Whether it’s a Friday evening flight, a hotel during the holidays, or a taxi ride in a downpour, we have all been burned by higher-than-normal prices due to excess demand. Raising costs when businesses are busiest is the norm across the travel industry, for instance – but now, consumers are beginning to see these ‘surge prices’ in more sectors.
NB: This is an article from Infor
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When fast food chain Wendy’s announced that strategic pricing changes were coming, the media pounced on the story, labeling it surge pricing. Nothing could be farther from the truth. Wendy’s new CEO, Kirk Tanner, said, “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings along with AI-enabled menu changes and suggestive selling.” A spokesperson for the brand confirmed the changes, telling Food and Wine that the varying price points can help Wendy’s to be more “competitive as “flexible.”
Restaurants have long used dynamic pricing, for example, by offering Happy Hour specials to attract customers after work. Stonegate Group, the UK’s biggest pub chain, says 800 of its 4,000 pubs will introduce “dynamic pricing” during evenings and weekends. The company has introduced temporary price increases before. The chain charged up to 50p a pint more when England football matches were shown in its pubs during the last two World Cups. Prices returned to normal after the matches.
The three-star Michelin restaurant Alinea, based in Chicago, has tested out flexible pricing. They introduced a ticket reservation system where customers would pay upfront, with the ticket price varying depending on factors like the day and time. For instance, if it’s cold outside, the restaurant might be less busy and offer lower prices.
So yes, it has begun and will continue growing in popularity with restaurant owners and their respective technology vendors. So why is this important, and how can restaurants and other food service companies implement a revenue management strategy without losing their guests?
Our world is ripe for disruption, but hotel and hospitality technology companies need to tread lightly when it comes to playing around with menu pricing models. The average guest today is much more savvy than at any previous time. They know how to price shop, compare pricing, and text with friends and family to gain better insights on optimizing their hard-earned dollar.
This doesn’t mean there isn’t a shift happening; it is just happening behind the scenes, and this is where it needs to stay.
QR codes used to be a novel way for companies to show and promote their products or services. Today, nearly 60 percent of adults expect to use their phones to access key restaurant features, including ordering food. And more quick-service and casual dining restaurants are adopting QR code ordering to improve operations. Customers access a digital menu through their smartphone camera and place orders without reviewing physical menus or interacting with servers.
With the disappearance of paper menus, the introduction of restaurant menu-based revenue management will be easier. However, restaurants face challenges mainly due to a plethora of paper, hard-coded POS platforms, and a need for more flexibility. The potential of QR codes in the QSR and full-service restaurant industry is significant. In fact, the global market for QR code payments is expected to grow by 16.5% between 2023 and 2032 (The Brainy Insights, 2023). The widespread adoption will streamline operations and enable innovation in revenue management practices.
Revenue management practices and science will also be used in sectors such as higher education cafeteria-style dining, sporting arenas, and stadiums. Any sports stadium has direct and indirect income. The most obvious is the first – ticket sales, rental of facilities, operation of food and drink areas, club shop, tour, and any other income dedicated to entertainment or marketing. Less evident is the pricing of individual menu items for general consumption. The capability for the stadium operator to use RM for event spaces, rentals, etc., is an untapped market. Rest assured that this growing sector has a great deal of opportunity.
When it comes to operating the actual restaurant or other space used for seating, the use of basic revenue management practices, such as analyzing service hours and seating capacity, can significantly enhance operational efficiency. This, in turn, can lead to improved customer satisfaction. By monitoring service hours in relation to revenue and consumer demand patterns, analysts can evaluate staffing levels, opening hours, and the impact of service efficiency on customer satisfaction. This method enables targeted adjustments in resource allocation and operational practices, ultimately enhancing revenue and profit performance.
The increasing adoption of dynamic pricing across various sectors signals a shift towards more sophisticated revenue management strategies, initially popularized by the travel industry. Companies like Wendy’s and Stonegate Group are pioneering this movement within the food service sector, introducing flexible pricing models that adapt to consumer demand and special occasions. These real-world examples demonstrate the potential of revenue management strategies to maximize profitability during peak times and enhance customer satisfaction by offering lower prices during less busy periods.
To implement these strategies, it’s critical to use technological tools, including Point-of-Sale (POS) and Business Intelligence (BI) systems that leverage data and automation, providing insights that align real-time pricing tactics with customers’ expectations, economic situations, competitors, and the current market. Those who team up with technology providers, like Infor, will be better prepared to handle the complexities of balancing profitability with customer perceptions.
By strategically integrating advanced revenue management, which involves the strategic coordination of pricing, promotions, and menu selections, food service operators can dish out sustainable profits and catalyze their growth.
