How do I establish a hospitality business? — Part 1

The first of three articles examining the tendency of some hospitality business owners to place emphasis into the wrong areas of their business, while largely ignoring key issues they should be paying attention to. See also: How do I establish a hospitality business? — Part 2 and Part 3

It’s funny how some business people choose to spend their money. I keep walking into restaurants and hotels that are rivalling each other for the irrational opulence award. Some of them are stunning — all brass and marble, wood panelling, expensive art, wall hangings — the lot. This is very pleasant for the customers, but none too sensible from a business point of view.

Why are you here?

I always thought that the idea behind a business is to provide a return on investment. If you go right over the top setting up a place you could wait many years for a return, or you may never see one. Meanwhile, if you’ve borrowed money to get established, you have to charge ridiculous prices to service your loans. If you fall for this trap you’re automatically locked into a situation that results in poor value for money to your customers.

Should I spend a lot on my décor?

Does all this expense proportionally add to the experience?

Does all this expense proportionally add to the experience?

How important is décor in a hospitality business? Not terribly. Ambience is very important, but expensive décor is unnecessary. One of my client’s restaurants is full most of the time and has a customer average sale up there with the astronauts — in spite of having the cheapest tables and chairs, cutlery, crockery, and an inexpensive décor. They’re doing very nicely, thank you.

We’ve done many customer perception surveys as part of their marketing plan and have had relatively few comments relating to the physical side of the business; it appears the customers either don’t notice these things or they don’t place a high a value on them. Most of their comments and perceptions relate to the food and the service, to which they pay very close attention.

What this restaurant lacks in décor and opulence it does make up for in ambience. You walk in from the street and you can feel the welcome and you can feel the ‘class’ — much more than most other glitzy establishments. It comes from the warmth of the people who work there, not from a dazzling display of financial irresponsibility.

You will, to be fair, sometimes see someone turn over a plate to see if it is Noritake or Target, but these people are very much a small minority. I suspect they are mostly other restaurateurs. The great majority come, partake and leave without performing either detailed examination or a mental valuation on the property or its physical contents.

Environment is less important than food and service

I believe that as long as the appearance of a place is clean and pleasant, customers place a relatively small value on physical surrounds. I think the 80:20 rule applies — 80 percent of perception comes from the food and service, and 20 percent comes from the environment. I’m not advocating some kind of hospitality nihilism, just the use of some common sense. You can make a place look spectacular on a modest budget if you are clever and if you try hard enough.

As well as the sickening amount that normally gets spent on décor, consider exactly what it goes into. Disturbingly, it often gets poured into fixtures and fittings in rented or leased premises. I can perhaps justify a freehold owner spending money this way — it can increase the value of the property — but sinking large amounts of money into a leased property strikes me as the action of the cerebrally deficient. Often, the landlord is the major beneficiary, while the business owner gets burnt.

Be careful what you spend on a leased premises

Be careful what you spend on a leased premises

The human tendency to try to keep up with the Joneses probably explains some places I have seen. I imagine that once, years ago, someone made a blunder and built a Taj Mahal when a tasteful shopfront would have done the trick. They went broke eventually, but not before they had set the scene for the next gastronomic Cecil B. DeMille. From that time till now, on they’ve come, one after the other, each trying to outdo the previous trendsetter.

Keep your architect and decorator on a leash

Architects and interior designers have a lot to answer, as well. Sometimes they seem to become overwhelmed by the chance to make a creative statement. Away they go — as if money is no object. It is amazing how many new business owners have told me their interior designer blew their budget half way through. I have had to supervise these people several times during my career. One got quite miffed at the very suggestion of financial accountability and sank into a truculent sulk that I had to break with a threatened lawsuit.

Give architects and designers strict budgets

Give architects and designers strict budgets

However, I am digressing from my main point, which is this: Why will most business owners happily spend international phone numbers on the physical side of their premises, when this represents only 20 percent of their customers’ perception, and not spend much at all on the development of themselves and their staff, when the staff are ultimately responsible for 80 percent of the customers’ perception? I suspect that most people are more comfortable spending on the tangible. Human development is an intangible thing — you can’t measure it, only its results, and those results can take some time.

Its almost as if some business owners work on irrational logic that if they make the place impressive enough the customers will overlook the mediocre food and the offhand service.

Overseeing detailed customer perception surveys has been a very interesting process for me. It constantly focuses my attention to those issues that really matter to customers. If more hospitality owners did this type of introspective examination they would view their businesses with a great deal more clarity and not make as many bad decisions.

People create hospitality, not physical things

Consistent food and good service are what really matter. These come from well chosen, well prepared, happy staff — people, not premises. Hospitality operators are in the business of providing an entertainment experience, not simply selling food and beverage. A customer will judge you by how they feel during and after their visit you, and how much this feeling cost.

I have felt the warm glow of true hospitality in some really basic places over the years. My favourite restaurants tend to be simple, and yet I can walk away with the same or better feeling as I do when I go to their up-market cousins, for far less money. These places are often full, the public voting confidently with their wallets. The irony is that their owners are not only pleasing their customers more, they are probably making much more money than the trendy financial Titanic down the road.

You cannot create hospitality by throwing money at the physical aspects of your business.