Amid an ongoing pandemic, the world continues to learn and adapt, developing new ways of conducting business and keeping things moving.
However, the food and beverage sector continues to face a hostile business environment all around the world and in Australia.
The Australian response to the Covid-19 pandemic has led to 90% of hospitality businesses suffering reduced sales and a drop in customers (source: Griffith University).
This comes as a shock to what is usually a diverse and vibrant industry that is one of Australia’s most recognisable assets worldwide.
As of 2021, the restaurant industry in Australia:
Includes 24,812 businesses
Employs 141,162 individuals, and
Has a market size of US$19 billion (source: IBIS World)
However, these numbers are a shade of what they were before the pandemic. In response, the hospitality industry has rallied and tried to manage the effects of the pandemic by rethinking strategies and expanding operations.
“It’s been incredible to see the huge transformation that the hospitality industry has undergone as a result of the pandemic,” says Ashik Ahmed, a Small Business Advisor from Australia (source: Deputy). “While it has had a devastating impact on a lot of businesses, watching the resilience of many of our customers as they embrace change and innovate is inspiring.”
The effects of the Covid-19 pandemic on Australia’s restaurant industry are:
Declining Customer Numbers and Sales
The most obvious effect of the pandemic on the country’s restaurant industry is a significant drop in customers and sales.
Ever since the lockdowns started throughout Australia, 90% of all restaurants have reported a drop in sales as mentioned earlier.
A major portion of these losses is the result of reluctance to dine-in at restaurants. The initial lockdowns closed down many restaurants that had not yet shifted towards other methods of sales or were reliant on customers dining in.
However, since then, customers have remained reluctant to engage with restaurants physically as they used to.
Still, takeaway sales have increased since the start of the pandemic. Around 25.7% of restaurants in a study (source: Griffith University) claimed all their sales to come from takeaways. Before, takeaways accounted for a paltry 1.1% of their sales.
Restaurants have been quick to adopt new delivery and takeaway options, but still face an uphill battle to regroup and grow.
The restrictions put in place by the Covid-19 response meant that restaurants had to decrease costs in order to survive. The reduced sales meant that the businesses opted for a reduction in staff to cut down expenses.
However, restaurants did not simply downsize. The staffing changes involved temporary layoffs, reduction in salaries, or freezing salaries. The following statistics come to light from the Griffiths University study cited above:
77% of the restaurants in the study opted to cut down expenses by reducing workdays
68.9% of the restaurants temporarily laid-off employees, while
42.2% of the restaurants dismissed employees permanently
The majority of the restaurants chose not to lay off staff permanently and the majority of the management staff (55.4%) took a pay cut as well. Moreover, just 23% of the restaurants in the study hired new staff after the pandemic.
The change in staff since the pandemic began also reflects the changing nature of the restaurant business. With takeaway and deliveries becoming more common, waiting staff is not needed as much as they were before and restaurants feel that they can simply continue with “essential staff” until the environment reverts to what it was before the pandemic.
Business Changes and Adaptations
Restaurants had to make significant changes to their operations to attract customers during the pandemic. Several restaurants used the time to develop more menu items and offer new products or services to keep busy during Covid-19 restrictions.
The surge in takeaway and delivery orders meant restaurants had to keep up with the demand of making something quickly and getting it ready for customers.
One key winner here has been pizza, with the dish seeing a massive surge in both delivery and takeaway orders (source: Commercial Real Estate). Restaurants have had to keep up with the trends and introduce new menu items accordingly.
Another key change in business strategy has been partnerships. Rather than shutting down, hospitality businesses have tried to weather the Covid-19 storm together. Several restaurants have signed up with delivery applications such as Doordash and UberEats.
Other restaurants have developed their own delivery services and mobile applications to reach customers without having to pay a fee or commission to the third-party delivery apps (source: PizzaDoh).
In short, restaurant and foodservice businesses have had to rethink their business strategies and how they operate to maintain sales.
The Importance of Social Media
The use of social media was necessary for businesses even before the pandemic, but it has become imperative since then. The engagement restaurants had with their visiting customers took a hit and it was important for contact to be maintained through the lockdowns and Covid-19 restrictions.
To accomplish that, maintaining a larger social media presence was required. According to the Griffith University study, a whopping 78.6% of restaurants claimed to have increased social media activity during the pandemic.
However, what is more interesting is that just 27.3% increased their spending on advertisements.
Instead, what restaurants have focused on is increasing customer engagement by improving their websites, increasing engagement through social media, and expanding in new market segments.
With people mostly spending time at home and avoiding public spaces, restaurants have looked to keep their existing customers in the loop.
One key aspect of customer engagement is restaurants asking their customers to provide feedback on menu items. In a way, the pandemic has brought restaurants closer to their customers, making them a major part of what is the new normal.
With the restaurant market in Australia supposed to grow in revenue by 1.8% in 2021-2022 (source: IBIS World), stability and normalcy are the words on everyone’s lips.
However, it is still prudent to be wary of future lockdowns and the existing Covid-19 restrictions. Increased vaccination and the diminished potency of the Omicron variant have provided the market with the hope of stability.
New restaurants are opening and people are getting more used to social distancing and other restrictions. Nevertheless, the fear of possible lockdowns is likely to keep both restaurant owners and customers on their toes.