the nightmare of a inflation The boom is hitting the travel, hospitality and leisure (THL) sector hard, whose stability in this 2022 recovery is threatened by the upward spiral in prices. To face this umpteenth challenge, a general price increase in the industry of more than 12% is expected, according to a study by the consulting firm Simon-Kucher & Associates.
This price increase is one of the ways for companies in the sector to cope rising fuel pricessupply chain issues, commodity shortages and rising wages, according to the consultancy’s ‘Inflation in the Travel, Hospitality & Leisure (THL) sector’ study.
You can view the report at the following link:
As detailed, the catering sector is one of the most affected by “the extraordinary increase in the costs of raw materials, energy and labor”
“Increasing prices to mitigate rising costs and a foreseeable loss of volume by businesses can have a short-term impact, but must be done in a sophisticated way to ensure long-term positive effects,” a- he added. points out. Thus, he recommends that the price increase be combined with volume-enhancing levers, such as loyalty programs and consumer value management.
The smallest price increases
The report confirms that although the sector is in full recovery this summer, over the long term the decline in consumer disposable income adds to food inflation threatens this reactivation.
Also, do not forget that despite the fact that tourism has also jumped on the bandwagon of price increases, it is not one of the sectors where these are the most widespread.
Thus, only 34% of tourism businesses have increased their prices, below sectors such as consumer goods (54%) or raw materials (70%). In addition, one in three companies have not made or plan to make price increases due to inflation, which is why they are more conservative than those in other sectors.
By geographical area, it is in America that the price increases the most have been completed to date (46%) compared to EMEA (Europe, Middle East and Africa) (30%), the most conservative, while Asia-Pacific is between the two previous (35%).
In the second quarter of the year, headline inflation levels remained high in all areas. In the euro zone, it climbed to 8.1% and that of the United States to 8.6%.
The rise in prices in European restaurants remains high (7.1%), although lower than the aggregate indices, despite aid from the various governments. However, the recorded increase in travel, of 14%, doubles that of restaurants.
According to the quarterly Simon-Kucher inflation perception panel in Spain, consumers they receive bigger raises than the real ones.
“Depending on the business sector, consumers perceive price increases between two and four times higher than what actually happens. It is therefore essential to differentiate these price increases to minimize the impact perceived by consumers”, recommended
Thus, he warns the THL sector: the key to managing prices is not so much how much they rise, but how these increases are managed.
“Sophisticated price management takes into account, for example, the existence of psychological price barriers that should not be crossed, that the customer’s sensitivity to prices is very different depending on the role of the product/service or the occasion of purchase/consumption and that there are tools to generate a positive multiplier effect of the impact of the increases”, he underlines -he.
Otherwise, raising prices late and badly dilutes the short-term financial impact and harms the long-term impact on customer perception, even for very small increases, he argues.
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