If there is one thing our country is known for, it is its flavor, gastronomical culture, quality and diversity of its food products. Tourism and exports have promoted our Mediterranean diet, positioning Spain as a global gastronomical reference. TripAdvisor users feel that Spanish cuisine is among the best in the world and it is what is behind 20% of all tourist visits. That is why Spain has positioned itself as the country with the most bars and restaurants in the world: one for every 175 residents for a total of 277,539 establishments prior to the emergence of COVID-19, according to the National Institute of Statistics. The hospitality sector employs 1.7 million people and represents 4.7% of the gross domestic product. Revenue in the hospitality sector in 2019 reached €37.4 billion: a 1.7% increase over the previous year, with €27.3 billion from independent establishments (1.2% less) and €10.1 billion from organized chains (8.4% more).
Following several years overcoming the financial crisis that began in 2008, sector growth was supported by the recovery of the job market and the increased tendency to consume due to an increase in disposable income. This consumption is closely linked to labor activity, as reflected by the fact that three-fourths of hospitality consumption occurs on working days.
The arrival of the current pandemic has suddenly interrupted all expectations and tendencies. The group affected most by the confinement in March were bars and restaurants. On March 13, following the application of the state of alarm, the vast majority of the establishments shut their doors, and as the events unfolded, hospitality workers have been increasingly aware that many of them would disappear. The Spanish hospitality sector will close out 2020 with a drop in revenue of around 50% due to COVID-19, which represents a decrease of over €17 billion in turnover. Different forecasts indicate that some 90,000 bars and restaurants could close. Based on these calculations, this will represent the destruction of approximately 400,000 jobs. Restoration Brands Chairman, Carlos Pérez Tenorio, covering 40 well-known chains such as McDonald’s, Burger King, Telepizza and 100 Montaditos, is calling for urgent measures. He says that “we expect to cross a major desert, so we are sending out an SOS to the Public Authorities because we need help and resources.” He also pointed out that he expects a difficult 2021, which will see an “accordion effect” that will make it possible to return to pre-crisis levels beginning in 2022.
Restaurants with Michelin stars will fall, as will others located in the coolest parts of the cities, run by renowned chefs, regular weekend hangouts and neighborhood establishments where we have coffee each morning. Establishments will have to learn to survive bringing in 60% less than they did in previous years. This new situation makes it necessary to reconsider the structural change of the business before reopening and the need to conduct an in-depth study in order to guarantee survival. According to Ferran Adrià, the crisis will likely be long, and we are going to have to crunch numbers to survive.
Most businessowners in the hospitality sector are looking at the primary short-term challenge being home food delivery and local pickup for consumption at home. Home food delivery has doubled, reaching an 8% share. The increase is noteworthy, but it is even more significant in large urban centers. As a result, recovering traffic for customers who go physically to the establishments is essential because it represents 92% of their activity.
The new health situation has impacted consumers and is causing significant changes to habits and behaviors of consumers. Clients are now more digital, home-based, selective and restrictive in their spending; they feel more vulnerable and are more concerned about their health. In this sense, business models for hospitality businesses will need to adapt and respond to changes with the support of technology.
As we return to normality, we see bars and restaurants that are completely reinvented in search of adapting to the new consumption habits. Delivery is here to stay. Now it is not only fast food or restaurants that simply provide home delivery of their dishes. There are new home food delivery concepts that were created to adapt to the current situation. From selecting famous dishes and recipes designed especially for home delivery, to vacuum-packed preparation, ready to heat up with minimal cooking. The hospitality sector will learn to introduce itself in customers’ homes.
Pablo Machado is professor of Business Economics in the Escuela de Economía y Empresa