Brexit Hospitality Summit: Hospitality's fears and how it can face up to them

The fears: staffing​

The summit, at The Grange Hotel in London yesterday (27 June) saw hundreds of members of the industry attend to find out how they could succeed in a political and economic landscape that is currently both unstable and unpredictable.

The immediate fear is that hospitality will face a deepening skills shortage if EU workers are sent home. 

In the discussion Connecting Capital, Nadeem Boghani, vice chairman of Splendid Hospitality Group spoke of the impact Britain’s potential exit from the EU had on his business. 

The hotel boss, whose company owns and operates 19 hotels in the UK with more in the pipeline, said staff from Europe were scared they would be kicked out of the UK and were desperate for reassurance they still had jobs.

“On Friday morning, all our European staff were waiting outside Hilton Bankside to see the general manager, waiting to know where they stood,” he said.

With this in mind, Fiona Hyslop, Scottish Cabinet Secretary for Culture, Tourism and External Affairs, said now was the time to reassure workers from Europe that they are welcome.  

“We must extend the hand of friendship to to workers from the EU that are vital to our sector,” she said.  

Nick Varney, chairman of the BHA warned that there should not be a ‘restriction on the flow of foreign labour when skills in Britain are in short supply’. 

“It’s very important we have a seat at the table in [post-Brexit] discussions,” he said. 

There were other immediate concerns raised about the implications Brexit and a weakened economy would have on current and future hotel developments.  

Boghani said: “We spoke to contractors who would not be able to honour prices for materials quoted in Sterling and we are concerned about what we do if we can’t get labour in to construct hotels.” 

In fact, the company put a major £30m hotel development project ‘on hold’ after it heard that a ‘major employer’ located opposite was planning to relocate its headquarters outside the UK. 

The fears: the economy​

According to PwC projections, by 2020 the economy will be three to five per cent smaller than expected in terms of GDP following the Leave vote and the economy is expected to grow by an average of one to one and a half per cent over the next three to four years, rather than the two per cent predicted if the UK had remained in the EU.

Dr Andrew Sentance CBE, senior economic adviser at PwC, said: “I think the economy is likely to be weaker than if there had been a Remain vote. Growth will be weaker in the second half of this year and in to 2017."

In his speech 'The economy post-referendum', Sentance spoke of two negatives and one positive for hospitality resulting from Brexit. 

"The negatives are the instability and lack of confidence and the fact that image of the UK currently, particularly from travellers from Europe, is not a welcoming one," he said. 

However, the hospitality industry could be set for a short term boost in visitors, with the falling value of the pound making the UK a cheaper holiday destination for foreign tourists. 

“A weaker pound - though I don’t welcome it as an Economist - could offset some of these negatives," he said.

Tourism VAT: easier to cut or not? ​

The ongoing issue of cutting tourism VAT was a key part of discussions at the summit, but there were conflicting views over whether a Brexit would help or not.

Butlins managing director and chairman of the BHA's Cut Tourism VAT campaign Dermot King said: “We are now presented with one of the best opportunities to convince to Government to support us by cutting VAT.  

“When politicians look outside their Westminster office, they don’t see a need for a reduction…but tourism can be a driver of wealth [outside London].” 

King said the campaign’s new strategy will focus on the how a VAT cut could inject investment in to the UK's struggling seaside communities, with a core aim of ‘protecting the future of the Great British holiday’. A consumer-focused campaign is set to launch on 11 July. 

John Whittingdale, Secretary of State for Culture Media and Sport and a Leave campaigner, said: “[Brexit] does mean that there are some regulations the we never supported that we can now remove. If we wanted to abolish VAT on hotels and tourism we could now do so.”

But the MP added: "I’m not making a promise."

However, Fiona Hyslop, Scottish cabinet minister for Culture, Tourism and External Affairs, speaking after Whittingdale, reminded delegates that the UK Government had power to reduce VAT as a member of the EU: “[The Government] doesn’t have to leave the EU to reduce [VAT]. If they haven’t done it by now why would you be so optimistic that they want to abolish it?" she said.

The future: embrace change​

In the discussion 'Connected Disruption', Rafat Ali, CEO and founder of travel industry intelligence and marketing platform Skift, told delegates that although Brexit marked a change of direction, we are already living in a rapidly changing world. He said companies embracing it were the ones who would succeed. 

"You should get used to change. Change is going to be part of things for the next 10 to 20 years," he said. "It pays to look at business in an alternative way." 

Whittingdale said Britain leaving the EU held 'new opportunities' for hospitality. "The pound has fallen so it makes visiting Britain more attractive than going abroad and makes it a cheaper destination for overseas visitors," he said.

The MP said Brexit also meant opportunities to 'do away' with some regulations set by Brussels that may have stood in the way of growth previously. 

BHA chairman Varney said now was the time to work with Government and get hospitality's views heard.

"Historically, this industry has always been very fragile so the Government found it easy to divide and rule. The BHA is the vehicle to engage with Government," he said. 

“We need to shout louder and get someone in Government to speak for us. We have a lot of shared aims but we don’t have anyone to sit around the table. Nearly all roads lead to the Treasury and the Chancellor and that is a very hard door to get open.”

Former Conservative party leader William Hague, closing the summit, echoed Varney's views and urged the industry to look at the positives. 

He said: “Get ready to argue for a change in regulations you always thought were wrong. If there are taxes that could change…it’s going to be a really important time to [engage with] the Government from September.”