Hospitality at odds: Footfall high, profits down
New research reveals robust demand among consumers for eating and drinking out, despite the rocketing cost of household bills. However, it seems businesses are not exactly reaping the rewards; and with more cost increases on the horizon, with the new duty rises set for 1 August, hospitality is facing a tough summer.
The Cost of Living Pulse, a CGA survey which canvassed 1,000 on-premise consumers in Britain and Ireland, shows that 40% went out for food and drinks at least weekly in April 2023. Of those surveyed, a total of 94% went out at least once during the month too, marking a trend that stretches back to last October, with a dip of only two percentage points during that time.
The Pulse also indicates that hospitality remains a top priority for many people’s discretionary spending. A total of 39% said they would prioritise visits to pubs, bars and restaurants over other areas of interest if their disposable income were to be cut further – a significantly higher number than those who said clothing (28%), home improvements (27%) and international holidays (27%).
Demand is clearly there. Even if there is hesitation in the market, consumers still value their forays into the out-of-home market to such an extent that they are willing to ignore the glaring cost-of-living elephant in the room.
Yet, up and down the country, hospitality is struggling.
Sam Martin, CEO of Peckwater Brands, which works in the hospitality arena, says: “Conditions for hospitality businesses are undoubtedly tough, with record food inflation, skyrocketing energy bills and falling consumer spending all having a notable impact. The stark reality is that so many establishments are loss-making and many fear for their survival.
“Unfortunately, the challenges facing the hospitality sector will not disappear any time soon. Raising prices might be the only option available to many businesses, but with consumers wrestling with a cost-of-living crisis and seeking out lower prices wherever possible, this could damage their customer bases.”
The counter view to CGA’s optimistic findings makes for sobering reading. Peckwater Brands, which surveyed senior decision-makers within UK hospitality, found that 44% of businesses are currently operating at a loss, while 53% are impacted by the rising cost of goods and 50% by higher energy bills.
And here comes the real rub. The most major elephant of the herd in the room currently is the duty rise, which – when it lands on 1 August – will add approximately 44p on a typical bottle of still wine in the off-trade. That 44p becomes £2-3 in the on-trade, which will represent an unmanageable hike for many.
As Andrew Bewes, MD of Hallgarten & Novum Wines, told Harpers recently, the old increases of 4p or 5p a bottle could be absorbed by an operator for a time. But at 44p or £2-3, will this be the tipping point for consumers who have so far clung on to the treat of meals and drinks out, but are slowly losing the wherewithal?
For the full article, see this month’s issue of Harpers, now available online and in print.
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