Restaurants, stay focused on Driving Revenue!

Business, Restaurants, Trends

We are in an increasingly competitive environment, with higher rents and staff costs. So restaurants have little option but to focus on driving revenue.

They can improve revenue by increasing the number of customers they serve and/or the amount of money that is spent by each guest.

Since the nineties, Hotels and Airlines have achieved enormous growth through savvy manipulation of their revenue streams.  Customers accept that if they stay in a hotel one day, the price can be double that of another day. Plane tickets vary enormously in price too. The objective is to attract the right customer at the right price at the right time with the right product. Budget airlines are now so efficient at driving revenue, that they achieve near 100% occupancy rates.

Restaurants can have large fluctuations with an excess of customers during certain key times. This can be daily, weekly or by season. But then they see excess capacity during periods of low demand. So why not adopt the strategic approach used by hotels? This would lessen these fluctuations, while driving revenue. It would also contribute, to increasing a restaurant’s profits.

But few restaurants are aware that their business model is suited to apply these techniques which drive revenue and significant growth.

Revenue management is all about manipulation of price in relation to demand and supply. Restaurant owners wrongly assume that price can only be manipulated through increasing or decreasing it. Our customers would be seriously annoyed if we price a dish at £15 one day and £30 the next!

Hotels and airlines can vary their prices. But restaurants have a host of other strategic levers at hand to maximise net revenue by guest and by the volume of customers served.  Restaurant revenue management strategies are as diverse as the many different types of restaurants.

We all want a dynamic environment where every aspect of the business is carefully aligned and optimised to drive revenues. So a restaurant needs to understand its concept and the customers it is trying to wow.

Some duration management techniques, which control the length of stay per seat, can be disastrous in a luxury restaurant. On the other hand, they are very effective in a busy high street outlet. So understanding average meal lengths is important, because this controls the number of tables available.

Understanding customer behaviour, means that menus, promotions and loyalty techniques can be engineered. This allows restaurants to target specific segments during the day, week, month or even year.

The redesign of menu’s and processes, together with improved forecasts of customer arrivals, will improve staff scheduling. it will also help control the cost of sales. These are key elements in driving up restaurant profit margins. Restaurant owners common desire to minimise staff costs can backfire, if reduced staffing leads to slower table turnover and longer meal times.

Although many restaurants practice some revenue management approaches, few have a strategic framework that effectively coordinates this process.

Achieving the full potential of your investment in a restaurant, lies in management’s ability to market and manage every available moment of the restaurant, as a unique product.

Driving revenues and using effective techniques to maximise capacity should be as carefully managed as the quality of the service process itself.


Lucienne Mosquera MIH is Managing Director at Hospitality Business Development


Would you like to know more?

Download our latest White Paper entitled “Why Return on Hotel Investment Can Significantly Underperform” or contact me, Lucienne Mosquera (Managing Director) for an informal conversation about your Investment.