Hospitality Operating Costs Account for Over Half of Turnover

Operating costs in the hospitality sector have risen to 55.2% of annual turnover (before rent) the highest level since 2007, according to a report from industry body, UKHospitality and business property adviser, Christie & Co.

The report launched today (July 26), emphasises the significant impact of the pandemic on hospitality operators as the sector emerged from one of the most challenging periods in its history.

The 13th edition of the UKHospitality Christie & Co Benchmarking Report reveals the results of a survey of operators that covers over 5,000 hospitality businesses and, for the first time, includes a separate hotels segment.

The report shows that operating costs have increased to challenging levels at 55.2% of turnover before rent – the highest since 2007. This has been driven by the soaring utility, premise and operational costs facing operators in the industry, as they attempt to rebuild following the pandemic.

The sector has faced relentless economic and operational challenges forcing operators to adapt and look to alternative revenue streams to drive business. Whilst the report notes a contraction in like-for-like sales of 2.3% in comparison to 2019 H2 across the entire survey, certain segments of the market saw top line growth, with accommodation-led businesses leading the way at 9.8% like-for-like growth in revenue, as these businesses took advantage of the staycation boom.

The survey period covered the six months to December 2021, which is representative of a turbulent time for the sector and half the usual period for analysis. As a result, the responses this year reflect the continuing evolution of both the UK consumer and investor landscapes.

Stephen Owens, Managing Director – Pubs & Restaurants at Christie & Co comments,
“Despite the significant challenges that lie ahead in 2022, new opportunities and ways of operating have emerged over the last few years, and with consumer demand returning, there is still reason to remain cautiously optimistic. With full year trading returning for next year’s survey, we look forward to updating the sector with an increasingly accurate benchmark against which operators can compare performance.”

Kate Nicholls, Chief Executive of UKHospitality, comments,
“This year’s survey highlights the extreme pressure that hospitality operators are labouring under, with costs soaring to a new record high. We have been working with Government to make clear the harm this is causing to our ambitions for growth, investing in high streets and creating skilled roles. It’s imperative that Government takes action to help us tackle the inflationary headwinds we face, unlock growth by removing regulatory barriers and creating a tax and investment framework for the future.”