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How hospitality can free up funds to reinvest in growth

Accenture research reveals opportunities to grow amid industry volatility.

The hospitality industry is facing a push/pull of consolidation and growth. In this volatile business climate, companies must increase agility to respond quickly to changing business and economic conditions. Accenture surveyed hospitality executives and found that leaders know the benefits of reducing costs, increasing competitiveness and reinvesting cost savings into growth, but only one-fourth strongly agree they are positioned to deliver those outcomes.

Going for growth

Many hospitality executives are focused on freeing up funds to reinvest for growth. In fact, 82 percent agree or strongly agree that, "our business is now focused on cost reduction to free up funds to invest in growth initiatives." More than half are pursuing these measures to improve competitive advantage, but only about a quarter say, "our business achieves the optimum balance being agile and being lean."

A few factors are getting in the way of growth. These include:

Inflexible operating models. Inflexible operating models, difficulty scaling savings and challenges with prioritizing investments prevent hospitality companies from unlocking funds to reinvest in growth. Only 18 percent of executives surveyed say their business has a flexible operating model that can adapt to consistently deliver on strategy and executive activities that drive value for the organization. Converting to a digital operating model would enable the flexibility needed to keep pace with the speed of industry change.

Savings aren’t scalable. Only 25 percent of executives surveyed strongly agree that their company has optimized their process for identifying and removing activities and investments that do not add value. Optimizing processes and moving non-core competencies to a shared services model would free up cash to reinvest, yet 39 percent have limited internal shared services.

Too many areas of reinvestment. Identifying the right areas to invest is the most frequently cited (61 percent) barrier to growth. Furthermore, investments aren’t always strategic. Only 20 percent say their company prioritizes the reinvestment of cost savings in alignment with the business strategy.

Digital is key

Hospitality executives see digital investments as an enabler of cost reduction (78 percent) and advanced operating models (86 percent). Nearly half (47 percent) say digital technologies is their top area for reinvesting cost savings. But reinvesting in growth isn’t just about going digital, it’s about being strategic when it comes to reinvesting.

Accenture suggests three actions to help pave the path to growth in the hospitality industry:

  • Hospitality companies today must be lean and agile to respond to customer demands and keep up in an ever-changing marketplace. A flexible operating model can enable this agility.

  • Reinvest savings in digital capabilities that allow the business to work efficiently, maximize customer insights and improve omni-channel experiences, thus enabling growth.

  • Execute more effectively by cutting out the non-core capabilities, or moving them to a shared services model where you can achieve savings at scale.

The hospitality industry can achieve greater agility to compete—even during tough economic times. The key is to start taking steps today that will position your business for the future.

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