Written By: Joel Kaczmarek
A fortunate fact to begin with is that the hospitality industry across the world does not have oligarchic structures as, for instance, the car industry. Instead of a handful of a few large players, a mixture is in place, where several mid-size system gastronomy chains and thousands of individual restaurants represent a significant economic power with millions of jobs. In one of their presentations, Clipperton Finance, Europe’s leading independent investment bank fully focused on high growth technology companies, estimated that there are 800,000 restaurants across Europe that form one of the largest sub-digitized markets still in existence.
The economic impact of the hospitality segment is rather enormous: a study by Ernst & Young from 2013 estimates that the hospitality industry (hotels, restaurants, cafes, catering, etc.) in Europe supports 16.6 million jobs and builds a turnover of more than one trillion euros. Thus, 3.7 percent of Europe’s gross domestic product and 7.8 percent of all employees depend on the hospitality industry. Every 13th job in Europe is settled in this segment, and every euro spent here leads to further expenses of €1.16 in other fields. In the individual countries, these percentages are often even more significant.
The Untamed Potential
The gastronomy and hospitality industry is presented as conceivably underdigitalized, as many restaurateurs simply lack the necessary training or are so absorbed by their day-to-day business that they become frightened and advice-resistant. However, from a structural point of view, it can also be stated that the corresponding technology was clearly too expensive for a long time and lacked the relevant access points.
But technology has long become a commodity, while the industry shows massive inefficiencies, whether it is material flow, planning, replicability or the main cost factor spoiling food. These and other factors have hitherto only been addressed by system restaurateurs and thus their business has been sustainably profitable.
No matter at which stage, whether pre-arrival, in-house or post-purchase, there is a wide range of digital opportunities. For example, a study at the METRO Group analyzes digital scenarios, such as reservation, online food ordering, loyalty programs, mobile payment or marketing, and it is not quite surprising that consumer acceptance is growing. On the side of the restaurants, the staff, the acquisition and the factor of bureaucracy are some of the hurdles. Deeper insights into the digital divide in the food sector are also offered by a series of studies from the École hôtelière de Lausanne:
- Measuring ICT utilization and implementation barriers among independent restaurants
- Digital Consumer Trends and Behaviors within the restaurant industry
- How independent restaurants can meet the challenge of digital business transformation
The Rise of System Gastronomy
While the economic crisis in 2008 caused the development of independent restaurateurs to be flattened, a different kind of supplier is gaining market share. The well-organized and cost-optimized system gastronomy has managed to make the restaurant business extremely profitable. The basis for this development is mainly standardized procedures, a uniform offer in many branches, exact employee requirements and intensive training courses. In this way, a massive scalability can be generated, which is spread mainly in urban areas.
Thanks to its high systematization, system gastronomy can also significantly better react to the increased awareness about food contents: allergenic, lactose-free or vegan food are factors that can be handled in a plannable manner. The German Hotel and Catering Association (DEHOGA), in its Annual Report on System Gastronomy, estimates that the Top 100 players in the segment
achieved a net sales volume of 12.6 billion euros in 2015.
And these highly organized chains are also beginning to expand into new gastronomic subsegments. In addition to burger chains like McDonalds, Hans im Glück, Burger King or Jim Block and pizza stores like Joey’s Pizza, Pizza Hut or Domino’s, there are a lot of specialists, such as Vapiano (Italian), Sausalitos (Mexican), Schweinske (German), Block House (steak), Sushi Factory (sushi), North Sea (fish) or Coa (asian), to name but a few.
Venture further to learn more about this complex ever-evolving architecture to realize the digital connectivity of the industry. Startups are reinventing the industry approach from replacing analog business models with digital, to now actually founding digital-first businesses. What is needed is an open platform with access, unbridled innovation and plenty room for error. If a business succeeds in adapting its own structures to build up a certain intellectual ownership and managing the upcoming signaling in digital hospitality, promising synergies could be lifted. Head over here, to dive deeper into a view on the market situation in hospitality and food tech, and while you’re at it, also check out Part II and Part III in the same series.
Joel Kaczmarek is the founder of digital kompakt, an online magazine publishing deep dive analysis and podcasts about the digital ecosystem in Germany. Previously, Joel lead Gruenderszene.de, one of Germany’s leading magazines on the startup economy, as chief editor and publisher. He helped build the online magazine from its early day, which led to the foundation of the digital publishing house Vertical Media (now acquired by Axel Springer, since 2014). Joel Kaczmarek is also the author of the best-selling Samwer book “Godfathers of the Internet”. You can follow Joel on Twitter at @Indivijoel.