Why Restaurant Occupancy Is So Important
by Alec McGuffey May 27, 2022
With the days of vaccination and mask mandates largely in the past, the restaurant industry is officially in full recovery mode. But what does full recovery really mean for restaurant operators?
The line between turning a profit and closing shop forever was already thin prior to 2020, and it’s only gotten thinner. Popular cost-cutting tactics like scaling back menus and raising prices typically don’t make enough of a dent to fully offset losses, all while risking a negative experience that could alienate even loyal customers.
Rising costs and labor shortages continue to complicate the effort to turn a consistent profit—and even restaurants that return to pre-pandemic numbers are often limited to profit margins as low as 3-5%.
Even operators who are able to stabilize costs back to pre-pandemic levels, the best case scenario is often a profit margin far lower than averages seen in other industries.
The hidden cost of empty tables
Most operators ignore their biggest source of losses every night: the tables that sit empty.
That’s because the traditional economic model depends on busy days with high occupancy to make up for slower ones with low occupancy. But when the busy days aren’t able to make up the difference, profits go into the red, and fast.
The rising fixed costs that restaurants pay just to open their doors each day are putting an increasingly tighter squeeze on profit margins that were slim to begin with, and that means every empty seat in a restaurant is more expensive than ever before.
And increasing your occupancy can make a bigger difference than you might expect.
Driving occupancy during slower periods and attracting a more consistent stream of customers can lead to profit margins of 30% or higher. Compare it to the status quo:
Of course, it’s no industry secret that more butts in seats means more money—but actually attracting those guests at the right times is another matter entirely.
Why the industry accepts empty tables
When it comes to filling a restaurant, operators have historically been limited to strategies that cast a wide net, like social media promotion, marketing emails, and broad specials like happy hours.
These traditional strategies are limited in scope, though, and by targeting both new and existing customers, they fail to meaningfully address the empty tables dragging down margins on a daily basis.
When it comes to filling a restaurant, operators have historically been limited to strategies that cast a wide net, like social media promotion, marketing emails, and broad specials like happy hours.
However, these strategies are limited in scope and fail to meaningfully address the empty tables dragging down margins on a daily basis.
Not only that, but popular reservation platforms don’t report on occupancy rate, or the missed opportunities of empty tables—and this only perpetuates the idea that occupancy is largely out of the operator’s hands.
“Operators know that if a table sits empty they are losing money,” says Utku Martin, General Manager of A La Turka in NYC. “But most operators struggle to visualize their empty seats and actually do something about filling them at specific times, since their current tools don’t give them an easy way to do this.”
Rethinking your ability to control your own restaurant’s occupancy means that the profit losses of slow days are no longer a given—and that’s where occupancy management comes in.
Using Occupancy Management at Your Restaurant
Filling an empty seat can have a more significant, measurable impact on your profit margins than tactics like cutting costs or unpredictable, broad-strokes marketing campaigns.
Other industries have prioritized occupancy control for decades—and in fact, have made it the principle by which they thrive.
Airlines and hotels maximize occupancy by offering variable pricing based on demand, staving off the losses of fixed expenses by keeping their seats and their rooms filled as close to capacity as possible at all times.
Restaurants now have the opportunity to apply similar tactics to their own industry, and to use similar tools to optimize and automate the process.
Want to see how other restaurants are doing it? Schedule a chat with the Seated team below.
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