Hospitality under pressure: why cutting costs won’t drive long-term growth

By now, the advice to cut costs will feel very familiar. Review staffing, reduce overheads, trim budgets – it’s a well-worn path, and one most business owners have already been down multiple times.

James Vincent, performance director at the UK’s largest business coaching firm, ActionCOACH UK, and host of The ActionCOACH Podcast, works with business owners across a wide range of sectors navigating these challenges. And while cost discipline remains important, the reality is that most operators don’t need to be told to cut costs again – they’re already doing it.

Here, James shares advice on what comes next…

The limits of cutting back

Cost-cutting has its place. In the short term, it protects cash flow and helps businesses stay stable during difficult periods. But it has limits.

There comes a point where further cuts don’t create efficiency and they start to erode your capability. Marketing gets quieter, teams become stretched and the customer experience begins to slip. Growth slows, not because demand isn’t there but because the business is no longer set up to capture it. And for many hospitality operators, this line has been reached.

Shifting the focus from saving money to creating value

This starts with understanding what’s actually driving the business. Which products generate the strongest margins? What activity brings customers through the door? Why do people return?

Without knowing the whole picture, it’s easy to keep cutting in the wrong places. It highlights the absolute importance of knowing your numbers. Once you have financial clarity, decisions become less reactive and far more strategic.

Where hospitality businesses should turn next

With cost control already in place, the opportunity now is to focus on the areas which drive growth – particularly those in which hospitality is uniquely positioned to deliver. Three stand out: community, experience and perceived value.

1. Building community, not just customers

There’s a clear shift happening in what customers want. It’s no longer just about the transaction – it’s about how a place makes them feel.

In an increasingly digital world, real human connection carries more weight. Hospitality businesses need to create a sense of belonging – where customers feel recognised, comfortable and part of something bigger – naturally encouraging repeat visits.

And repeat business is where long-term value sits. As explored in an episode of The ActionCOACH Podcast with Jeffrey Gitomer, the focus should be on giving customers a reason to keep coming back, not just attracting them once.

2. Elevating the customer experience

Good service is expected. What stands out are the moments that go beyond it. It might be something small: remembering a name, adding a personal touch or creating an experience with a difference. These details are easy to overlook when costs are under pressure – but they’re often what customers remember the most.

They’re also what turn customers into advocates. Guest Geoff Ramm spoke to me in The ActionCOACH Podcast where he explained that treating every customer like a star isn’t about extravagance – it’s about consistency in how people are made to feel.

3. Competing on value, not price

With margins already tight, competing on pricing alone is a difficult game to sustain. A stronger approach is to focus on perceived value.

This is what the customer feels they’re getting for what they’re spending. This is where the idea of ‘affordable luxury’ comes in: delivering a premium-feeling experience without the premium pricing.

Rory Sutherland touched on this in another episode of The ActionCOACH Podcast too. He talks about differentiating your business through non-obvious value and says: “It’s not an efficiency if it comes at the expense of a customer.”

It might be in the presentation, the service or small touches which elevate the overall experience. Done well, it allows businesses to protect margins while strengthening their position.

Playing to hospitality’s strengths

Hospitality has been through a rough period but there is also plenty to shout about. There’s a big shift happening. As AI and automation continue to take over transactional tasks, human interaction is becoming more valuable, not less.

This plays directly to hospitality’s strengths – experience, atmosphere and connection. Businesses that lean into this will gain a competitive advantage immediately; they’ll be much better positioned for where the market is heading.

Moving beyond the obvious

Cost-cutting isn’t wrong but it’s no longer enough. Most businesses, especially in the hospitality industry have already taken that route. The opportunity now is to move beyond it – to focus on what drives loyalty, builds differentiation and creates reasons for customers to return.

Because in the end, long-term success in hospitality won’t come from who cuts the most. It will come from who gives customers the strongest reason to keep coming back.

For more insights and practical business tips, The ActionCOACH Podcast explores ideas like knowing your numbers, innovation and customer retention in much more detail, tune into The ActionCOACH Podcast