Is UK Hospitality getting the support it deserves?

Is this year teetering on the edge of becoming yet another annus horribilis for the hospitality sector?

There is a clear and present argument for proactive government support for the UK hospitality sector. This industry is worth around £91 billion, and employs somewhere in the region of 330,000 people (source). This is not an insignificant contribution to the UK economy. In the face of ongoing crises and the week after the IMF projected global growth to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023 (source), the UK economy is expected to have the slowest growth and highest inflation in the G7 (source). Given all this, to what extent is the government currently helping or hindering UK Hospitality to get back on its feet and thrive?

These are recent legislation changes that directly impact the sector:

• Quality of Living – designed to improve the quality of living for those working in the Hospitality sector. This includes items like increase in National Minimum Wage and New Tipping Laws
• Health and Safety – comprising any legislation that directly links to health, such as Natasha’s Law and the more recent Calorie labelling
• Sustainability – any new legislation that is focused on getting businesses to net zero, such as the plastic packaging tax
• Covid Protection – any legislation that was in place to support the sector during the pandemic. Specifically, the recent update reverting the Hospitality VAT rate back to 20% and the expiration of the moratorium on landlord action.

But are these legislation changes helping or hindering a turnaround?

So far, few green shoots

Reports that have come through so far this year indicate a drop in the number of licensed premises in the UK for the first quarter of 2022. The total closed sites since the beginning of the first lockdown is 9,200 (Source). This number is not predicted to recover anytime soon. The removal of the VAT Covid protection kicked into action this month (April), which could see a potential swathe of further closures and site rationalisations as pressure intensifies on profit margins.

The decision to proceed with the increase in VAT will risk compounding business pressures as it leads to further price increases being passed onto the consumer - in an environment where inflation and a potential recession is already seeing a squeeze on household income. Whether the government has been rash and acted too soon on this decision remains to be seen.

No Netflix and save

On the customer side, households are certainly feeling the pinch, will we see a tightening of wallets and purse strings in hospitality? Already, pandemic household name, Netflix, is experiencing a dearth in subscriber numbers. Admittedly, the reasons for this are multi-fold, but it is hard to ignore that consumers are starting to make savings and cutting down on luxuries. With a significant rise in the cost of utilities, it becomes difficult to ignore the fact that hospitality spend is considered a luxury, which may lead to a drop in demand. Currently there are no government initiatives, like the eat out to help out scheme, to provide some much needed damage limitation to this hard hit sector in the face of a continued squeeze. On the other hand, following two years of lockdowns is this the year where consumers prioritise spend on going away, eating out, and socialising? Perrhaps the demise of Netflix and Peloton are hospitality's gain?

Staff shortages

Focusing on the other side of the bar, the impact of Brexit, a prolonged furlough and multiple lockdowns have led to a shortage - and struggle - to recruit and retain talent across hospitality. The increase in minimum wage and the staff tipping legislation, whilst great employee initiatives, have not helped employers manage costs in this hard-hit sector either. Hospitality businesses now need to invest more fully in their HR strategy - offering increased salaries, providing learning opportunities and having a greater focus on wellbeing to manage retention. This trend has even hit mainstream. Only this weekend an article inThe Sunday Times covered how hospitality companies in the UK are turning to lucrative salaries and golden handshakes in their efforts to attract essential talent from overseas (source).

And what happens to Net Zero?

Moving forward, one of the main considerations and focus for the sector will continue to be Sustainability. The plastic packaging tax is one small step to a bigger initiative to get to net zero. The UK Hospitality’s collaboration with the Hospitality Carbon Reduction forum has also produced a roadmap focused on Strategy and Data, Buildings, Renewable Energy, Sourcing and Beverage, Transport and Carbon Removals. This is a proactive approach focused on delivering true sustainability, one that hopefully the government will get behind, support and tailor legislation changes accordingly.

Not all hospitality is equal

These are undoubtedly challenging times for UK Hospitality; just a couple of weeks ago Big Hospitality magazine announced that ‘hospitality businesses face existential threat’ (source). However, it need not be all doom and gloom. The hospitality industry is very diverse and not all sectors will be impacted equally. Just last week, according to Lumina Intelligence (source) the pub and bar market is predicted to recover to 99% of its pre-pandemic value this year.

Summary

It is clear UK Hospitality is an important industry – for our economy, our social wellbeing, and for UK tourism. Despite the disappointing lack of will on behalf of the government currently to support this industry, there is always opportunity in adversity for companies willing to flex, adapt and innovate. As Senior Insight Manager at Lumina Intelligence, Katherine Prowse has been quoted: ‘it will be experience-led operators that lead recovery in 2022’ (source). To improve experience, businesses need free up their workforce to focus and deliver on the purpose of their business – serving their customers. This, therefore, provides a great opportunity for digitisation to become a competitive differentiator for the sector, enabling businesses in the hospitality sector to automate time consuming processes, maximise their resilience and stay up to date on the latest legislation.

It is clear that the companies who will thrive and survive will likely be those who are agile and responsive enough to navigate, innovate and flex to customer needs in an ever-changing landscape. At Zupa our vision is to help create sustainable businesses where people spend less time caught up in mundane tasks or trying to stymie challenges with cash flow issues and wastage and are, instead, freed up to do what they love.

Image credit: Alexander Schimmeck from Unsplash

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