Industry costs rise to 12-year high

By Stefan Chomka contact

- Last updated on GMT

Industry operating costs rise to 12-year high

Related tags: Costs, Restaurant, Inflation

Operating costs faced in the hospitality sector have risen to a 12-year high, according to figures in a new report.

The 2018 UKHospitality Christie & Co Benchmarking Report says that controllable costs rose one percentage point in the year to September 2017, to an average of 52.5% of turnover for restaurant, pub, hotel and bar businesses, the highest in the 12-year history of the report.

Payroll costs, the single largest cost for eating and drinking-out businesses, according to Christie & Co, now stand at 29.4% of turnover, an increase of 1.5 percentage points in the past 12 months.

The report also shows a real-term shrinking of like-for-like sales, which have risen 1.1% - below inflation. Margins for food sales remain flat while margins for drinks sales have declined since last year, says the report. Food sales now account for an average 36.5% of all revenue, with accommodation sales making up an average of 2.8%.

Meanwhile, 40% of businesses surveyed reported a hike in their business rates and 20% have reported that they have had to cut staff numbers to address cost rises.

The results of the report” make for sobering reading”, according to UKHospitality chief executive Kate Nichols. “At a time of political and economic uncertainty, the Government must provide support to help address spiralling costs that threaten the future of the hospitality industry in the UK,” she says.

“The Government must immediately commit to reform of a broken business rates system.”

“This year’s results reflect the continuing evolution of both the UK consumer and investor landscapes,” says Ramzi Qattan, director at Christie & Co and report author. “Food sales have reached a new high water mark, and room revenues continue to grow at a strong pace as more operators are attracted to high-margin letting rooms.”

Christie & Co says it anticipates further cost rises above the rate of inflation next year, which will be couples with the challenges and opportunities arising from Brexit. “[This] is an extremely challenging task given the prevalent uncertainty surrounding what will happen on and after 29 March 2019,” says Qattan.

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