experience.

For example, coordinating F&B with revenue management ensures that the on-property restaurant reservations and event bookings align with the hotel’s overall occupancy and pricing strategies.

The obvious and ultimate goal of cross-department collaboration is to enhance the guest journey and experience. Aligning efforts across revenue management, sales, marketing, and operations ensures hotels can create a seamless and personalized experience for their guests.

This can include personalized room amenities, customized dining options, and exclusive access to hotel facilities. Engaging with guests before, during, and after their stay through targeted communications and personalized offers can further enhance their experience and encourage repeat visits.

Looking Ahead

As you can see, modern hotel revenue management has become an intelligent discipline driven by data analytics, dynamic pricing, and artificial intelligence (AI). These elements are really becoming a non-negotiable for optimizing revenue, enhancing guest experiences, and maintaining a competitive edge.

Data analytics provides deep insights into market trends, guest behaviors, and demand patterns, enabling more accurate forecasting and strategic decision-making. Dynamic pricing, powered by real-time data and AI, allows hotel operators to adjust room rates fluidly, maximizing revenue by responding to market conditions.

AI further enhances revenue management through advanced capabilities such as predictive analytics and personalized guest services, all of which streamline operations and improve efficiency when integrated with other departments within your hotel.

Looking ahead, the future of hotel revenue management promises exciting innovations and trends. As AI and machine learning technologies continue to advance, we can expect even more precise forecasting models, and highly personalized guest experiences. The integration of big data from diverse sources, including social media, online reviews, and IoT devices, will provide richer datasets for analysis, leading to more nuanced insights and strategic opportunities.

Additionally, the increasing importance of TRM and revenue per available guest (RevPAG) will encourage hotels to optimize not just room revenue but also ancillary streams such as dining, spa services, events, and more.

Move Forward Today

For hotel operators like yourself, you must embrace and invest in advanced analytics tools, AI-powered RMS, and dynamic pricing strategies.

Adopting a data-driven approach will position you to better understand your hotel’s market, anticipate demand fluctuations, and tailor your offering to meet guest expectations.

This proactive stance will not only drive revenue growth but also enhance your brand equity.

Stay ahead of the curve and adopt cutting-edge technologies and strategies to navigate the complexities of the modern market and ensure long-term success. Now is the time to invest in the future, leverage the power of data and AI, and lead your hotel to new heights of profitability and excellence.

Image: DALL-E

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October 10, 2023by David Klemt David Klemt No Comments

Taco Bell Racking Up Rewards Program Wins

Taco Bell Racking Up Rewards Program Wins

by David Klemt

Taco Bell, masters of the limited-time offer and loyalty program, continue to rack up wins with the return of a fan-favorite promotion, and more.

The fast-food giant operates more than 7,800 restaurants in the US alone. However, the company understands that sheer numbers aren’t enough to turn a profit.

Rather, Taco Bell continually proves they understand the power of promotions, loyalty, and LTOs.

The QSR routinely releases specialty items, then packs them away to generate buzz and traffic by making them available once again—for a limited time. Compellingly, Taco Bell also ties their LTOs to their loyalty program. Often times, the only way for guests to enjoy special perks and items is to be a Taco Bell Rewards member.

Not only does this help to engage existing members, this approach drives new program signups.

Case in point: the Taco Lover’s Pass.

National Taco Day Promotion

If you’re industry or a fan of Taco Bell, you should be aware of the Taco Lover’s Pass by now.

Tracing its genesis to 2021 in Arizona, the LTO pops up every now and then. In exchange for $10, those who grab a pass can get one free taco each day for 30 consecutive days.

Oh, and the pass is now only available via the Taco Bell app, and to members of the Taco Bell Rewards program. Again, this is an excellent way to boost engagement. Do guests want to take advantage of this LTO? Great—they’ll need to exchange their info and provide access to themselves to do so.

Normally, the Taco Lover’s Pass is available for purchase for just one day. However, this time around Taco Bell gave rewards members two days to snag one. This is likely due to a new menu item drop coming tomorrow.

For quite some time now, Taco Bell has been hinting that they’ll be making breakfast easier and better. And now we know how they plan to accomplish that goal.

Joining the Seasoned Beef Crunchy Taco, Seasoned Beef Crunchy Taco Supreme, Seasoned Beef Soft Taco, Seasoned Beef Soft Taco Supreme, Spicy Potato Soft Taco, Seasoned Beef Doritos® Locos Tacos, and Seasoned Beef Doritos® Locos Tacos Supreme on the Taco Lover’s Pass is the new Toasted Breakfast Taco.

Today, October 12 (a Taco Tuesday!), Taco Bell drops the Toasted Breakfast Taco, and holders of their coveted pass can grab one for free.

Clearly, Tuesdays are important to Taco Bell. Let’s not forget that they very publicly challenged the “Taco Tuesday” trademark, and very publicly celebrated its cancellation. So, launching an all-new item that will drive traffic to Taco Bell during the breakfast daypart makes perfect sense. The drop also further solidifies their branding and marketing.

Steal a Base…

…Steal a Taco. Not only is the Taco Lover’s Pass back, so is Taco Bell’s Major League Baseball promotion.

And, once again, it’s available only via the Taco Bell app, and only to Taco Bell Rewards members.

Focusing on the Fall Classic, “Steal a Base, Steal a Taco” is a collaboration between Taco Bell, the MLB, and Topps.

Starting October 27 (not a Tuesday), the first player to steal a base will earn the title Taco Hero. That player will also earn free Nacho Cheese Doritos® Locos Tacos for Taco Bell Rewards members.

Taking things further, however, is Topps. The iconic trading card brand has put a limited run of Topps TacoFractor cards into circulation. People who hold the card of the first player to steal a base during the 2023 World Series could win Taco Bell for life. For this promotion, that comes in the form of a digital $15,000 Taco Bell gift card.

Alternatively, the holders of Topps TacoFractor Wild Cards could win the big prize.

On October 10 (a Tuesday!), Taco Bell Rewards members will have the chance to score free Topps Chrome or Cosmic Chrome packs. This limited Tuesday Drop could lead to a Taco Hero card, which in turn can lead to winning Taco Bell for life.

Takeaway

Unquestionably, Taco Bell understands the power of marketing messaging, branding, promotions, and the LTO.

However, they also understand the need for loyalty and rewards programs to do more than just offer discounts and free menu items. A great loyalty program needs to be big, bold, and encourage constant engagement.

With that in mind, it’s more than likely time for most operators, regardless of size, to review and rethink their programs.

Image: Chad Stembridge on Unsplash

Closeup view of buttons on vintage, antique cash register

September 28, 2023by David Klemt David Klemt No Comments

SevenRooms Reveals Revenue Management Tool

SevenRooms Reveals Revenue Management Tool

by David Klemt

Just when you think SevenRooms is done launching new solutions for the year they announce a new tool that will excite operators.

That new tool is Revenue Management. Much more than “just another” plugin, SevenRooms Revenue Management is an engine.

This new engine is feature-rich and automates a number important tasks. In fact, one feature in particular has our attention: the “do-it-for-me” function.

What does that feature give operators the power to accomplish while saving time and labor costs? Below are just a handful of benefits:

party size recommendations
dining duration configurations
decrease last-minute cancellations via cancellation policy implementation
floor plan configuration recommendations

Should this automation feature prove easy to understand and use, we can see that this latest tool may become the most popular among SevenRooms users.

To learn more about Revenue Management, scroll down to the latest SevenRooms press release.

Growth Recap

Let’s take a look at just some of the growth SevenRooms has achieved over the course of just the past few years.

March 2021: SevenRooms appoints Pamela Martinez as the company’s chief financial officer.
September 2021: SevenRooms announces a multi-year partnership with TheFork. The partnership is big news for operators throughout Europe and Australia. Further, the partnership illustrates how the company is pursuing global growth.
October of 2021: The company forms a partnership with Olo. This ensures clients who also use Olo are able to capture data from a key group: off-premise customers. That data creates profiles for such customers automatically. That means operators can learn more about—and effectively market to—customers who engage with them via online orders.
December 2021: SevenRooms and ThinkFoodGroup—the hospitality company behind Chef José Andrés’ portfolio of restaurants—make their partnership public. Interestingly, this partnership also includes ThinkFoodGroup joining SevenRooms in an advisory role.
January 2022: The platform announces the hiring of a chief revenue officer, Brent-Stig Kraus.
December 2022: SevenRooms enters into a partnership with Competitive Social Ventures.
January 2023: The company announces the appointment of their first-ever chief marketing officer.
March 2023: SevenRooms announces that Danny Meyer and EHI are investors in the platform. Following that announcement, SevenRooms launches Email Marketing Integration less than two weeks later.
May 2023: The company drops their Pre-Shift tool. Two weeks after that launch, SevenRooms announces a new global partnership with Marriott.

Most platforms launch a new solution or announce new partnerships once or twice per year. Not SevenRooms. And it’s this constant growth that encourages us to recommend the platform to our clients.

SEVENROOMS LAUNCHES REVENUE MANAGEMENT TO HELP OPERATORS INCREASE SALES & PROFITABILITY

Automated revenue management solution will provide restaurants with the tools they need to optimize their operations and fill more seats, more often

NEW YORK (September 28, 2023) – SevenRooms, a guest experience and retention platform for the hospitality industry, today announced the launch of a new solution for restaurants: Revenue Management. The product serves as an engine for operators to generate more sales and profitability from the same seats, using data science to recommend how to optimize availability and increase table utilization.

To survive current economic conditions, restaurants need solutions that can save them time, reduce their labor costs and increase their sales and profits. Inspired by effective revenue management strategies long-used by the travel industry, Revenue Management extends this practice to the restaurant industry. The product automates these processes without the need for analysts, additional staff or high-priced consultants to manage changes, helping to:

Fill more seats, more often to increase sales by reducing the time seats sit empty
Save time and reduce burdensome labor costs by automating in-depth analysis, quickly making changes with a ‘do-it-for-me’ option
Provide operators with easy-to-digest insights along with ready-to-use actions that demystify proven steps taken by revenue leaders

Other systems on the market today may offer reporting on a handful of insights, but none help operators immediately action revenue-focused suggestions with a ‘do-it-for-me’ option that has an instant impact on their operations. Sample actions include recommendations on party size or dining duration configurations, when to institute cancellation policies to decrease last-minute cancellations, floor plan configuration recommendations and more. Diners also benefit, with more available reservations, a better dining experience (e.g. being sat on time and not being rushed out the door) and more unique experiences and offerings to choose from when dining out as operators have more time to focus on the guest experience.

Notably, Revenue Management also gives operators insights into how much demand was missed across booking channels by summarizing data on recent reservation attempts. This helps operators better manage these channels and optimize their books to offer more reservations across their most profitable channels.

“With Revenue Management, we are delivering on our promise to help operators make more money, providing a product that automatically executes on strategies used by the most successful hospitality brands throughout the world – without having to add team members or search out implementation experts,” said Angela DeFranco, VP of Product at SevenRooms. “This tool is both proactive and reactive, helping operators uncover untapped opportunities while simultaneously working to identify potentially harmful configuration issues that may restrict venues from maximizing sales and profitability. Today’s operators are busier than ever, and we are excited to bring Revenue Management to hospitality operators, helping them automatically fill more seats, more often while continuing to elevate their guest experiences.”

For more details on SevenRooms’ newest innovations, please visit sevenrooms.com/new.

About SevenRooms

SevenRooms is a guest experience and retention platform that helps hospitality operators create exceptional experiences that drive revenue and repeat business. Trusted by thousands of hospitality operators around the world, SevenRooms powers tens of millions of guest experiences each month across both on- and off-premises. From neighborhood restaurants and bars to international, multi-concept hospitality groups, SevenRooms is transforming the industry by empowering operators to take back control of their businesses to build direct guest relationships, deliver exceptional experiences and drive more visits and orders, more often. The full suite of products includes reservation, waitlist and table management, online ordering, mobile order & pay, review aggregation, email marketing and marketing automation. Founded in 2011 and venture-backed by Amazon, Comcast Ventures, PSG and Highgate Ventures, SevenRooms has dining, hotel F&B, nightlife and entertainment clients globally, including: Marriott International, MGM Resorts International, Mandarin Oriental Hotel Group, Wynn Resorts, Jumeirah Group, Hard Rock Hotels & Resorts, Wolfgang Puck, Michael Mina, Bloomin’ Brands, José Andrés Group, Union Square Hospitality Group, Australian Venue Company, Altamarea Group, AELTC, The Wolseley Hospitality Group, Dishoom, Live Nation and Topgolf. www.sevenrooms.com

Image: Erik Mclean via Pexels

May 8, 2023by David Klemt David Klemt No Comments

3 Ways to Build Revenue on Mother’s Day

3 Ways Restaurants Can Build Revenue This Mother’s Day

by Austen Asadorian

With Mother’s Day quickly approaching, there’s no doubt that operators across the country are preparing for the celebratory—yet extremely busy—day.

During their preparations, it’s important that operators find and incorporate new tools and innovative marketing tactics. Doing so will not only fill seats, it will ensure they capitalize on a key opportunity to drive incredible revenue.

Below are three simple but powerful ways operators can generate revenue and loyalty on—and beyond—this Mother’s Day.

Encourage Reservations & Offer Upgrades

An easy way to make this busy day seamless for guests—and, ultimately, staff—is to encourage and allow guests to make a reservation before they arrive. Reservations give operators insight into who will be dining with them, help optimize seatings and covers, and provide a idea of how much to order to eliminate food waste if a special menu is being offered.

Using a reservation system also provides operators with the opportunity to offer diners upgrades during the booking process, even including prepayment should they want to go that route. This not only allows operators to earn additional revenue before a guest even visits, but also a convenient way to offer guests peace of mind knowing they’ve handled that “something special” for Mom way before the big day.

These upgrades don’t have to be anything crazy or extreme (although that’s always an option). In fact, according to the National Restaurant Association, consumers want special touches and discounts over everything else. So, an upgrade can be something as simple as a beautiful flower arrangement waiting on the table to a special off-menu dessert brought out at the end of the meal.

Use Email & Social Media to Your Advantage

Properly promoting Mother’s Day offerings to guests is extremely important because if no one knows about it, who will come?

Operators should utilize tools like email marketing to send personalized communications to their guest database promoting the venue’s Mother’s Day reservation availability or special offerings. Better yet, these tools can be used to offer loyal guests reservations before they open to the general public, further creating a special experience for those faithful diners.

In the same vein, operators should harness the power of social media, too. Operators can target paid marketing efforts on social channels like Facebook and Instagram to drive even more awareness and revenue for their restaurant by creating an event, including the details of the activities, specials, or Mother’s Day promotions, and exporting the names of top guests and email data.

Surprise Them with a Second Visit

While Mother’s Day is the focus right now, it doesn’t stop there for operators. To drive the revenue they need, it’s important to turn these celebratory diners into repeat guests.

To do so, operators should consider offering Mother’s Day diners complimentary gift cards or discounts (even via email post-visit) to bring them back. This could be for an upcoming graduation, Father’s Day (so Dad can also get the love), or even for a future birthday.

This “surprise and delight” factor is one of the easiest strategies to capitalize on holiday traffic and get diners to return to a restaurant once again as a loyal guests.

Here’s to You, Mom

Moms should be celebrated every day, but especially on Mother’s Day, and it’s important to make sure they have the best experience when dining out.

By incorporating simple tactics like offering reservations and custom upgrades or even a special surprise at the end of the meal, operators not only succeed in making the day memorable, but create a guest who will return over and over again.

About Austen Asadorian

Austen Asadorian is the Vice President of Sales at SevenRooms, where he is tasked with supporting SevenRooms’ global expansion efforts and accelerating the company’s goal of being the best-in-class solution for hospitality operators globally. Prior to joining SevenRooms, Austen was Peloton’s Director of Sales, leading the company’s go-to-market strategy for retail growth and expansion. He started his career at Hillstone Restaurant Group where he cut his teeth learning how to run efficient and profitable restaurants at scale. Austen was ultimately promoted into an executive role where he oversaw the company’s Manager in Training Program and Back of House Operations. Austen graduated from the Culinary Institute of America (CIA).

Image: grumpymonstergroup via Vecteezy.com

March 22, 2023by David Klemt David Klemt No Comments

Spring Clean Your Business!

7 Ways to Give Your Business a Spring Cleaning!

by Kim Richardson & David Klemt

In case you’re so busy you didn’t catch it, we’re officially—finally—in spring, and that means it’s time to spring clean your business.

Below you’ll find a spring cleaning slideshow with helpful advice from KRG Hospitality consultant Kim Richardson.

Each slide contains her best advice for reviewing, refreshing, and improving your business. For your convenience, Kim organizes her spring cleaning advice in just seven slides.

It’s time to look at your business through fresh, energized eyes! Your team, guests, and bottom line will thank you.

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Note: Unable to view the slides above? Each slide is transcribed below.

1 Re-plant Your Core Values

Review your core values with your team.
Post them where everyone can see them daily.
Foster core values through consistent training.
What kind of experiences are you offering your team?
Hire a coach to help you discover your core values.

2 Tidy up Your Guest Journey Map

Walk through your business from the guest perspective.
Review your website for content, ease of use, current info.
Review your technology and potential pain-points.
Touch up items that may have become run down: paint, signage, furniture, equipment, etc.
Review your flow of service and communication.

3 Spruce up Your SOP & Training Programs

Evaluate how well current SOPs are being followed.
Evaluate how well you continuously train your team.
Make updates as needed and add any new procedures.
Ensure SOPs are easily accessible by your team.
Discuss your standards during pre-shift meetings.

4 Deep Clean Your Financial Books

Review your budgets and projections for the year ahead.
Review and organize the financials tracking processes; receipts, invoices, files, etc. and digitize what you can.
Consider updating your financial tracking technology or bringing in a third party to assist.

5 Dust off Your Business Plan

Evaluate the progress of your business plan.
Acknowledge what you have accomplished.
Are you on track to achieve your goals this year?
Do all of your goals still make sense?
Make any necessary updates and create a game plan to stay on track; review every 30 days.

6 Freshen up Your Marketing Plan

Budget time and money to dedicate towards marketing for the next 90 days.
Create strategic campaigns that will create awareness, build a database, and retain your targeted customers.
Consider working with a third party or having someone dedicated to this role internally.

7 Declutter Your Mind

Perform a calendar audit.
Review goals and formulate action plans.
Practice mindfulness through journaling or meditation.
Consider hiring a mindset coach to help you organize your life and your business.

Image: PAN XIAOZHEN on Unsplash / Slideshow Images: Kim Richardson / KRG Hospitality

March 21, 2023by David Klemt David Klemt No Comments

IRS Proposes New Tip Reporting Program

IRS Proposes New Tip Reporting Program

by David Klemt

The Internal Revenue Service is proposing a voluntary tip reporting program which they’re calling the Service Industry Tip Compliance Agreement (SITCA).

Making the announcement via Notice 2023-13 back in February, the IRS is giving people the chance to comment on the SITCA proposal.

Per the IRS, their intention is to “take advantage of advancements” in POS, scheduling, and e-payment technology. How do they intend to leverage all this tech? In short, the IRS is proposing that POS systems will have to process payments and tips in the same way.

To clarify further, if someone pays by credit card, they’ll have to tip via credit card. If a guest pays in cash, they’ll have to tip in cash. So, should SITCA become the industry standard, the days of paying with a credit card but leaving a cash tip will be over.

However, in my eyes, this isn’t a simple “modernization” of IRS processes.

If the IRS is proposing a new for businesses to process tips, they’re looking to catch non-compliant businesses and tipped workers. A likely culprit or contributing factor to this IRS scrutiny? The retail venues now asking for or suggesting tips when customers check out.

So, it would be wise to reiterate to your team the need to report tips accurately. And remember, business owners need to ensure they’re complying with tip reporting as well. Getting flagged for inaccurate reporting is a great way to catch an audit, penalties, and a huge bill.

Nuts and Bolts

According to the IRS, SITCA will reduce taxpayer burdens. And, of course, the service claims the program will also reduce their own administrative costs.

Additional “features,” per the IRS website, are as follows:

The monitoring of employer compliance based on actual annual tip revenue and charge tip data from their point-of-sale system. There will be allowance for adjustments in tipping practices from year to year.
Participating employers demonstrate compliance with the program requirements by submitting an annual report after the close of the calendar year. This reduces the need for compliance reviews by the IRS.
Employers participating in SITCA will receive protection from liability under the rules that define tips as part of an employee’s pay for calendar years in which they remain compliant with program requirements.
Participating employers have flexibility to implement employee tip reporting policies best suited for their employees and business model. Policies must be in accordance with the section of the tax law that requires employees to report tips to their employers.

Requests for Comment

Interestingly, Notice 2023-13 contains a request for comments in four specific areas:

By what means a technology-based time and attendance system may be used by tipped employees to report tips. This includes tips in cash and other forms of tipping made through electronic payments methods (other than a credit card), regardless of whether the tips are received directly from customers or through tip sharing arrangements.
How tip sharing practices vary across service industries and how the SITCA program can support employer participation while accommodating potential differences in Federal, state, and local labor and employment law requirements.
By what methods employers of large food or beverage establishments participating in the SITCA program may meet their filing and reporting obligations under section 6053(c) and also satisfy the SITCA program requirements for compliance, while minimizing the administrative burdens on taxpayers and the IRS.

Those interested in providing such feedback have until May 7, 2023 to do so. The IRS has set up two ways to provide comments on Notice 2023-13:

Mail: CC:PA:LPD:PR (Notice 2023-13), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044; or
Electronic: Visit the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and Notice 2023-13) and follow the instructions for comment submission.

Personally, I have more questions than comments. Bear in mind, the IRS will stop accepting comments, feedback, and questions on May 7, 2023.

Image: Jon Tyson on Unsplash

March 10, 2023by David Klemt David Klemt No Comments

Reduce Discounts, Increase Profits

Reduce Discounts, Increase Profits

by David Klemt

There’s reason to be optimistic about generating revenue this year but operators must also be savvy if they want to boost their bottom lines.

Put another way, the growth some industry organizations and experts are predicting isn’t just going to occur. We’re optimistic about 2023 as well, but it’s going to take hard work and shrewdness.

As we know now, the National Restaurant Association is forecasting massive sales this year. In fact, the NRA projects the foodservice industry will generate $997 billion in sales. That’s nearly a trillion dollars just from the foodservice space.

Clearly, that’s a big number. It’s also $60 billion more in sales than the industry generated in 2022. That’s impressive in and of itself, surpassing the 2022 sales forecast by almost $40 billion.

Okay, so those are a lot of big numbers. Should foodservice outperform the forecast again, the industry will pass the trillion-dollar mark. And I know every owner and operator, be they independent, chain or franchisee, wants a healthy share.

However, impressive as those numbers are, they’re just that: numbers. Operators will still have to do the work to increase traffic; convert first-timers to repeat guests; and increase revenue. Fail in those tasks and there’s no reason to expect profits to rise.

It’s math, after all, not magic.

One way operators can increase revenue and profits is to offer fewer discounts. Really, this isn’t an incredible concept: If more guests pay full price, operators see more profits.

Real-world Example

Costs are up nearly across the board, and it can be tempting to offer discounts in an attempt to increase traffic. However, one group has shown over the past couple of years that discounts don’t need to be an operator’s go-to traffic- and sales-boosting tactic.

Carrols Restaurant Group is a Burger King franchisee. According to Restaurant Business, the group operates more than 1,000 Burger King restaurants. So, they operate approximately one out of every seven Burger Kings in the US.

Last quarter, Carrols managed to generate more than $14 million in free-flow cash. That’s higher performance than the group has seen in the past couple of years.

A significant factor for Carrols and Burger King is backing off of discounting. Again, this isn’t groundbreaking but it’s still noteworthy. A brand that once was reliant on discounting is now backing off that model and seeing dividends.

Of course, guest perception, the guest experience, and marketing play a role. Guests must still feel they’re getting value for the dollars they spend. They must also feel that their experience, from QSR to full-service, shows that they’re valued by the restaurant. And the marketing messaging must truly speak to a brand’s guest base and bring them through the doors to spend their money.

Premiumization over Discounts

The bottom line for an operator’s bottom line is this: If prices are continually discounted, that lower price is now the actual price. At least, a discounted price is now the normal price in the eyes of guests.

In other words, an operator who discounts all the time is training their guests to only visit and buy items when prices are lower than usual.

The superior option? Offering premium LTOs that speak to a brand’s base and tempt them to spend more. LTOs don’t need to come with discounted prices. In fact, they should be treated as premium promotions and command premium prices.

Create seasonal LTOs (in one concept’s case, inventing a fifth season), as an example, to generate buzz and increase traffic. Offer premium items at premium—but fair—prices to leverage the traffic, increase sales, and boost profits.

Another strategy that’s more effective than discounts? Building a brand with which guests resonate. Guests who relate to a brand tend to visit more often and support it with their dollars.

It’s tempting to discount. Don’t give in to temptation.

Image: Karolina Grabowska on Pexels

February 22, 2023by David Klemt David Klemt No Comments

Do Super Bowl Ads Work on Consumers?

Do Super Bowl Ads Work on Consumers?

by David Klemt

One of the biggest Super Bowl ad winners is Pepsi Zero Sugar.

Brands spent hundreds of millions of dollars to advertise during Super Bowl LVII, but do their ads actually translate to demand for their products?

A week ago we shared our ten favorite beverage-focused Big Game ads. Along with those ads we shared some numbers.

One of those numbers was $7 million, the cost of a 30-second Super Bowl ad on Fox. Other numbers? $500 million and $700 million, the range of revenue it’s estimated that Fox generated this year from Super Bowl ads.

At this point, these ads and the Halftime Show have essentially become their own entities. Some people watch the Big Game for the ads, some for the show halfway through. It stands to reason that brands are well aware of this development. So, they try to create the most impactful ad possible in the hopes of generating consumer demand.

In other words, these brands aren’t spending all this money just so they’re commercial can be deemed cool. Sure, brands want that buzz. But they also want an ROI on the millions they spend.

The big question is, then, are they seeing a return? Well, it just so happens that behavioral insight platform Veylinx has a data-driven answer to that question.

In short, the answer is yes. Of course, it’s a nuanced yes. For example, it appears Gen Z doesn’t care much about Super Bowl ads, as you’ll see below. Also, non-advertisers in the same categories as Super Bowl advertisers appear to see a benefit from the ads.

You’ll learn more from the Veylinx press release below. It’s an interesting read with valuable data for restaurant, bar, and hotel operators.

NEW YORK, Feb. 22, 2023 — A new study from behavioral research company Veylinx determined whether or not Super Bowl commercials boost consumer demand for the products advertised. The results show that 2023 Super Bowl advertising fueled a 6.4% increase in demand among viewers.

The overall increase in consumer demand was driven by women, who accounted for a 21% increase in demand growth. The commercials had minimal impact on men, yielding just 1% demand growth for the brands tested. Gen Z viewers were largely unimpressed by the Super Bowl ads, with demand among 18 to 25 year olds actually shrinking by 1%.

“It’s not really a surprise to see that Super Bowl ads improve sales, but the short term bump alone may not be enough to justify the $7 million price tag,” said Veylinx founder and CEO Anouar El Haji.

Using Veylinx’s proprietary methodology—which measures actual demand rather than intent—the study tested purchase behavior during the week before the Super Bowl and again the week after. The research focused on measuring the change in consumer demand for eight brands with Super Bowl ads: Michelob Ultra, Heineken 0.0%, Hellmann’s Mayo, Downy Unstopables, Crown Royal Whisky, Frito-Lay PopCorners, Pringles and Pepsi Zero Sugar.

Super Bowl Advertising Winners Overall

Michelob Ultra – 19% increase in demand

Pepsi Zero Sugar – 18% increase in demand

Frito-Lay PopCorners – 12% increase in demand

Heineken 0.0% – 11% increase in demand

Super Bowl Advertising Winners Among Women

Pepsi Zero Sugar – 45% increase in demand

Michelob Ultra – 40% increase in demand

Heineken 0.0% – 40% increase in demand

Crown Royal Whisky – 26% increase in demand

Halo Effect for Non-Advertisers

The biggest winners were arguably brands in the same product categories as Super Bowl advertisers. Non-advertisers in those categories appeared to benefit nearly as much as the advertisers: demand grew by 4.2% percent for the study’s control group of non-advertising competitors. Corona Extra, Kraft Mayo and Lay’s STAX were the greatest beneficiaries in a control group that also included Budweiser Zero, Arm & Hammer Clean Scentsations, Canadian Club Whisky, Popchips, and Coke Zero Sugar. Notably, every non-advertiser saw at least a slight increase in post-Super Bowl demand.

“The goal of our study was to look specifically at how consumer demand is affected by running a commercial during the Super Bowl,” El Haji said. “It’s possible that the non-advertisers deployed other marketing efforts to offset or take advantage of the Super Bowl advertising—or they simply benefited from increased exposure for their categories.”

Additional Findings

Study participants also answered a series of follow-up questions about their preferences, perceptions and how they watched the Super Bowl. More than three-quarters watched at home through various platforms, the most popular being the live cable/satellite broadcast (38%), followed by YouTube TV (15%) and Hulu (10%). When asked why they watched, it’s no surprise that participants were all about the game (64%)—but the commercials were the next most popular reason for watching (39%), followed by halftime (35%), the social aspect (26%) and fear of missing out (13%).

About the Research

Veylinx studied the behavior of 1,610 U.S. consumers pre- and post- Super Bowl LVII. Unlike typical surveys where consumers are simply asked about their purchase intent, Veylinx measures whether consumers will pay for a product through a real bidding process. Consumers reveal their true willingness to pay by placing sealed bids on products and then answering follow-up questions.

For more information about the study and the Veylinx methodology, visit info.veylinx.com/super-bowl

About Veylinx

Veylinx is the most realistic behavioral insights platform for confidently answering critical business questions during all stages of product innovation. To reliably predict demand, Veylinx captures insights through a Nobel Prize-winning approach in which consumers have real skin in the game. This is a major advance from traditional market research practices that rely on what consumers say they would hypothetically buy. Veylinx’s unique research methodology is trusted by the world’s largest and most innovative consumer goods companies.

Main article image: PepsiCo / Article body images: Veylinx

November 21, 2022by David Klemt David Klemt No Comments

Traffic Up but Margins Thinner

Traffic Up but Margins Thinner

by David Klemt

The One Table 2022 report from Datassential focuses on the state of the operator and what the industry can expect moving forward.

This informative report shares survey results from 801 operators across America. While some of the findings are positive, it’s clear many operators are enduring significant challenges.

For some, traffic and sales are up. However, that’s not the situation others find themselves in.

To download and review the Datassential One Table 2022, please click here.

The Respondents

For this report, Datassential shares the survey answers from 801 respondents.

Most survey respondents are independent operators. In fact, they account for 71 percent of the participants. Making up the rest of the field are chain operators (15 percent) and franchise operators (14 percent).

As far as segment types, the majority of survey participants operate in the fast-casual space (18 percent). Unsurprisingly, fine dining is the smallest group of respondents at six percent. Thirteen percent operate midscale restaurants, and 12 percent are at the helm of casual-dining concepts. Somewhat surprisingly, just ten percent of participants operate QSRs.

Interestingly, the service format is fairly even among survey participants. Fifty-three percent of operators are full-service and 47 percent are limited-service.

Similarly, survey respondents represent the country’s regions pretty evenly:

South: 30 percent
Midwest: 29 percent
Northeast: 21 percent
West: 20 percent

In terms of market type, most respondents operate in the suburbs (49 percent). Following somewhat closely are urban-market operators, at 31 percent. Just 20 percent of survey participants operate in rural markets.

Traffic, Sales and Margins

At first glance, Datassential’s survey reveals positive news.

Now, I’m sure people find the terms “pandemic, “pre-pandemic,” and “post-pandemic” exhausting at this point. However, there’s no denying we continue to feel the aftershocks sent through the industry by the pandemic.

So, how do things look now in comparison to pre-pandemic traffic and sales levels?

First, the positives. Nearly half of survey respondents—47 percent—say their traffic is up in comparison to where it was pre-pandemic. Add to that the 14 percent who say their traffic is the same and 61 percent of operators appear to be in good shape.

In terms of sales, 51 percent of survey participants have good news. That news is that their sales are higher in comparison to pre-pandemic levels. Again, add the 14 percent who don’t see any change. So, that’s 65 percent of operators who appear to be performing well.

But with the good there’s bad. Unfortunately, 39 percent of respondents report lower traffic than pre-pandemic levels. And sales are lower than they were before the pandemic for 35 percent of survey participants.

Operator margins are lower for all respondents. Generally speaking, the profit margin for operators before the pandemic sat at 21 percent. Now, the average is 13 percent. QSRs and fast-casual restaurants are a bit higher among survey respondents: 17 percent and 15 percent, respectively.

On paper things do look up for many operators. However, the industry is still suffering, with a third struggling to rise to even pre-pandemic levels of traffic and sales.

Image: Daniel Bradley on Unsplash