Hospitality under strain: why cost-cutting alone won’t fuel sustainable growth

It’s been a prolonged period of pressure for hospitality businesses. Rising labour costs, energy bills, tax changes and persistent supply issues have pushed many operators into survival mode for far longer than anticipated.

At this stage, the advice to reduce costs will feel all too familiar. Reassess staffing, cut overheads, tighten budgets – it’s a route most business owners have already taken, often more than once.

James Vincent, performance director at ActionCOACH UK – the country’s largest business coaching firm – and host of The ActionCOACH Podcast, works with businesses across multiple sectors facing these exact challenges. While financial discipline still matters, most operators don’t need reminding to cut costs – they’re already doing it.

Here, James shares his advice on what should come next…

The reality of continuous cost-cutting

Reducing costs has its role. In the short term, it safeguards cash flow and helps businesses remain stable during difficult periods. But it isn’t a long-term solution.

Eventually, further cuts stop improving efficiency and begin to weaken the business. Marketing actively drops off, teams become overstretched and the customer experience starts to decline. Growth stalls – not because demand has disappeared but because the business is no longer positioned to capture it. For many in hospitality, this tipping point has already been reached.

Refocusing on value creation

The next step is shifting the attention from saving money to creating value. This begins with understanding what truly drives the business. Which products deliver the strongest margins? What actually brings customers through the door? Why do they return?

Without clarity, it’s easy to continue cutting in the wrong areas. This is why having a firm grip on your numbers is critical. With clear financial insight, decisions become more deliberate and strategic, rather than reactive.

Where hospitality businesses should focus now

With costs control largely in place, the opportunity lies in strengthening the drivers of growth – particularly those unique to hospitality. Three areas stand out: community, customer experience and perceived value.

Creating community, not just transactions

Customers’ expectations are shifting. It’s no longer just about the purchase – it’s about how a place makes people feel.

In a world that’s increasingly digital, genuine human connection has a much greater value. Hospitality businesses should aim to create a sense of belonging, where customers feel recognised and part of something – encouraging repeat visits naturally.

And repeat customers are where long-term value is built. As discussed in The ActionCOACH Podcast with Jeffrey Gitomer, success lies in giving people a. reason to come back, not just attracting them once.

Enhancing the customer experience

Good service is expected – it’s the baseline. What makes a difference are the moments which go beyond it.

This might be something small: remembering a guest’s name, adding a personal touch or offering something unexpected. These details are often overlooked when budgets are tight, yet they’re the moments customers remember most.

They also turn customers into advocates. As guest Geoff Ramm shared on The ActionCOACH Podcast, treating every customer like a VIP isn’t extravagance – it’s consistency in making people feel valued.

Competing on value, not just price

With margins already under pressure, competing purely on price is difficult to sustain. A stronger approach is to focus on perceived value – what customers feel they’re getting in return for what they spend.

This is where ‘affordable luxury’ becomes powerful: delivering a premium-feeling experience without premium pricing.

Rory Sutherland explored this idea on The ActionCOACH Podcast too, highlighting the importance of creating values in ways that aren’t always obvious – ‘It’s not efficiency if it comes at the expense of a customer.’

Often, it’s the presentation, service or small finishing touches which elevate the overall experience. Done well, this allows businesses to protect margins while strengthening their market position.

Playing to hospitality’s strengths

The sector has faced significant challenges but there’s also opportunity ahead. As AI and automation take over more transactional tasks, human interaction is become more valuable – not less.

This plays directly to hospitality’s core strengths: atmosphere, experience and connection. Businesses which lean into these will gain an edge now and be better positioned for where the market is heading.

Moving beyond the obvious

Cost-cutting isn’t wrong – but it’s no longer enough. Most hospitality businesses have already exhausted that path. The real opportunity now lies in focusing on what builds loyalty, differentiates the business and gives customers a reason to return.

Because ultimately, long-term success in hospitality won’t come from who cuts the most – it will come from who creates the strongest reason for customers to come back.

For more practical insights and business strategies – from understanding your numbers to driving customer retention – tune into The ActionCOACH Podcast, and to discover how ActionCOACH works with business owners, please visit www.actioncoach.co.uk

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