Hospitality operators ‘labouring under extreme pressure’ as costs soar

Published yesterday (26 July), the report, which surveyed 54 companies covering 4,791 licenced managed outlets, shows that operating costs have increased to an average of 55.2% of turnover before rent – the highest since 2007. 

Costs vary between segments, led by 59.8% of turnover for accommodation-led outlets.

The report says the increase has been driven by the soaring utility, premise and operational costs facing operators in the industry, as operators attempt to rebuild following the pandemic.

“This year’s survey highlights the extreme pressure that hospitality operators are labouring under, with costs soaring to a new record high,” says Kate Nicholls, chief executive of UKHospitality.

“We have been working with Government to make clear the harm this is causing to our ambitions for growth, investing in high streets and creating skilled roles.

“It’s imperative that Government takes action to help us tackle the inflationary headwinds we face, unlock growth by removing regulatory barriers and creating a tax and investment framework for the future.”

The sector has faced relentless economic and operational challenges forcing operators to adapt and look to alternative revenue streams to drive business.

Whilst the report notes a contraction in like-for-like sales of 2.3% across the entire survey in the six months to December 2021, compared to the same period in 2019, certain segments of the market saw top line growth, with accommodation-led businesses leading the way at 9.8% like-for-like growth in revenue, as these businesses took advantage of the staycation boom.

“Despite the significant challenges that lie ahead in 2022, new opportunities and ways of operating have emerged over the last few years, and with consumer demand returning, there is still reason to remain cautiously optimistic,” says Stephen Owens, managing director – pubs and restaurants at Christie & Co.

“With full year trading returning for next year’s survey, we look forward to updating the sector with an increasingly accurate benchmark against which operators can compare performance.”