Discounting Damages Productivity In Hospitality Industry

Global software provider Fourth has revealed that productivity across the UK hospitality industry has fallen, with the key measure of sales per labour hour sitting at £34.01 – a 62p reduction since May 2017 – dropping as low as £30.65, when analysing the restaurant sector alone.

The headline number, mined from Fourth Analytics data on the hourly pay of thousands of hospitality workers, is blended across the hotel, restaurant, QSR and pub sectors. The analysis also reveals that wages as a percentage of sales have risen 0.9% over the same period.

The figures have been impacted by heavy discounting across the restaurant and casual dining sectors, with many groups pursuing aggressive discounting policies in the UK over the past four-to-six weeks. This is reflected by statistics published in The Telegraph reporting a rise of 20-30% in discounting over the past year alone.

Furthermore, cost pressures from decreasing productivity have been exacerbated by continued, but steady, wage-cost inflation, with the average hourly wage in the hospitality industry now sitting at £8.28, a rise of 2% since May 2017, which is 3% above the Government’s target of reaching £8.05 by April 2018.

Commenting on the figures, Mike Shipley, Analytics & Insight Solutions Director at Fourth, said: “Our figures show that a domino effect of aggressive discounting in the hospitality industry, particularly the restaurant sector, has taken a heavy toll on productivity as brands compete for custom in a very competitive market place.

“Compounding the issue, the latest figures from the Coffer Peach Tracker, show that managed pubs, bars and restaurants like-for-like sales were down 0.9% in September. This trend is indicative of the wider hospitality industry, with significant cost headwinds taking their toll as operators battle to maintain and build sales.

“Discounting is a quick fix to this complex situation and with Brexit looming on the horizon, it’s imperative that operators scrutinize all aspects of their operation to understand where they can cut costs, such as smarter scheduling software and renegotiating procurement deals in line with the market.

“As with all adversity, there is a silver lining and, ultimately, the businesses who successfully navigate this period, streamline their business models and increase efficiency of labour and procurement, will be well placed for growth when the market reverts.”

Regional pay gap

The regional pay gap has remained the same at 13p in line with May 2017 (and for most of 2016), with areas inside the M25 paid £8.35 on average and areas outside paid £8.22.

Gender pay gap

The gender pay gap, which favoured women by 2p in December 2016, before reverting in favour of men in May 2017, has stabilised, now sitting at 14p in favour of men.

This is driven by the male bias of workers in the kitchen and back-of-house roles, which are typically paid a higher hourly rate, versus a female bias in the front-of-house roles, where workers have the opportunity to top up their daily hourly rate through customer tips.

Mike added: “Our demographic analysis shows that male non-British workers continue to make up the majority of back-of-house workers and chefs in the industry, and with continued pressure on skill shortages in this area since the Brexit vote, the hourly rate for men has started to increase, due to the continuing squeeze on supply.

“In context with this, female workers continue to make up the majority of front-of-house workers, where tips and gratuities form a key part of remuneration, and when taking this into consideration the overall rates of pay become more aligned.”

Others statistics

  • U21s in the hospitality industry are currently paid on average £7.23– £1.63 more than the NMW for their age group.
  • The wage rate for U21’s has been consistently tracking the increases to the wage rate for O25’s since the introduction of the NLW rather than the lower U21 minimum wage rate, indicating that wage rate parity is becoming increasingly common.