Anticipated Trends in 2024: Diminishing Dining Spots, Thriving Markets, and Long-Awaited Tech Mergers
Hitting The Reset Button: A Fresh Glimpse at the Hospitality Landscape in 2024
After a tumultuous year, 2023 got the hospitality industry back on its feet. The pandemic haze finally lifted, and we celebrated a restoration of pre-pandemic frequency of restaurant visits. But the year wasn't entirely smooth sailing; SVB's collapse, rising interest and consumer prices, increased minimum wages, and harsher economic conditions made the year far from picturesque.
As we get ready to ring out the old and ring in the new, I'd like to speculate on what 2024 might have in store for the hospitality sphere.
Trimming Down to Essentials
2024 could be the year of smart optimization for restaurants. In a world where operational costs, especially labor and food costs, continue to rise, operators are compelled to be more prudent. Kevin Burke, partner of Franchise Equity Partners, believes this prudence will drive restaurants to be more thoughtful about menu engineering, portions, and pricing, all to combat the shock of higher prices without driving away customers. Expect menus to shrink as they become leaner in an effort to reduce waste and streamline options.
Furthermore, with minimum wages on the rise, restaurants will seek creative methods to decrease staffing levels. Technological advancements, such as the increased use of kiosks, voice automated drive-throughs, and self-pour beverage machines, will only accelerate this trend, resulting in historically low staffing levels.
Additionally, large chains will prioritize designing their restaurants to boost delivery and takeout sales over dine-in options. Some restaurants have already eliminated their dining areas, embracing the convenience of takeout amidst our fast-paced lifestyles. This trend is predicted to persist, with the overall square footage of new locations significantly decreasing in the coming year.
Market Rebound on the HorizonPublic market activity in 2023 was a snooze-fest compared to previous years. M+A activity was minimal, and the IPO market remained unusually quiet. However, Roger Matthews, managing director of Bank of America's Consumer and Retail Investment Banking Group anticipates a surge of assets coming to market in the beginning of 2024. With pent-up demand on both the buy and sell sides, a more favorable deal-making environment is on the horizon.
When it comes to IPOs, Cava paved the way for successful restaurant groups. Mike Esposito, cofounder and managing partner of Franchise Equity Partners, believes that with equity markets bouncing back, IPOs should also thrive towards the latter half of 2024. While the volume of IPOs may not match that of Cava, smaller restaurant groups can still expect to make a splash in the coming year.
Consolidation is Coming
2024 might bring about the year of consolidation in the restaurant technology industry. Over the past 20 years, the sector has witnessed explosive growth, with fierce competition amongst startups in every niche. However, as capital for early-stage companies becomes less accessible, investors and venture capital firms will become more selective with their investments. Strategic acquisitions by larger players will become more common as a means to strengthen their offerings and capitalize on record-low valuations.
In conclusion, while 2023 may have presented challenges to the hospitality industry, I am optimistic that 2024 will herald substantial progress as brands focus on optimizing operations, finding creative solutions to staffing concerns, embracing technology, and revitalizing public market activity. I eagerly await the opportunities and developments 2024 will bring to the foodservice and hospitality landscape.
For my esteemed readers, I extend my gratitude for your unwavering support, and I look forward to sharing more insights in the New Year. Happy New Year!
Behind the Scenes- Trends in restaurant design involve adapting to changing consumer behaviors, incorporating technology, and integrating sustainability practices [2, 5].- Restaurant staffing faces challenges such as labor shortages, increased competition for skilled workers, and automation technologies [1, 2, 5].- The focus on digital transformation in the restaurant industry includes online ordering, delivery services, and mobile apps to improve customer engagement and streamline operations [2].- The rising cost of food prices may influence consumer spending habits and restaurant pricing strategies [3].- Economic growth and inflation are expected to be positive but slower compared to previous years [1].- Food prices for dining out increased by 4.1% in 2024 [3].
- The hospitality industry might witness tech-driven optimizations in 2024, as rising operational costs compel operators to streamline menu engineering, portions, and pricing.
- As minimum wages continue to rise, restaurants could possibly adopt tech advancements like kiosks, voice automated drive-throughs, and self-pour beverage machines to reduce staffing levels.
- Large chains are likely to prioritize designing their restaurants for delivery and takeout sales, with a predicted decrease in the overall square footage of new locations.
- With a surge of assets expected to come to market in 2024, both public and private deal-making environments could become more favorable for the hospitality and restaurant sectors.
- Consolidation could be on the horizon for the restaurant technology industry, as investors and venture capital firms become more selective with their investments and strategic acquisitions by larger players might become more common.
- In 2024, we may see continued fascination with lifestyle trends such as sports, food-and-drink experiences, and sustainable practices, which could influence restaurant design, menu engineering, and marketing strategies.
