Hospitality facing ‘chronic’ inflationary pressure as growth stalls

24-May-2023 - Last updated on 24-May-2023 at 09:42 GMT

Related tags Inflation Cga Finance ukhospitality

Hospitality turnover in the last year was down 14.7% compared to pre-pandemic levels when accounting for inflation, according to new figures provided by UKHospitality.

The UKHospitality Quarterly Tracker, in association with CGA, shows that the revenue generated in the last 12 months is 4.1% above pre-pandemic levels, but remains ‘significantly below’ the like-for-like sales required to keep up with inflation.

Turnover across the sector has also contracted by 0.3% in the first quarter of this year, compared to the same period in 2022.

“Unfortunately, these figures no longer come as a surprise and simply reinforce the chronic nature of the pressure hospitality is under due to inflation,” says Kate Nicholls, chief executive of UKHospitality.

“Despite consumer demand remaining strong and revenue being up on 2019, businesses are simply nowhere near able to keep up with the cost pressures they’re facing across energy, food and drink.

“Even more concerning is that our fears that this endless pressure would cause the sector to contract are starting to be realised, with turnover contracting in the first quarter of this year.”

Nicholls notes that with regards to inflation, energy remains the single biggest cost to businesses at the moment.

“We want to stem that bleeding, so support from Government is essential,” she continues.

“Direction to energy suppliers from Ofgem and the Government to renegotiate the highest contracts is an essential starting point.”

Real terms growth ‘remains elusive’

Alongside the UKHospitality Quarterly Tracker, new figures from the monthly Coffer CGA Business Tracker shows that Britain’s leading managed restaurant, pub and bar groups achieved like-for-like and year-on-year sales growth of 6.9% in April this year.

It is a seventh positive month in a row for the Tracker, which is produced by CGA by NIQ in partnership with The Coffer Group and RSM UK, and significantly higher than the figure of 1.4% in March.

However, growth remains well below the current rate of inflation, and rising costs continue to impact both consumers’ spending and businesses’ margins.

April trading was boosted by public holidays, including Easter and the start of the early May bank holiday weekend.

Good weather helped to draw consumers out to pubs, where like-for-like sales were 8.1% ahead of April 2022. Growth in the restaurant sector was fractionally behind at 7.6%, but bars had another difficult month, with sales down 9.1%.

In London, April sales rose 10.4% year-on-year — just ahead of inflation; while growth beyond the M25 stood at 5.8%.

“April’s trading figures show the impressive resilience and appeal of managed restaurant, pub and bar groups in a very challenging market,” says Karl Chessell, director - hospitality operators and food, EMEA at CGA by NIQ.

“It’s particularly pleasing to see the sustained recovery in London, where Covid restrictions took a heavy toll on hospitality.

“Consumers clearly remain eager to eat and drink out, and we can be optimistic that their spending will increase when household bills start to ease — but with inflation so high, real-terms growth remains elusive.”