Hospitality & leisure

What’s impacting Hospitality & Leisure?

Cocktail graphic

2020 was a particularly challenging year, forcing the Hospitality and Leisure sector into an unprecedented situation. 2021 has not particularly started off much better, however, we feel that those operators, within the sector, who survived 2020, and are able to mothball their business for much of Q1, will start to benefit once the vaccines begins to control the pandemic.

Hospitality and leisure, has always been a robust industry, and whilst the next year will not be easy, our sector team feel there is particular opportunity in 2021 for those businesses that operate locally, benefiting from a greater number of people working from home, and also for those that have adapted their businesses, through innovation, to prosper.

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.

Chris Maloney - Menzies Accountant

A guide for restaurant entrepreneurs

Chris Maloney – 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

Marketplace competition

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’.

Technological advances

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.

Resources

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.

People issues

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.

Competitive pricing

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.


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Chris Maloney - FCCA ACA CTA

Partner

Chris Maloney is a Menzies Partner specialising in strategic business advisory and corporate tax for SMEs and Head of the Hospitality & Leisure team.