With the cost of living crisis – where will consumers cut spend next?

As the consumer continues to feel the financial pinch with increases in almost every conceivable part of their monthly budget, the Hospitality industry holds its breath to see how consumer behaviours will naturally change. From food inflation to increases in the cost of utilities, consumers are becoming very intentional about where they spend their hard earned cash, but is this a threat or an opportunity?

According to an interesting piece of research curated HGEM (Hospitality Guest Experience Management) wherein they surveyed 450 mystery guest members between the ages of 18 to 66+. The findings of the report indicate that most consumers (87%) are already affected by the cost-of-living crisis with the results showing that it’s unfortunately the youngest, and the oldest that are most affected. 91% of both Gen-Z (18-25) consumers and respondents aged 66+ have felt the impact of the crisis; the least affected (78%) were in the 56-65 age group.

The results of the study also showed that if budgets contracted, 3 out of 4 (72%) would reduce visit frequency to their favourite hospitality venues, rather than find a cheaper alternative. Sector analysis revealed that the highest percentage of consumers opting for the reduction of frequency, rather than cost, were identified in the quick service sector (79%), meaning that people are least likely to choose a cheaper alternative but rather go less often.

Quick service was followed by dining out (76%), drinking out (70%), leisure (69%) and lastly accommodation (65%). From a demographic perspective, Gen-Z stands out as the age-group who could most likely be swayed by cost, the report reveals.

Consumers were also asked to pinpoint what they’d stop spending on first, if budgets tightened. The ranking from lowest priority to top priority for spending is as follows: 1) delivery & takeaway, 2) holidays abroad, 3) eating / drinking out, 4) retail (non-essentials) 5) UK holidays.

The results suggest that delivery & takeaway market may soon see a decline after a long period of success and stability, whereas UK domestic holiday sector, which saw a boom last year, appears to be in a strong position again. But could this provide an opportunity for hospitality to look to improve guest experience and service? Create an environment which exceeds expectations and a service culture to match? A product which guests, regardless of age, create a buzz about and intentionally visit?

Finances are tight and this does not seem to be forecast to change in the near future but this can create an opportunity for businesses to reinvent themselves to be that destination of choice and delight.