2023 Restaurant Industry Outlook: Leveraging AI & Analytics to Streamline Operations (and Much More)
Each year, Hospitality Technology asks restaurant operators, consultants, and academics to give us a look at what the year ahead may look like. We’re looking for key priorities, technology that can meet evolving goals and customer expectations, and the solutions that hold the most promise. We’re pleased to share our 2023 Restaurant Industry Outlook. As always, we’d love to hear your answers to these vital questions — my digital door is always open at [email protected].
Meet Our Restaurant Industry Experts
- Daniel Connolly, Ph.D., Professor of Management, Drake University
- Flavio Diomede, Director Retail Platform Technology, Starbucks
- Mehmet Erdem, Ph.D., CHTP, Associate Professor of Hotel Ops. & IT, William F. Harrah College of Hospitality, University of Nevada, Las Vegas
- Toby W. Malbec, Managing Director, ConStrata Consulting
- Joe Tenczar, Chief Information Officer, Restaurant CIOs
What are restaurants’ top 2023 priorities?
Daniel Connolly, Ph.D., Professor of Management, Drake University: Top priorities for 2023 should be on 1) labor (recruiting, training, and retaining people), 2) using technology to create efficiencies, reduce dependency on labor, provide quality and consistency, and deliver guest value through service and personalization, 3) sustainability and the environment, and 4) use of data analytics to drive smart decision-making.
Flavio Diomede, Director Retail Platform Technology, Starbucks: A priority for Starbucks is providing a seamless process for customers to order and for orders to be prepared and handed to customers; a parity of experience for customers and partners/baristas.
Toby W Malbec, Managing Director, ConStrata Consulting: 2023 will be a financially challenging year, and with greater pressures on finances and continued labor challenges, greater emphasis will need to be placed on cost control measures that DO NOT impact the overall guest experience. There are a number of ways to make the unit operation more efficient through tighter inventory, better understanding of food cost and shrinkage, and ideal (not minimal) labor costs. These processes are driven by a strong operational understanding of the restaurant dynamics and supported through prudent deployment of technology. If your ideal business process cannot be supported through your technology? Then you have the wrong tech!
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What is the greatest disruptive force on the restaurant industry?
Connolly: The greatest disruptive forces on the restaurant industry today are the labor situation and supply chain issues. Going forward, technology elements of the Fourth Industrial Revolution such as artificial intelligence, the Internet of Things, robotics, and drones will likely provide great disruption as they become more capable and affordable.
Diomede: AI and Machine Learning will become ubiquitous in making our baristas smarter.
Malbec: Prescriptive AI: for years we have had technology be able to tell us when something is happening (your labor cost is trending to be too high based on your sales being 5% down today) but we are now entering an era where prescriptive AI (…therefore send Lindsay home now and have Myles come in an hour later) should be able to help management know what to do with the dynamic data being presented. We are reaching a stage, with continued challenges in keeping tenured managers, where the industry will rely heavily on machine learning and prescriptive AI to help make left-right business decisions throughout the course of a business day in order to keep businesses profitable.
Joe Tenczar, Chief Information Officer, Restaurant CIOs: In 2023 it will likely be food costs.
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What technologies should restaurants be looking to embrace?
Connolly: Restaurants need to find ways to expand capacity and capabilities in light of the current labor shortages. As such, they should be looking to embrace technologies that streamline workflows (such as tablets, pay at the table, automated inventory and purchasing) and, where possible, that can offload work from restaurant staff through automation (such as artificial intelligence, voice response systems, robotics in the back of the house) and by shifting aspects such as reservations, ordering, and payments to guests. It is also important for restaurant to have good demand and labor forecasting systems in place and a robust way to connect with employees to fill open shifts.
Diomede: Software-Defined Store Infrastructure, Enhanecd Usability, AI/ML.
Malbec: Recognize that today’s workforce is not yesterday’s workforce; they are motivated and therefore retained based on different drivers. Look to technologies that embrace the individuality of your workforce and allow the on-demand access to information and lifestyle flexibility that they covet. Recognize that employees do not view their job as a paycheck but often as an extension of their values, and as such simply offering a few dollars more pay without addressing the unique aspects of today’s workforce could be detrimental.
Tenczar: A great analytics platform that allows you to understand your guests and your operations. This is especially important when there are large cost pressures.
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What’s the most overhyped tech?
Connolly: I consider the Metaverse, drone delivery, and service robots (those in the front of the house) to be overhyped technologies. While they may have a great deal of appeal and offer a lot of potential, these technologies are still evolving. They are getting lots of press, and some companies are investing considerable capital in these technologies, the return on investment isn’t there yet, and unfortunately, the hype is distracting attention and resources away from other key priorities such as the guest experience, friction-free commerce, and labor needs.
Diomede: AI/ML. There is a risk that folks will assume that this provides a silver bullet to solve all kinds of staffing shortage issues. This is not true, in my experience and opinion.
Mehmet Erdem, Ph.D., CHTP, Associate Professor of Hotel Ops. & IT, William F. Harrah College of Hospitality, University of Nevada, Las Vegas: Robotics in restaurants. A majority of robotics applications in the restaurant industry are enhanced versions of automation and self-service technologies,i.e. "bartender Robot, Robot Chef, etc." . The hype of advances in restaurant Robotics is often misconstrued as the industry being just a step away from Humanoids interacting with patrons and employees at the same level of human employees/managers, and serving staff being at the verge of being replaced by Humanoids. Current applications are far away from delivering high-quality guest interactions.
Malbec: Loyalty Programs: if your organization has not moved away from a “BUY X and GET Y” philosophy, then you are continuing to promote a behavior that has not shown an definitive ROI. Look at instituting a Recognition program that captures unique data on each of your guests and curates an experience designed just for them. In many cases, it may not even include discounting, but targets those things that the customer wants and improves their experience. Rewards should be managed judiciously and used where effect can actually be measured.
Tenczar: Cryptocurrency. The restaurant industry can’t even figure out how to embrace digital wallets on a large scale. Crypto wouldn’t be possible unless that could happen.
What’s the most underrated tech?
Connolly: An underrated technology is energy management. Given rising energy costs and environmental concerns, energy management should garner greater attention than it has been getting. It should not be overlooked.
Erdem: Guest/customer feedback technologies. In the era of user-generated content and social media, restaurateurs cannot afford a delayed response in service recovery. Customer-feedback technologies, e.g. feedback opportunity provided to the patron at the time of check delivery, have been deployed since early 2010's but are not widely utilized by the restaurant industry. The impact of addressing service failure (real or perceived) in a timely fashion is a major factor in successful service recovery and assuring that the guest will return to the business.
Malbec: Digital Signage: when a customer is in your restaurant or in line at the drive-thru, what are they looking at? Your brand has the opportunity to market (often in a 1-2-1 manner) to a customer who if you have a Recognition program you already know a great deal about. A well-designed and graphically-appealing DMB strategy can show measurable results in terms of sales and can influence your customer’s behavior to your mutual benefit.
Tenczar: Probably not possible to be underrated, with so much hype, but AI will become heavily embedded in restaurant tech over the next couple of years. OpenAi’s ChatGPT and Google’s (maybe called) LaMDA can immediately be used to better enable operators to make more actional insights based upon restaurant data.
Where do you see opportunities for future innovation?
Connolly: Future innovations will come in a variety of areas and in a variety of forms. I expect that we will see many changes to the guest experience (that is, how services are delivered), to the guest journey, to marketing to guests, and to the back-of-house functions. Artificial intelligence and robotics will likely be game changers in the not-too-distant future.
Malbec: We continue to operate in a restaurant ecosystem where innovation occurs in silos and the swim lanes often prohibit “edge-to-edge” data sharing. Most organizations will have duplicate data throughout the enterprise, or data that needs to be manually massaged or moved to other applications in order for them to have access to it. The vendor marketplace continues to receive a failing grade for its willingness and ability to open up their systems and knock down the walls within the applications, despite the hard work of many standards groups to address this. It’s unfortunate that a restaurant operator cannot select their technology and build their perfect restaurant ecosystem without having to consider who plays “nice” and who doesn’t.
Tenczar: As above, I have been a huge proponent of better computer decision-making, instead of relying on restaurant staff being tenured or educated enough. Have the system tell the general manager what will move the needle instead of having them read through dozens of reports and having to know what to do with that information.
Restaurants and hotels have leaned heavily into contactless technology over the past three years. What’s next?
Connolly: When it comes to contactless technology, I foresee the use of technologies with more natural form factors (e.g., voice-activated systems where people can speak directly to place orders, make reservations, settle their checks, etc.). I also envision the use of ubiquitous computing down the road to seamlessly complete and pay for transactions. Amazon’s Just Walk Out technology could be a harbinger of this.
Erdem: A recent study we have conducted indicates that guests' preference for contactless technologies is on the raise. In the short term, the next stage for ensuring successful adoption is the inclusion of contactless tipping as a standard function. Although restaurants don't have a comparable 'captive audience' like cruise-lines and theme-parks where guests are more willing to embrace the dependance on contactless technologies in exchange for convenience, in the long-term we should expect to see a wider range of contactless applications across the restaurant industry in order to meet the evolving expectations of guests and to enhance the overall dining experience.
Tenczar: Short term – staff ID cards. No reason to have a swipe or to type in your code! Long term- ubiquitous wallet that has guest preferences across restaurants.
Where has technology been underserved?
Connolly: I consider an undertapped technology to be a restaurant’s Wi-Fi. A restaurant’s Wi-Fi can provide a treasure-trove of data, that if analyzed and used effectively, can provide invaluable insights regarding customer traffic, demand patterns, and other customer insights that can be used to create marketing opportunities. While many restaurants offer free Wi-Fi, I am not sure that many are aware of and currently capitalizing on the data that are being collected.
Malbec: Menu engineering and analysis: did that LTO actually generate more revenue than we would have otherwise (margin, frequency, add-ons) or did it actually cannibalize our business? What items should we promote more vigorously either through menu placement of menu board promotion to help improve the bottom-line or to move excess ingredient inventory? I am not aware of any vendor who does these kinds of analysis well.
In the wake of increased data collection, what data technologies should restaurants be looking to?
Connolly: If they aren’t already doing so, restaurant companies should be looking to adopt some of the top data analytics tools. There are many available; for example, Tableau, Python, Apache Hadoop, and SAS, to mention a few. It is also important to have good data cleansing tools. Remember, gleaning accurate insights from data is dependent on having quality data!
Tenczar: Many restaurants are utilizing customer data platforms. If your restaurant is not, you are missing out on tying the guest information to their transactions for the purposes of customization and marketing segmentation. Also, back-office analytics products are mandatory for all but the smallest brands.
Get Involved
If you want to continue the conversation on AI, join Restaurant Technology Network (RTN) for monthly collaborative conversations in its AI Share Group, where restaurant technology stakeholders share ideas and explore various AI / ML real-world applications. Learn what’s new and exciting when it comes to consumer and employee-facing AI, and how new technologies are creating unmatched operational efficiencies - in every facet of the industry.
Watch this sizzle reel below to get a glimpse into the types of conversations and topics this workgroup will explore.