What’s impacting Hospitality & Leisure?
Consumer spending in the hospitality and leisure sector has remained strong despite the uncertain economic climate and low wage growth. A recent study by Mintel has forecast that we will be spending £141 billion on enjoying our leisure time by 2022 and tourism spend in the UK is forecast to grow to £257 billion by 2025. Due to this positive outlook, businesses in the sector – pubs, restaurants, hotels, health and wellness, gambling businesses and others are competing.
Hospitality and Leisure sector advice services
We advise hotels, pubs, clubs and leisure operators, as well as a number of sector-dependent clients. We work closely to find solutions to industry issues, utilising our expertise in everything from business strategy and corporate finance, to audit and tax advice.
A guide for restaurant entrepreneurs
Dave Gosling – Hospitality & Leisure sector specialist
Good news is hard to come by in the UK’s restaurant sector at the moment, but here’s some – consumers are spending more on leisure and restaurants than ever before.
This situation begs a number of questions. With consumer spending in these areas on the rise, why are so many restaurant businesses in the UK struggling? And what can they do to avoid this?
More Hospitality & Leisure Brighter Thinking
Key challenges of the Hospitality and Leisure sector
In order to compete, the sector will need to track trends closely, making sure they are giving consumers exactly what they want. Greater competition from new entrants is putting pressure on operating margins. There is a larger focus in the sector on providing customers with an experience rather than a service.
For hotels, the low value of the pound has seen an increase in overseas tourism, while low wage growth in the UK has encouraged people to take ‘staycations’.
Increased use of online booking systems has made eating out/booking a table more convenient. Restaurants and bars can harness this technology to differentiate their customer experience by offering online ordering at the table or introducing more sophisticated software, allowing customers to select their table or even choose wine for their meal. Greater focus on customer database management and social media is also required.
Property cost increases, employment cost increases and increased prices for food and drink are putting pressure on operating margins. Accurate forecasting and keen cash
management are essential to ensure businesses are operating profitably. Introducing efficiencies through control of energy usage and supply chain costs could also improve business performance.
Hotels, restaurants and health and wellness businesses are amongst those businesses worst hit by current skills shortages with concerns over Brexit increasing the labour supply and vacancies are proving hard to fill. Some businesses have been forced to increase wages, which is adding cost and putting further pressure on operating margins. Business owners should review their talent pool / succession line and consider developing their current employees by providing additional training and development.
Funding / Finance
Despite the low cost of borrowing, there’s been a lack of investment in parts of the sector, which may be partly due to a lack of investable assets. However, confidence is returning and deal activity is expected to improve. With cash ready investors ready to take the plunge, food business entrepreneurs should be focused on developing a robust plan and existing businesses on demonstrating their profitability.
Intense contract price competition continues to put pressure on operators, in some cases driving them to undercut competitors just to secure the busiest routes. Operators should avoid agreeing to unsustainably low rates just to remain operational. In this climate of price competition, it is vital that all business owners focus on margins and forecast to make sure they are operating within their means.