Hospitality Sector’s Suffering Needs A Permanent Fix

By Kunal Sawhney, CEO of Kalkine (www.kalkine.co.uk)

After the Platinum Jubilee celebrations, the hospitality sector is back to its old days. The 4 days celebrations to commemorate Queen Elizabeth’s Platinum Jubilee resulted in heavy spending by Britons. It proved a major boost for the ailing hospitality industry. Data from Barclaycard Payments revealed that there was a huge 41.5 per cent rise in spending at restaurants. Also, 74.2 per cent of increased spending was reported at pubs, bars, and nightclubs during the period 2-5 June.

As per different industry bodies, the figure was nearly £400 million higher than pubs, restaurants, bars, and other hospitality locations could expect to earn during a regular Thursday to Sunday in May.

Platinum Jubilee boost a short-lived affair
The ongoing economic turbulence and households’ struggle to make both ends meet amid record-high inflation are going to keep further spending in check. The fillip in sales that the hospitality and retail sector witnessed during the celebrations may not last for long.

Also, there is big trouble brewing up; while the 4 days of celebrations boosted the sales of hospitality, the three days of railway workers’ national strikes later this month on 21, 23, and 25 June could jeopardise the hospitality business in the country, as during that period various cultural events, including the Glastonbury festival is scheduled to take place during the period. It will even deter normal evening outings of people in the country and can also discourage domestic as well as international tourism.

Crisis similar to during pandemic
The hospitality continues to face serious troubles. UK Hospitality has stated that lots of pubs and restaurant operators have already started closing, and over 10,000 pubs and restaurants may get closed soon due to rising energy costs and an increase in rents. As per the estimates, around 20,000 of its members are running below break-even, and another 30,000 don’t have any cash reserves.

When the industry was already struggling with pandemic-induced demand slowdown and supply chain bottlenecks, the war between Russia and Ukraine made the situation worse. Now inflation in the restaurant business is as high as 13-17 per cent, forcing the businesses to trade at 20 per cent up so that they can deal with the inflationary situation amid higher wages due to staff shortages.

Government support is required for the industry
Lots of hospitality businesses will meet their weakest profits or could go into losses this autumn. Many will be in need of raising money to survive. People will spend more on essentials amid rising inflation, and that would hurt the businesses. The government, though, on its part, has done a lot for the industry VAT issue is still something that can be revisited. At a time of crisis, when pubs and restaurants have once again started paying 20 per cent VAT in respect of food sales, the supermarkets are paying almost nil, putting them in an advantageous position to sell their beer at a lower cost.

Another factor that needs to be taken care of is the dwindling investment scenario in the sector. There was a drastic fall in investment in the hospitality sector during the pandemic. The government will have to help the industry with an investment policy that can cater to the future shift in priorities for the sector.