Are we moving forward? Hospitality business confidence falls but it's not all doom and gloom

By Luke Nicholls

- Last updated on GMT

Related tags: Cent, Olympic games, Uk, London

Thirty per cent of hospitality and leisure business owners are pessimistic about the future, compared to 16 per cent in the previous survey
Thirty per cent of hospitality and leisure business owners are pessimistic about the future, compared to 16 per cent in the previous survey
Almost half of hospitality and leisure companies in the UK will not reach profit targets this quarter with an increasing number of business owners feeling pessimistic in outlook due to the lack of any bounce in spending during the Queen’s Jubilee and the Olympics.

That’s according to research by accountancy firm RSM Tenon, entitled ‘We’re pedaling hard – are we moving forward?’ It discovered that 44 per cent of over 100 businesses surveyed believe they will not reach revenue targets, while 30 per cent are ‘pessimistic’ about the future, compared to 16 per cent in the previous survey.

Despite the Olympics not yet bringing the profits many had hoped, confidence among hospitality and leisure businesses was slightly higher in London, with 55 per cent of businesses predicting they would reach their revenue goals in the next quarter, and 58 per cent saying they would reach their profit targets.

Commenting on the survey’s results, Ufi Ibrahim, chief executive of the British Hospitality Association, said: “While the Jubliee and the Games did not deliver much profit to the H&L sector, we believe that Britain will reap the real benefit of the vast media coverage of the Games in the next five years, and this would be the real legacy of the Olympics for UK hospitality.”

Jonathan Perrin, head of hospitality and leisure at RSM Tenon, added: “Uncertainty in the Eurozone and regarding the coalition government’s policies have affected the outlook for business along with the conflicting impact of the Jubilee and the Olympics.

Not all doom and gloom

“In turn, falling investment and rising commodity costs have also put pressure on businesses. However it is not all doom and gloom, with one in five businesses saying they remained ‘very confident’ about hitting revenue targets this quarter.

“And the real effect of the Olympics is likely to benefit our economy in the long term, with Government initiatives, for example, to increase tourism from China.”

General confidence in the market was mixed, with 43 per cent saying conditions were better, but 41 per cent saying they were worse, compared to 29 per cent previously. The biggest worries in the H&L sector were concerns about weak demand and rising economic uncertainty, with 82 per cent of businesses seeing this as a challenge compared to 52 per cent previously.

The research went on to reveal that many hospitality business owners are turning to outsourcing, with exactly half of the UK’s hospitality and leisure sector outsourcing IT; 51 per cent outsourcing payroll management and processing, and 50 per cent outsourcing tax compliance including VAT.

Forty-two per cent of those companies said their main reason for outsourcing was that it enabled them to focus on the core business; 39 per cent said it was a cost reduction, 36 per cent said it was more efficient to outsource, and 35 per cent said it provided access to specialist skills.

Harry Capewell, head of outsourcing for London at RSM Tenon, said: “It’s revealing to see that, even in times of recession, cost reduction is not the main reason why businesses are outsourcing, it’s the ability to allow companies to concentrate on their core business.

“Equally, it’s interesting that in this survey, quality of the provider ranks ahead of price in the selection process. Good outsourcers will guarantee their staff’s technical ability and require skills to be kept up to date.”

Empty 2013?

Last month BigHospitality reported that a number of restaurant, bar and hotel operators have been warning of difficult trading conditions ahead as the focus moves away from Britain and the packed 2012 events calendar. 

The growing fear that difficult economic conditions could contribute to the impact of the looming, so-called 'Empty 2013'​came as the BDO Optomism Index reported another steep drop in positivity.

Meanwhile, at a recent event debating the impact of the London 2012 Olympics on the hotel industry,  Ruth Mortimer, editor of Marketing Week, said there was a growing view among marketing and business leaders that next year would be very different to operate in without the big tourist and sporting events of 2012.

On the flip side, while the global economy and the Olympic Games legacy remain concerns, a majority of UK hotel general managers expect revenue per available room (RevPAR) to stabilise or increase next year and into 2014. In the latest Hotel Confidence Monitor​conducted by HotStats, nearly 300 UK chain hotel general managers were asked how confident they were about the future performance of their hotels. Seventy-five per cent of London GMs think RevPAR will increase or stay the same in 2013 while in the provinces the confidence is only marginally less (73.9 per cent).

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