The hospitality industry has been hit hard by the events of the past three years. But for those who weathered the storm, there are opportunities ahead. How can SMEs capitalise on the trends set to shape their sector over the coming year.
It is hard to think of a sector more impacted by the challenges of the past few years than hospitality. Almost overnight, the pandemic closed the entire idea of travel and eating out and – just as that was ending – spiralling inflation and reduced consumer spending have dealt many firms a hammer blow. According to the Hospitality Market Monitor from AlixPartners and CGA by Nielsen IQ, the sector now has 13,037 fewer sites than it did before venues were first closed through lockdown three years ago.
Hospitality recorded a drop of 4,809 premises across the whole of 2022 with more than three quarters shutting their doors in the second half of the year.
Nearly nine in 10 of these businesses were independents as small businesses weakened by the impact of Covid were forced to close. The Market Monitor said many closures last year were the result of spiralling costs, whilst fragile consumer confidence, industrial disputes and labour shortages have also made it a challenging start to 2023 for many SME operators.
Over the course of the past three years, those UK SMEs that have survived have had to demonstrate remarkable resilience and agility. These attributes will stand them in good stead to take advantage of new trends shaping the industry – and the consumer landscape that underpins it – when the recovery comes.
There are many subtle trends that will undoubtedly impact owners and operators dependent on their market and offering, but the following are likely to shape businesses across the broad hospitality industry in 2023.
1. Blended workspace/ leisure space
The rise of hybrid working arrangements and the increase of ‘digital nomads’ is a COVID-created trend that seems here to stay. Many hospitality venues can capitalise on this shift by enhancing their offering to cater for local home-workers or business travellers. Ensuring you have good wifi, charging points, quiet spaces and quality coffee will help capitalise on demand from this segment.
The cost-of-living crisis has undoubtedly tightened available consumer spend for eating out and weekends away. According to a report by Forbes Advisor, 83% of UK consumers have reduced restaurant spend in response to rising domestic costs.
Hospitality operators will need to ensure that for customers who will be looking for a good deal, that their offering delivers. This doesn’t necessarily mean a race to the bottom, however. It just means that your business needs to communicate what makes it worth the spend.
3. Evolving menu demands
Each year, The Unilever Food Solutions Future Menu Trends Report canvasses the opinion of 250 professional chefs working in over 70 different countries, to determine the trends it feels will shape the food and beverage industry. For 2023, it predicts that vegetables will become an increasingly major part of menu design. It predicts their “promotion from side-dish to main event” in response to increasing numbers of vegan, vegetarian and flexitarian diners looking for well-crafted plant-based foods.
67% of its operator panel also predict that sourcing local ingredients that help to reduce the carbon footprint of restaurant dishes is a trend that consumers are increasingly looking for.
4. Increased International tourism
VisitBritain are forecasting 35.1 million inbound visits in 2023 (86% of the 2019 level and 18% higher than in 2022) and £29.5 billion spend (104% of the 2019 level and 14% higher than in 2022). If the latter figure is achieved, it would be a record for the value of inbound spend in the UK in nominal terms.
The dollar strength against the pound translated into 380,000 US-based visitors arriving in the UK in the last quarter of 2022 (a 6% increase on Q4 2019 levels). Businesses that can advertise to – and cater for – a return to higher levels of tourism from both the US and Europe are likely to fare well. But hospitality owners also need to consider increases in middle-class affluence in markets such as China, South East Asia, Nigeria and India and how that might shape guest and dining preferences.
5. Solving problems through technology
Like many other sectors of the UK economy, hospitality has been badly impacted by recent labour shortages. To overcome these staffing issues, more hotel and restaurant operators will adopt digital tools such as QR menus, cloud kitchens, web-based booking and guest service apps. This also helps meet a shift in consumer behaviours as digitally savvy Gen Zs and millennials actively digital interactions with mobile ordering and automated kiosks, for example. Restaurants may also explore and less labour-reliant concepts, such as smaller restaurants and open kitchens where chefs can double up as service staff.
The turbulence of the past three years have hit most UK businesses hard, but with economic recovery expected later this year, there are new opportunities to evolve and prosper.
Adapting your business to meet these opportunities will likely require some investment. If your business does not have the necessary means to fund this today, you may need to consider external finance.
At Capify we offer a range of business loans to help support small businesses throughout their growth journey. Check to see if you’re eligible for one of our loans by visiting www.capify.co.uk. Or, if you’d prefer to talk to a member of our team, we’d be happy to guide you through the process.
Give us a call today on 0330 822 4906.