As the hospitality industry continues to navigate the challenges and realities of Covid-19, opportunities are emerging, with some new adoptions showing signs they might be here for the long haul.
Having enjoyed its status as one of the world’s great culinary destinations for years, Australia is now witnessing its revered restaurant industry digging deep to survive. Constrained by closures and rules around physical distancing and seating capacity, hospitality industry players large and small are busy transforming their approaches.
When the CBD dining precincts of Australia’s major cities witnessed the en-masse departure of international travellers, students and thousands of office workers in March, chefs and restaurateurs in those areas quickly moved to undertake a radical reassessment of all that was once familiar and an exploration of what might be possible.
Along with integrating new standards of hygiene and physical distancing into their spaces, for most operators, successful adaptation to Covid-19 challenges has also meant diversifying their offer. Rather than relying on a traditional single-channel existence, hospitality operators are now thinking more like retailers and investigating the long-term potential of a multichannel and multipurpose existence; looking beyond the confines of in-house dining and designated operating hours to identify ways to activate their physical spaces beyond their usual role of cooking food and seating customers.
While the obvious path of introducing takeaway and delivery options has been adopted by everyone from cafes and bars to top-tier restaurants, many have also taken the opportunity to action new hybrid business models: incorporating the likes of a grocery store or bakery component, alcohol sales, hampers and finish-at-home meal kits, investing in bespoke online ordering technology and upskilling staff for broader roles within the business. There’s also been a rise in chefs availing themselves to customers for fully catered at-home dinner parties, producing instructional online content and selling collectible branded merchandise.
With statistics suggesting that up to 40 per cent of Australia’s CBD workforce has been working from home since lockdowns started in March (source: ABS), proximity to one’s neighbourhood cafe, restaurant and shopping centre now has new meaning. While the daily movements of former CBD workers might be curbed (for now), their food and drink habits have remained and adapted, with many now seeking out their daily coffee fix, lunchtime sandwich and Friday night pizza and drinks from businesses close to home.
This shift to localised living presents potential for thriving new markets, according to Luke Young, General Manager – Retail at QIC: “When your income is unchanged but you’re no longer commuting to the city for work, it’s natural to look closer to home for many of the experiences you’d usually seek out,” Young explains. “And with such a large proportion of the CBD workforce currently working from home, much of that disposable income spend is being redistributed to the suburbs – which creates some really interesting opportunities for food service operators.”
Suddenly, the typical cafe or restaurant business model has the potential for great diversity, and this energised new mix is being welcomed by consumers who, with limited opportunities for social interaction, are hungry to engage with their favourite food brands via multiple touchpoints.
In short, we’re being offered a glimpse of a future where restaurants, cafes and even bars evolve to become much more complex – and potentially more profitable – ecosystems, exploring new ways to connect with their audiences and venturing beyond the limitations of conventional cost-per-cover metrics to think and behave more like their retail counterparts.
With restaurant meal delivery edging into the grocery retail space and advancing into an ever more diverse and appealing offer, food and drink brands are increasingly inhabiting space in people’s homes. According to a recent report on macro trends by LS:N Global, the millennial demographic is shaping a cultural change in the way we cook and dine at home. The report states: 'As this demographic matures, their values are changing, and the home is being re-established as a vital frontier for the future of food and drink'.
It also predicts that even beyond the current climate, the at-home dining and drinking trend is one that is likely to grow: 'As consumers seek social but intimate experiences, at-home eating and drinking is set to play a new role in the industry’s future'. It suggests that for maximum cut-through, brands must look to elevate convenience and facilitate healthy and sociable experiences for consumers; 'behind closed doors, the new roles of food and drink brands will involve inspiration, connection and education'.
Indeed, around the world, consumers are embracing the new age of at-home dining. Here in Australia, where delivery made up around 8 per cent of the market pre-pandemic, it now constitutes up to 30 per cent in some states, according to ABS statistics. And many in the industry say it is likely to stay that way, as consumers acclimatise to the increased choice, ease and convenience now on offer from some of their favourite venues.
Owner of the Gradi restaurant group, Johnny Di Francesco, who has six popular pizzeria venues across Melbourne – including one at Eastland – reports that his regulars were quick to support Gradi’s recent shift to at-home dining, as well as the restaurant’s own line of ready-meals and groceries, which he introduced earlier this year at a dedicated pop-up space.
Di Francesco says that the industry’s ability to innovate and pivot swiftly in the face of the pandemic is something that should be praised. “This industry really has been hit harder than most, yet operators across the board have been agile and quick to diversify, which shows you how resilient we are. We’re not just cooks; the best minds in this business are also incredibly entrepreneurial,” he says, adding: “Times like this bring out ideas that you might not think about if you were running business-as-usual.”
“Because our regulars can no longer dine in, many are pre-ordering meals so that they can have the Gradi experience at home,” he explains. “Takeaway and grocery sales have increased dramatically, especially in the suburbs. Particularly early on, we saw a massive influx of people bulk-buying comfort food such as pre-made pizza, lasagne and osso bucco to feed their families.”
He adds that while the fees associated with third-party delivery services are too cost-prohibitive for most restaurants, Gradi recently invested in its own ordering and delivery platform. “We are now using our own vehicles to offer free delivery of our menu and grocery items within five kilometres of each of our sites,” Di Francesco explains. “Not only does this support our customers, it also creates additional work opportunities for our restaurant staff.”
Young believes that as the effects of Covid are still being felt in the short to mid-term, a focus on servicing captive suburban markets provides a glimmer of hope for struggling food service operators. “This moment holds great potential for some really interesting new arrivals in Australia’s suburban centres,” he explains. “While an emergent young Melbourne chef might have once dreamed of opening their first restaurant on Smith Street or Flinders Lane, for example, I think they’ll now consider looking to the suburbs as a feasible business proposition.”
He posits that while the undeniable lure of city venues will still remain, the Covid era is broadening the possibilities for the enjoyment of engaging food and drink experiences in both the city and the suburbs. With significantly more receptive suburban audiences, new and established industry players now have a chance to embed their offers within local communities at a time when many locals are eager for dynamic, high-quality food and beverage experiences close to home.
“I think we’ll be seeing a growing group of young chefs realising some great opportunities in underappreciated suburban settings, catering to an audience that is arguably more open to local talent and fresh ideas than ever before,” says Young. “And because the cost of establishing a new business in the suburbs is more attainable, you’ve got a much more sustainable cost basis for small businesses – which is something that the industry has desperately needed for some time now.”
Young says he has faith in the potential for this new shift to prompt a return to thriving local neighbourhoods, as envisioned in QIC’s own microcity approach, which has long facilitated the introduction of big-name CBD hospitality brands to suburban centres, with Eastland’s Town Square – which houses the likes of Paco’s Tacos, Huxtaburger and Gradi – a prime example.
“QIC has always invested in the cultural capital that food and dining experiences bring to our communities,” he explains. “In this current climate, I’m really keen to see if we might be able to bring some of that emerging, innovative talent into the suburbs in new ways. The location of our assets in key growth corridors with strong public transport connectivity, our collaborative approach to leasing and tenancy delivery, plus our suite of pop-up retail opportunities, can pave a reduced-risk path to market for fledgling businesses. The support we provide all our retail and hospitality partners is integrated and ongoing, ranging from retail design resources to hands-on marketing support. The support we provide all our retail and hospitality partners is integrated and ongoing, ranging from retail design resources to hands-on marketing support.”
When coronavirus turned the industry upside down, it forced a reckoning that will, hopefully, result in a more sustainable future for the country’s food service operators. Young states: “If this year has shown us anything it’s that the hospitality industry is one that is fuelled by deep reserves of creativity, resilience and optimism. Teamwork and community are inherent to this industry’s values, and by finding new purpose amid the uncertainty, it is creating a pathway to a more innovative way of operating into the future.”
Learn more about how we’re bringing innovative food concepts to Australia’s suburbs.