2025 and the hospitality landscape: what can we expect?

2025 is now well underway and on the surface, it may appear that the hospitality industry is headed for another challenging year. While there may well be hurdles to overcome this year, there are also many opportunities for growth and innovation.

The industry is faced with increasing operational costs and high consumer expectations, it has never been clearer that hospitality continues to be an industry full of resilience, adaptability, and agility.

We’re expecting exciting new trends in the kitchen, such as an increased focus on sustainability, the continued rise of alcohol-free alternatives, and operators honing in on elevating the customer experience and value for money.

Equally, the industry should also acknowledge the core tensions faced by hospitality this year: from increasing consumer expectations to operational constraints from rising costs, labour shortages and taxation pressures.

Additionally, Labour has committed to a Child Health Action Plan as part of a mission to create the “healthiest generation of children ever”. Though a positive step toward long-term change, new policies surrounding “junk” food advertising will undoubtedly have an impact on a variety of QSR (Quick Service Restaurant) brands navigating the complex industry landscape in 2025.

Despite these undeniable tensions, there are a variety of ways operators can reframe these challenges and turn them into potential opportunities for growth.

At Classeq, we’re always here to support hospitality businesses throughout the ebbs and flows of the industry. Let's look at the expectations and possibilities for the year ahead.


Operational Costs vs Consumer Demands

Operational Costs

The biggest, and most obvious, challenge faced by the hospitality industry is the steep increase in operational costs.

A sustained increase in energy and rent bills will impact businesses in 2025, and the increased National Insurance contributions and National Minimum Wage will add £3.2 billion to the hospitality wage bill. Since wages make up over 50% of the industry’s operational costs, businesses will unfortunately feel a sting.

These rising costs are expected to force some operators to reduce staffing, which could then have a knock-on effect on the service quality as a result. For other businesses, these costs could sadly be too much to continue operating.

Labour Shortage

Additionally, the industry is still facing a labour shortage hangover caused by the major events of the last few years. Finding and retaining key talent is a challenge echoed throughout the industry, exacerbated by the pandemic, Brexit, and perceived unappealing working conditions in some cases.

The pressures of operational costs and labour shortages are urging employers to run a more optimised, up skilled, and agile workforce; however, despite labour cuts being made, this new way of staffing businesses can actually create opportunities for retention.

With increasing labour costs pushing operators to embrace a more agile workforce, an increase in cross-department training and more dynamic roles within the hospitality industry is on the rise, benefiting both employer and employee alike.

Through initiatives such as cross-department training, businesses can offer more dynamic and attractive jobs: diverse responsibilities, in-depth training across a multitude of departments and the ability to switch between roles during a busy shift. Some independent venues are cross-training team members in front of house and back of house roles. This could perhaps be something other operators explore in the future.

The future of hospitality may revolve around quality over quantity; fewer staff members per business due to budget and labour shortages, but an increase in fulfilment and retention owing to more dynamic and interesting work. It’s worth mentioning that operators could consider leaning more heavily on technology and AI to streamline and optimise manual, and frequently mundane, tasks, relieving both labour costs and unfulfilled staff members. We are seeing this further afield, such as the burger-flipping robot at a CaliBurger franchise in Pasadena. Or the delivery drone used by Domino's to drop off a pizza order in New Zealand.

Of course, this does raise questions, such as whether these team members really want to work in different roles? Or do they feel they have no other choice?

Or perhaps this could be a way to free employees up to take on extra shifts? It could well be something larger chains explore in the future, but there are cons to consider alongside the pros.



Consumer Demands

As costs rise for the consumer too, we can expect to see changes in consumer demands. An increased price for dinner and drinks will create an increased expectation in experience and value, which creates further tension within reduced labour forces.

There are numerous strategies that businesses can undertake to navigate the realities of increased operational costs and increased consumer demand, which in turn will provide opportunities for businesses to grow.

For example, operators can enhance the value perception of their offering through focusing holistically on the customer’s experience; exceptional service, carefully curated menus, appealing ambience and integrating loyalty programmes and various other perks within the dining experience.

Furthermore, keeping a finger on the pulse of current trends and demands will arm hospitality businesses with the knowledge to navigate the ever-changing customer expectation. This also means gathering vital customer insights from regulars and fully understanding the nuances and expectations of their customers, as well as the general consumer.

For example, keeping on top of hot trends such as Veganuary and Dry January are non-negotiable for operators to remain competitive. It’s worth noting that incorporating alcohol-free alternatives all year round could also be a wise move as recent reports suggest 14.8% of the nation don’t drink alcohol.

Whilst navigating these turbulent times, hospitality operators may benefit from adopting a clear and transparent communication strategy on their marketing channels. It can help avoid reputation-damaging communication errors, such as under-delivering on promises and setting unrealistic standards. If they keep talking to their customers, they can start to create great loyalty.

Further to this, it’s advisable that operators build personalised communications into their marketing strategies to remain competitive and keep up with demand, since it’s estimated that 76% of consumers are more likely to buy from companies that offer personalised products/services.

With such a saturated market and an overwhelming choice, trust and personalisation are two core pillars that will inform the consumer’s decision about where to visit this year.

How are customers responding?

One of the most notable considerations to consider taking forward into 2025, and to use as an opportunity for growth and transformation, is the idea of adding value to the customer experience.

Since rising costs are also affecting consumers, they will be much more sparing, and therefore critical about their dining experiences, as well as resistant to these price increases.

These expectations could include greater personalisation of experiences, flawless service, and an accessible and inclusive menu.

Since health-conscious Gen-Z are continuing to enter the market, and general attitudes toward health and well-being are becoming more mainstream, we can expect health-conscious and sustainable choices to be at the forefront of 2025 dining trends.

This includes incorporating alcohol-free alternatives beyond Dry January, building vegan and plant-based options into your offering, and keeping a closer eye on sustainable practices.

There’s an obvious gap between customer expectations and operational realities, however there are opportunities for businesses who are willing to evolve and adapt in an effort to close this gap.

For example, by including delivery options and/or partnering with third-party delivery platforms, operators can directly enhance the customer’s value perception whilst diversifying their revenue stream.

Another strategy is promoting strategic partnerships with local farms, breweries, or other artisan suppliers. These menu offerings will delight environmentally and socially conscious customers, increasing the likelihood of engagement and loyalty.

Innovating in the Face of Adversity

Despite the turbulent events of the recent past, hospitality continues to rise up time and time again, and we know this time will be no different.

The dynamic and fast-paced nature of hospitality is not for the faint-hearted, which gives us a clue as to the character and attitude of the resilient workforce that keeps the industry thriving.

Equally, we can also thank the dependable loyalty of customers who continue to enjoy hospitality businesses during times of upheaval. To eat, drink and be merry is an innate human desire that cannot always be quenched by staying at home; we crave connection, socialisation, and nourishment, therefore hospitality will continue to be a staple in the everyday lives of the nation.

An important consumer behaviour to consider here is a phenomenon called “The Lipstick Effect”, which frequently comes into play during times of economic unrest and uncertainty.

The Lipstick Effect refers to consumers picking themselves up inexpensive treats during economic down-turns, since the ability to splurge is out of the question. Whilst lavish dinners and decadent experiences may be off the table, a high-quality, speciality coffee on the weekend is a perfect, affordable pick-me-up.

This phenomenon highlights the feeling of “escapism” that hospitality provides customers, despite the state of the economy. No matter what decline we face as a nation, hospitality will always hold its place in the heart of customers. There’s usually room in the monthly budget for a take-out dinner or quick pint with friends, anything that serves as an act of self-care during an otherwise bleak time.

Turning Challenges into Opportunities

In response to the core tensions faced by hospitality, numerous operators are already implementing various strategies to tackle rising costs and increased expectations.

For example, Quick Service Restaurant (QSR) brands such as LEON implement self-service kiosks into their shop floors. These kiosks remove the need for additional labour, whilst intelligently up-selling and capturing valuable customer data for future engagement, thus saving operational costs, and increasing revenue.

In terms of sustainability, many restaurants incorporate “Zero Waste Programmes” into their offering. For example, “root-to-stem” or “nose-to-tail” cooking methods are becoming increasingly popular, both to meet customer expectations of sustainable cooking practices and to help spread costs by using fewer ingredients across multiple menu items.

To maximise customer experience and perceived value, restaurants are expected to be investing in more comprehensive staff training programmes for their smaller teams, including premium service standards, extensive menu knowledge and knowledge of the restaurant’s history and culture. Whilst prices continue to rise, it’s vital that every touch point with the customer is thoughtful, professional, and accommodating.

The Future is Bright - Optimism & Opportunities

Hospitality has been a symbol of resilience for decades, undergoing more changes and consumer evolution than most other industries; the key to the industry’s survival has been to reframe challenges as opportunities for growth.

Although we acknowledge that the times ahead are daunting and uncertain, they are not enough to kill the spirit of our industry, or the nation’s desire to eat and drink out!

Change is guaranteed. Those hospitality businesses who embrace change and innovate are the ones who continue to thrive and delight their customers into 2025.

And at Classeq, we’re here for you every step of the way.



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At Classeq, we are passionate about the growth and success of the hospitality sector. That’s why we are committed to providing you with content that explores every part of the hospitality journey from the distribution of catering equipment to the final experience on the customer’s plate.



References:

https://www.bidfood.co.uk/blog/the-uk-eating-out-market-where-is-it-headed/

https://www.ukhospitality.org.uk/work/hospitality-hit-by-3-4-billion-budget-hangover/

https://get.popmenu.com/post/ai-in-restaurants

https://www.livescience.com/61994-flippy-burger-flipping-robot-flops.html

https://www.cnbc.com/2016/11/16/dominos-has-delivered-the-worlds-first-ever-pizza-by-drone-to-a-new-zealand-couple.html

https://365retail.co.uk/meeting-customer-expectations-in-the-hospitality-industry/