4 Min Read | By Marbet Lewis
While the hospitality industry has been slowly adapting to strict social distancing protocols, with many on-premise service establishments having already taken-on a significant cost increase in continuing to operate during the pandemic, reduced capacity requirements will present ongoing financial obstacles for the industry. Fortunately, we have witnessed the resiliency of the industry over the past several weeks, primarily in its ability to adapt and innovate at a remarkable rate. Because of that resiliency, the hospitality industry can restart its 2020 in the new normal, with long-term integration of some of its COVID-19 pandemic services. Take-out and delivery sales were slow to get started early on in the initial pandemic shutdowns. More recent data and reports show an increased consumer interest in take-out and delivery options as people settle at home and become more comfortable in their stay-at-home social lives.
The peaked consumer interest in at-home convenience services may come from the increased availability of at-home comfort options and looking-ahead vacation packages popping up on all our digital feeds. Some of the new food and alcohol service options at restaurants include sealed margherita jugs, beer growlers, ready-to-cook meals, grocery and produce packages, and family style options. These innovations in menu offerings seem almost common sense now in a market flooded with third-party delivery services, but it would be a shame to see these unique convenience offerings disappear. In fact, the restaurant industry may be able to lean on its new convenience menus to balance profit loss from ongoing capacity reductions and other losses from lost patron traffic. Hotels may need to integrate similar convenience options, including expanded in-room amenities and entertainment options, for on-premise guests as cautious guests may stay room-bound for longer periods of time instead of lounging at lobby bars or restaurants.
Unfortunately, as social distancing protocols fade, it is likely that flexible emergency orders that have allowed such rapid innovation will also expire. The expiration of emergency orders allowing restaurants to offer to-go alcoholic beverages, for example, will mean those businesses may need to balance additional profit loss with greater access to credit. Off-premise liquor stores have also benefited from emergency orders allowing more expanded delivery and curb side pick-up options for package alcohol orders that will expire. Other emergency orders have relaxed restrictions on purchases of alcohol inventory on credit or consignment, which may prove crucial to smaller restaurants. These minor allowances, while initially intended as temporary measures, may need to become permanent to balance profit loss and the ongoing reduction in on-site patron traffic that the industry may continue to struggle with for months.
The financial loss to the hospitality industry is not isolated within the on-premise group. Reduction in traffic to on-premise venues also trickles down to wholesalers and suppliers through reduced purchasing and requested inventory buy-backs that are now permissible in some states. The supplier and wholesale tiers have been able to off-set losses from the on-premise industry by the surge in packaged alcohol sales, as the public built up home stockpiles and any inventory buy-backs were rerouted for off-premise sales. As consumers turn their attention away from stockpiling luxury goods, like alcohol, off-premise retailers, suppliers, and wholesalers will also need to benefit from flexibility in current regulations to offer each other additional brand support and better negotiated purchasing terms.
While the road back to a thriving hospitality industry may take much longer than it did to cripple it, new reopening guidance is being offered daily through the FDA websites, CDC, and various other non-profit industry organizations. The financial obstacles, however, will require more industry wide effort to push for permanent flexibility in regulatory laws that will interfere with business efforts to maximize profit and integrate new service standards and ongoing social distancing guidelines as they gradually fade from the norm of daily life.
About Spiritus Law:
Spiritus Law is an entrepreneurial law firm focused on business regulatory licensing, trade practice compliance and business conflict resolution for highly regulated industries dealing in alcohol production and distribution, hospitality services, commercial development and international business transactions. The Firm is founded on traditional principles of client counseling and teamwork with a cutting-edge twist on regulatory innovation and modern problem-solving. We focus on the business needs of individual clients and leading industry members so we can advance business objectives and influence regulatory changes that guide our clients’ business operations. Spiritus Law combines a unique blend of professionals, including attorneys, government consultants, licensing assistants and paralegals to assist its diverse clients. We leverage our unparalleled experience working with government agencies and judicial courts on the federal, state and local level to develop compliance business operation strategies and resolve business conflicts and disputes. Our modern approach to transparent client representation and employee engagement defines our collaborative spirit and progressive energy.
Primary service areas include Alcohol Licensing & Regulatory Compliance, Alcohol Production & Distribution Transactions, and Hospitality Regulatory Compliance & Permitting. The Alcohol Industry Group focuses on providing complete food and alcohol licensing and regulatory services in the development of licensing structures and business operational guidelines for the manufacturing, importation, purchase and retail sale and service of alcoholic beverages. Our firm services an array of industries, including alcohol producers, sports teams, hotels, theme parks, movie theaters, grocery stores, liquor stores, bars, commercial developers and more.