What the VAT reinstation means for hospitality businesses
While it might be tempting to simply raise prices, this could alienate price-sensitive customers, especially as the preferences of Gen Z, who value experiences and cost transparency, become more dominant. This generation tends to favour digitally connected, experience-driven venues that often operate with lower overheads, like popular food trucks and trendy pop-up restaurants that are also able to be more agile in the face of cost increases.
Instead, hospitality businesses must rethink their operations and seek innovative ways to optimise costs and manage the squeeze on margins without sacrificing on quality, staff and the experience of their customers.
3 Key strategies to help mitigate the 13.5% VAT impact for hospitality operators
1. Make your day-to-day easier
One of the best ways to tackle rising costs is by improving how efficiently your business runs day-to-day and as a starting point you should be thinking about automating routine tasks like inventory tracking or order management. For instance, using a digital procurement system can help you keep a close eye on what you're spending and what’s coming in. This means you can spot trends, negotiate better deals with suppliers, and reduce waste. Say for example you run a busy Galway café, by integrating a digital inventory management system, you can avoid over-ordering ingredients (especially at seasonal peaks throughout the year) that might go bad, ultimately saving you money and ensuring you always have fresh stock on hand.
2. Pricing tactics that work for you
Flexibility really is key when it comes to pricing your menu. Implementing dynamic pricing can help you adapt to changing customer demand and special events without alienating your loyal customers. For example, if you notice that your restaurant is busier during weekend brunch hours, perhaps it’s your Irish take on the ‘Shakshuka’ dish that has your punters returning for more, consider slightly increasing prices during peak times while keeping them lower during quieter days. This approach allows you to maximise revenue when demand is high while still offering value during slower periods. It’s a win-win: you maintain profitability and keep your customers happy.
3. Seeing your finances clearly
Staying on top of your financials has never been more important, especially now VAT is remaining at the higher rate. As Darina Allen of the well-known Ballymaloe Cookery School said recently at the organised ‘Day of Action’ in response to the government’s budget announcement, many establishments, particularly small restaurants and cafes are relying on making ‘a couple of cents on a coffee’.
In the tech world we live in, having real-time insights into your cash flow, margins and tax liabilities can make all the difference to your business. If you’re not already doing so, you should consider using restaurant management software that pulls data directly from your EPoS system to provide real-time analysis of these key metrics. This way, if you notice that costs are creeping up, like food expenses or staffing, you can quickly adjust your operations to suit. For instance, if the software’s data analysis highlights rising food costs, you might decide to run a special on certain menu items, such as pizza night to clear those veggie toppings before they need to go in the bin.
Tackling increased costs
As if the higher VAT rate wasn’t enough of a challenge for Irish businesses, management are also facing a hike in wages and energy prices. To experience any relief from these pressures, it’s essential to tackle these challenges head-on with strategies that can be effective.
1. Getting the most from your team
Labour costs are often one of the biggest expenses in the hospitality sector, especially with rising changes to the minimum wage, which now stands at €12.70 per hour here in Ireland. However, optimising your staffing levels can significantly mitigate these rising costs. For example, if you were to implement a scheduling tool this can assist you to manage shifts better, ensuring you have the right number of staff to work without overstaffing during slow periods. This not only reduces labour costs but also ensures your customers are served timely – aiding their experience.
2. Creating a workplace your staff want to clock in for
Keeping hold of those talented employees is crucial. A high turnover of staff can drain your resources and make you feel stuck on that hamster wheel of interviews. To tackle this, it’s important for businesses to create a positive workplace culture where employees feel valued. If you haven’t already, perhaps consider offering regular training sessions to equip your team with the skills they need, or the skills they would like to learn, whilst also showing them that you’re invested in them as an employee.
3. Save on Energy Bills
With energy costs skyrocketing, it’s wise to look for ways to cut back on those expenses. Whilst there was a slight gesture from the Irish government recently in the form of the Energy Subsidy Scheme, making small changes internally can lead to significant savings over time such as consider investing in energy-efficient appliances or installing smart tech to better control heating and cooling. Every little bit helps, and your bottom line will thank you!
Why technology is key for success
With the rising costs that hospitality businesses are facing now, embracing technology isn’t just a move that you’re thinking about; it’s become a true necessity for survival. And having the right digital tools can offer you transparency, automation, and efficiency that can help you navigate these challenging times. At Access Hospitality Ireland, we’re here to support you with a range of solutions to manage costs, streamline operations, and protect your bottom line.
Managing suppliers and inventory like a pro
Imagine you were in a position to simplify your daily tasks giving you back more time to focus on what you do best, which is creating memorable experiences for your guests. Digital solutions like Access Procure Wizard make it easy to handle procurement and inventory management. By centralising your data and automating repetitive tasks, you’ll not only save time and reduce human errors, but you’ll also get timely information on prices, stock levels and supplier performance, allowing you to make smarter, more informed decisions. This not only boosts your efficiency but also leads to more accurate planning and decision-making. In a cost-sensitive environment, having a clear picture of your resources is crucial.
Keeping Your Finances in Check
When costs are rising and VAT changes are on the horizon, having access to real-time data analysis from your EPOS system is like having a trusted compass. EPOS solutions offer real-time insights that allow you to monitor financial performance and gather actionable insights on the spot. This means you can stay more in the loop on your business’s financial health. You’ll reduce the risk of errors and ensure compliance with VAT requirements, giving you complete control over your cash flow and profit margins. It's about knowing where you stand financially at any moment, not just at budget time, so you can make informed, timely decisions.
Unlocking customer loyalty through technology
Embracing technology has never been more essential for fostering customer loyalty and enhancing your ongoing marketing efforts. By installing an intuitive hospitality CRM system, this will enable your business to capture valuable insights about your customers, helping your marketing team (or Marketing person) to craft personalised campaigns that speak directly to your customers. You’ll then be in a position to tailor your promotions and services based on guest preferences and their past interactions with your business. This level of personalisation not only makes guests feel valued but makes them feel ‘seen’, meaning they are more likely to visit again, which only makes their bill kinder to your bottom line.
Optimising your workforce for better service
Labour costs, which are continually growing, can be a significant burden for hospitality businesses but managing them doesn’t have to be too much of a headache. With Rotaready, you can optimise staff scheduling to ensure you have the right number of team members on duty at the right times, eliminating overstaffing or understaffing, saving you money and contributing towards maintaining good service, leaving no customers waiting. Happy customers are loyal customers, and a well-staffed business is key to providing excellent service.
Now is the time to prepare for this new era in Irish hospitality
As we move into 2025, Irish hospitality businesses face a challenging landscape with higher VAT rates, rising wages, and growing competition. However, with the right strategies and digital tools in place, businesses can strive to survive.
At Access Hospitality Ireland, we are committed to supporting the hospitality sector with our solutions that are designed to help you navigate this complex and ever changing industry, whilst doing your best to make a profit. By embracing technology and streamlining your operations, your business can protect its margins, improve customer experiences, and stay competitive.
Ready to sidestep the VAT burden and future-proof your hospitality business in 2025? Contact Access Hospitality Ireland today to discover how our digital solutions can support your business.