Find out how three entrepreneurs embraced hospitality sector innovation to help diversify in a competitive industry and take their companies to the next level.
Building a hospitality business is notoriously difficult. Rising rents, business rates and changing consumer behaviour put increasing pressure on the sector. Leaders that want to scale have to innovate to carve out a share of the market.
Starting up in the recession
The 2008 recession hit the already struggling hospitality sector hard. Pubs were the worst hit as consumers stayed home – the UK lost 8,000 venues between 2006 and 2016, roughly two per day – and in the decade since venues are increasingly being used for housing.
Ben Stackhouse developed his idea for multi-use venues against this backdrop. It started when he was working for someone that was converting failing pubs into residential developments.
“My manager was taking over unloved, disused or failing pubs and turning them into residential. He decided to convert one into a hostel and I came on board to run it. I worked there for three and a half years, during which he opened six to seven sites,” he said.
Stackhouse’s idea was to retain the pub and combine it with the youth hostel. That would provide a unique experience to backpackers and allow him to use revenue it generated to invest in the pubs.
“It was him making good use of the upper floors but seeing the downstairs as too much of a problem. They were being turned into lounges that didn’t generate revenue. Our main success was making pub customers see how the extra revenue from upstairs was spent. That gave them their Sky TV and happy hour back, but also made sure the backpackers were welcome,” he said.
The first location opened in 2007 as part of his new company PubLove. Launching a hospitality business months before the recession might seem like bad luck, but it meant locations were available for “next to nothing” if people had a compelling offer, said Stackhouse. PubLove didn’t pay a premium for the first five sites it opened and was able to negotiate discounted rents.
When innovation’s simple
PubLove took advantage of two simple innovations when it launched – great burgers and clean hostel rooms.
“From a hostel point of view, the innovation is about selling it on the back of the fact that the pub is part of the experience. Doing what we can to make the accommodation feel like it’s part of the pub without being cheap,” said Stackhouse.
He added simple things like increasing privacy and extra plug sockets helped. “When we started a clean room with working showers was enough to delight people,” he added.
Provenance was becoming really important, and quality burgers were a new thing when the first site opened. PubLove created the Burger Craft brand and presented it as a residency.
“That was instrumental in transforming the pubs from less desirable, quiet pubs to more modern thriving pubs for the local community. The burger market is pretty saturated now and we’re looking at other options,” he said.
Learning is the cornerstone of innovation
Hospitality sector innovation requires a commitment, namely talking to customers and following industry developments.
The sector has seen a massive shift towards provenance in the last five years. Restaurants are listing farm names, pubs are brewing beer and micro-distilleries are springing up.
Getting ahead of consumer behaviour requires looking at these micro trends and trying to figure out how they might translate into opportunities.
Stackhouse uses industry publication Propel Hospitality and events to keep an eye on what’s going on. Whenever there’s an opening that sounds innovative the team goes to check it out. When they identify a potential idea they do as much site research as possible. “We tried 30 burger restaurants when we were looking at that,” said Stackhouse.
PubLove has 80 staff and turned over more than £4m last year. The business took on investment from Ei Group, which bought a 50 per cent stake in 2017. The business has a pipeline of 15 sites lined up for the next three to four years and the partnership has provided more opportunity for innovation.
“Before the deal we had to buy our beers from them, and their range is limited. After they bought half the company we could buy from wherever because that maximised our offering. We had the benefits of the buying power and the ability to stay on top of trends,” said Stackhouse.
Another business thinking differently is Mr Flavour Events, which takes a scientific approach to creating drinks using techniques like UV lighting and homemade syrups. Director Ali Waheed wants to take the same approach to drinks that innovative chefs Heston Blumenthal and Grant Achatz do to food.
“I worked with high profile caterers who delivered stunning food with a key emphasis on visuals yet the drinks were always monotonous and didn’t show the same level in creativity.
“A key part of personal development is researching the latest food and beverage industry trends, increasing our business network through events and creating regular video content,” said Waheed.
From inspiration to innovation
The level of competition in the hospitality sector means business leaders need to innovate to grow their businesses. Staying ahead of industry trends and consumer demands not only means a business will survive but it will thrive.
Successful hospitality sector entrepreneurs work hard to make sure they are monitoring new ideas, such as unique spirits offering or a different approach to putting together a menu. This means committing to keeping on top of industry news, meeting as many people as possible and, perhaps most importantly, talking to customers.
“There’s no substitute for getting out there and seeing how other people do it,” said PubLove’s Stackhouse. “Innovation is everywhere. It’s about a combination of how people put things together. If you analyse what they’re doing and why and add your own knowledge you can turn it into something that’s original.”
Testing hospitality sector innovations
Arapina offers butter, gluten, wheat and dairy free, and vegan cakes as part of its wholesale and catering offerings. The ten-employee business uses pop-up shops to test demand for new ideas and locations.
“We did around 20 pop-ups in 2017 and this year we’ll do more,” said founder and CEO Michaela Pontiki. “It’s the most cost-effective, innovative way of getting your brand across to various local communities or target groups.”
The pop-ups are run for a day in big office buildings and around three months in markets or shop front locations. Pontiki stressed that each site generates a profit and they work to capture the insight.
“There’s a short questionnaire to fill in as to whether they want to see us more. We monitor Facebook groups in the local community. We give out discounts and offers and see how many people use them,” she said.
In an age when consumers demand originality and a great experience, PubLove, Arapina and Mr Flavour Events are thinking differently and not resting on their laurels.