To present brands that allow them to stand out from retail competitors, merchants in the hospitality space are turning to innovations. The need to stay competitive remains a top reason for companies in the $1 trillion accommodations and food services market to look to innovate as they seek to distinguish themselves from other market participants.
According to the PYMNTS Retail Innovation Readiness Index, nearly eight in 10 accommodation and food services merchants — or 77.4 percent — cite innovation as key for keeping them in the hunt. At the same time, three-quarters — or 75 percent — of retailers cite increasing sales revenue as an essential motivator. And just over six in 10 — or 62.2 percent — are seeking to improve customer loyalty.
Within the accommodations and food services space, quick-service restaurants (QSRs) from Domino’s to Chipotle Mexican Grill are turning to innovations in their businesses for a variety of reasons beyond solely keeping pace with the competition. These are just some of the reasons why QSRs innovate — and how they are bringing digital technology into their operations:
Seven in 10 QSR merchants — or 71 percent — indicated remaining competitive as a reason to innovate. Burger King is turning to coffee subscriptions amid the breakfast wars: Members of BK Café can receive one small coffee each day from the quick-service restaurant (QSR) company for a $5 monthly fee. The offering could help bring diners into its restaurants at breakfast time to discover its other menu items. Restaurant Brands International CEO Jose Cil told CNBC, “We thought the coffee subscription would be a good way to bring people in, raise some excitement at Burger King.” The outlet reported that QSRs like McDonald’s and Dunkin’ have sought to bring customers into their locations during the early morning — a battle that “has been ramping up over the last few years.”
Almost two-thirds — or 65.4 percent — of QSR merchants indicated customer loyalty as a reason to innovate. Domino’s, for instance, was offering its Points for Pies rewards members a chance to earn points without needing to make a pizza purchase from the chain to earn customer loyalty heading into the Super Bowl pizza rush. Users download the QSR’s app and sign up for the pizza chain’s rewards program to receive the promotion. Customers can earn 10 points through a “newly embedded pizza identification feature to scan their pizza” and redeem 60 points at the restaurant for a medium two-topping pizza. Domino’s Senior Vice President and Chief Brand Officer Art D’Elia said in an announcement for the offering, “Instead of advertising during Sunday’s game, we decided to invest in a breakthrough program.”
More than half — or 54.2 percent — of QSR merchants indicated meeting consumer demand for new payment methods as a reason to innovate. And QSRs are offering different payment options with digital innovations in their brick-and-mortar restaurants. Taco Bell, for instance, allows customers to pay with their credit cards or the restaurant’s gift cards at kiosks. Diners, however, don’t have to pay at the kiosks: The restaurant company allows diners to place their orders on the devices and then pay with cash at the counter. The kiosks are part of Taco Bell’s “All Access” digital strategy, which is geared toward letting diners interact with the company in whatever manner they’d like. The initiative aims to enable customers to place their orders through their preferred channels.
About half — or 48.6 percent — of QSR merchants indicated consumer demand for in-store shopping as a reason to innovate. Chipotle Mexican Grill, in one case, opened the doors to 137 new restaurants in 2018 “with industry-leading returns,” according to CEO Brian Niccol on a recent earnings call. At the same time, he noted that that digitized make lines are in more than 1,000 restaurants and are on their way to coming to all restaurants by year-end. He also said that digital pickup shelves are in roughly 1,000 restaurants and the company is at work on bringing them into all stores by the middle of the year. Overall, the company reported better-than-expected earnings results for the fourth quarter. The restaurant company reported sales of $1.23 billion and earnings of $1.72 a share compared with estimates from analysts of $1.19 billion and $1.34.
Roughly three in 10 QSR merchants — or 30.8 percent — indicated improving business analytics as a reason to innovate. Artificial intelligence (AI)-powered personalization platform operator Dynamic Yield, for instance, recently announced that it was being acquired by fast-food chain McDonald’s. The company’s technology lets companies create customer profiles and launch as well as optimize personalization campaigns in addition to automating decision making for customers. Dynamic Yield Chief Executive Liad Agmon said in a blog post, “Our acquisition by McDonald’s, one of the most iconic and beloved brands of our time, is truly an endorsement of that vision as they have chosen Dynamic Yield to help power personalization across their 37,000 restaurants in 120+ markets around the world.”
From McDonald’s to Taco Bell, QSRs are using digital innovations in their businesses for a variety of reasons. However, there is no one-size-fits-all approach in the space for food services and accommodations, and there is room for innovative companies to meet merchant demands in the age of restaurant innovation.