Five restaurant industry trends to watch in the Middle East

The Middle East’s restaurant industry continues to evolve, in line with global trends, changing demands for consumers, and regional specifics. Alpay Akdemir and Marissa Nolan from Mastercard share five trends that are expected to shape the industry’s developments in 2024.

Consumers will continue to prioritize their resources

Macroeconomic forces have impacted consumer spending over the last three years. Where higher interest rates, rising prices and growing energy costs reduced consumers’ ability to spend and lowered consumer confidence, a thriving jobs market, wage growth and excess savings effectively balanced those impacts. Through it all, a resilient and empowered consumer emerged.

Faced with a tightening wallet, consumers prioritized experiences over things, providing a boost to restaurant sales. While pent-up demand for experiences may start to rebalance to pre-pandemic levels in 2024, according to Mastercard research, which measures in-store and online retail sales across both cash and card and all tender types, the restaurant industry will likely continue its growth, albeit at a more tempered pace.

Consumers have started seeking different and unique dining experiences, whether that means a fine dining night out where the menu highlights seasonal ingredients, or a fast-food livestream where thousands of viewers eat along at home. However, pressures on their food-away-from-home budget pushes diners to make careful choices on how they meet their own personal needs.

That means value is becoming increasingly important. In 2023, as consumers felt the inflationary pressure, many traded down to still enjoy the eating-out experience, opting for “a good deal.” That behavior persists today as the once-a-month expensive steak meal is replaced by frequent trips to casual dining and limited-service restaurants offering multi-item bundles and deals. With the cost of groceries also moderately rising, consumers want food alternatives, and restaurants see value as the key to attracting customers.

Brands will need to carefully balance value offers to ensure that they drive profitable traffic. By measuring their impact on margin, they can see whether consumers are also buying full priced items and whether value items drive return visits. While some value offers may offer smaller profit, success in the form of increased sales and traffic indicate that value is what consumers want today.

Rewarding loyalty and providing personalization

Consumers and brands will align on the importance of loyalty
Global membership in digital loyalty programs increased to 24 billion participants in 2022 and is estimated to reach 32 billion by 2026. Consumers are willing to sign up, but with the sheer amount of programs in-market, the traditional earn-and-burn approach is no longer enough. As a result, many restaurants are moving away in favor of more customized programs with dynamic offers, benefits and rewards.

2024 will be the year of the empowered consumer, so more restaurants are building authentic relationships to foster loyalty. Recognizing that consumers want personalization, restaurants should focus on providing a catered experience that meets those demands.

Over 70% of decision-makers feel that their brand’s loyalty program lacks a modern digital interface, is difficult to use, is old and outdated and lacks the ability to deliver one-to-one personalized offers or experiences, according to a Forrester Consulting study conducted on behalf of Mastercard.

Driven by profitability and customer value, some restaurants are looking to redesign their programs. Many are moving away from bulk offers and providing more tiered, gamified and tailored loyalty experiences. Consequently, there are many perks to each:

• The tiered experience, through earned points or subscription services, allows the most loyal members to be specifically rewarded.
• The gamified experience, like weekly check-ins, fosters engagement through various channels, maximizing the limited time brands have with valuable consumer attention.
• The tailored experience has the capability to take on any form, like with personalized push notifications, and can increase efficiency and frequency, building authentic loyalty.

No matter the type of offering, restaurants ask themselves: How can we best reward the most loyal diners while still providing good value for those who are not? It all comes down to knowing their customers, respecting and protecting privacy and finding the right balance of personalization and loyalty.

Consumers are more likely to shop with a brand that delivers engaging experiences
Smart personalization has ushered in an era of consumer-centricity that will continue to change the way restaurants engage for the better. When a diner uses their app, visits the site or orders at a digital kiosk, contextual factors and consumer-permissioned data can be used to tailor the diner’s experience and suggest items based on past purchases, current trends, time of day or even weather.

For example, a global quick service restaurant (QSR) added personalized banners to their digital kiosks for customers that log into their loyalty account. When ordering, logged-in customers are subsequently greeted by their name and point count, along with items available within their specific point range. By facilitating easy access to this information when it matters most, the company promotes the loyalty program, reminds customers of the rewards associated with repeat business, introduces product discovery and increases the chance that a customer would generate additional value with a larger cart size.

This level of personalization is an easy way to drive engagement while also incentivizing loyalty signups to move customers from being unknown to being known.

For instance, Kudu recently launched their new loyalty program that aims to build an authentic relationship – especially the younger, more modern generations. The plan is to not only offer more perks with combos that they love, but program awareness will be spread across all points of contact, via the likes of social media videos and jingles that will contain hidden codes for even more bonuses.

Since launch, they’ve already gained over 350,000 members, of which over 90,000 are monthly active users, and issued over SAR 1.5 million, all numbers that are expected to continue growing.

Loyalty and personalization are inherently linked. Personalization can help restaurants master context, perception and expectation to deliver the smart recommendations and authentic connections consumers seek. And when the focus is on connection, the metric of success is neither revenue nor return on investment – it’s loyalty.

Restaurants will look to increase reach across digital channels

Restaurants have been increasing engagement through mobile apps, virtual brands, social media and third-party aggregators – this trend looks to continue in 2024, but not all channels will receive the same priority. Regardless of method, the draw of digital remains the same for all restaurants: reach the maximum amount of people they can.

As reach increases, restaurant managers and owners are met with higher demand on expectations. Limiting friction across channels is a major part of good engagement. Restaurants who traditionally did not prioritize the digital experience find themselves now needing to be able to have some connectivity across their touchpoints.

Consumer behavior dictates that online ordering is here to stay. With the share of digital ordering growing – DoorDash recently estimated that 80% of diners are ordering online the same or more than the previous year – restaurants are finding that they must prioritize consumer-friendliness, ease and convenience.

Most restaurants see the need to invest in their mobile apps. According to a 2023 Mastercard-commissioned Forrester study, 90% of respondents were somewhat or very satisfied with mobile ordering and payment technology on personal devices, but only an average of 49% of restaurants deployed it.

Those that do are having success. Consumers are using restaurant apps to look up menus, order food, play games and collect rewards. For example, Starbucks has enhanced its app, where users experience friction-free ordering and payment and are presented with engaging, personalized challenges. Prizes include free drinks, exclusive content and unique opportunities like a trip to a coffee farm in Costa Rica.

Accelerating reach involves optimizing digital presence, so virtual restaurants, which were huge during the pandemic, will likely decline. As some restaurants start to find that maintenance isn’t worth it thanks to the requirements needed for success – like differentiated menus and separate branding – companies have started to de-emphasize their virtual brands (or launch them as physical brands) and re-focus on their core presence.

Despite those few cases, digital channels have shown that they can increase engagement with consumers. Proper utilization leads to a more profitable and efficient model for the restaurant and convenience and relevant offers for consumers.

Technology will optimize operations and enhance the employee experience

Technology has long provided many employee experience benefits. Newer technology like automation is only furthering that trend by taking over monotonous or less-desirable jobs. Many restaurants are willing to implement technology to reduce back-of-house costs and improve the employee experience in 2024.

Undoubtedly, operational efficiencies benefit both employees and consumers. Businesses can have smoother processes that lead to better results, while consumers receive a more frictionless interaction. To make this a reality, operations must not only be effective, but they must also be accurate and provide a positive customer experience.

While the use of new technology itself isn’t novel, it has not yet reached a point of peak efficiency and implementation in an industry that has been traditionally slow to adopt new tools. State-of-the-art tech exists at some restaurants, but it is not yet commonplace with brands and franchisees wary of the upfront investment.

New technology could come in a variety of forms, including automation technology, order and pay technology, and artificial intelligence.

As a whole, the pace of tech development is rapid and doesn’t look to be slowing down any time soon. Many of these new technologies also introduce unique privacy or regulatory challenges that are still taking shape. Nevertheless, whether through automation, ordering and payment, AI or the next innovation, increased implementation is likely.

Investments in sustainability will speak to consumers

Commitments to ESG (environmental, social and governance) are not a fad. Brands have been making commitments over the past five years, and 2024 will be no different for this sector. Restaurants will prioritize existing initiatives and make new commitments.

The restaurant industry is uniquely set up to tackle ESG initiatives in many ways. Trending solutions span a wide range, including:

• Reducing food waste
• Eliminating single-use plastic and other packaging
• Enhancing the menu to include healthier, less carbon-heavy options
• Offering condensed employee work weeks
• Providing education reimbursement

One popular way to implement ESG is with gamification. Many apps already use gamification to drive digital engagement, and brands can use it to raise money and awareness for various causes. By having promotions tied to generous giving, customers can build charitable behaviors while feeling good about themselves and earning loyalty points, reinforcing continued engagement.

In examples like this, companies are using ESG to publicly orient themselves to social causes as a growing number of consumers become more cognizant of a brand’s mission. Younger generations especially have been vocal about company ESG practices as they speak up about how companies treat their employees and contribute to causes and politics.

These generations have shown a propensity to lean towards more environmentally conscious products:

• According to a study, 77% of generations younger than Gen X would like restaurants to be clearer about the environmental impact of different foods.
• Furthermore, a fifth of Gen Z and millennials selected “environmental impact” as an important factor when ordering food – compared to 7% of Gen X and baby boomers.
• In another sustainability study, 65% of consumers said they wanted more sustainable food options and were willing to pay more for them.

Many companies are sharing their environmental initiatives. Some are making more powerful commitments, like Starbuck’s plan to drastically reduce paper cup usage or Wendy’s goal to reduce greenhouse gas emissions by 2030. In the end, brands are taking the steps to change consumer behavior – and the world – for the better.

Conclusion

As we continue through 2024, restaurants will test new methods and enhance their businesses through personalization, digitization and better customer experiences.

Loyalty, personalization and ESG will continue to play essential roles in allowing restaurants to attract, connect and nurture diners, and technology will also help restaurants to innovate and continue to enhance customer experiences. Looking forward, the Middle Eastern restaurant industry is poised for continued growth and will rise to meet consumer expectations.

About the authors: Alpay Akdemir is Principal in the Data & Services practice of Mastercard, where Marissa Nolan is Restaurant & Convenience Strategy Lead.