SMEs in the Hospitality Sector Concerned About Corporate Competition

DaveGosling• 65% of SME owners in the hospitality and leisure sector are concerned that corporates ‘have too much say’ over their future viability
• 25% are either not intending to do anything about it or feel unable to do so
• 35% believe the prolonged period of Brexit uncertainty has favoured corporates

About two-thirds (65%) of SME owners in the hospitality and leisure sector are concerned that multinationals and other large corporates ‘have too much say’ over the future viability of their business, according to research compiled by accountancy firm, Menzies LLP.

In order to address this, 67% SME owners in the hospitality and leisure sector – among them pub and restaurant businesses – are intending to boost their own competitiveness by cutting costs and raising finance to re-invest in their businesses and a similar percentage are looking for ways to spread risk. However, a quarter (25%) are not intending to take any action at all, most of them adding that they ‘feel unable to do anything about it’.

About one in three (35%) respondents in the hospitality and leisure sector believe the prolonged period of Brexit uncertainty has favoured multinationals and other large corporates, allowing them to gain ground over SMEs.

Dave Gosling, partner at accountancy firm, Menzies LLP, said:

“Small and medium-sized businesses in the hospitality and leisure sector have been suffering in the current climate of uncertainty and many believe large corporates and multinationals have been better able to prepare for Brexit and invest in technologies to give them a competitive advantage.

“Whilst they realise that being smaller and more agile is a bonus, SMEs are concerned that corporates will be more cash-ready to take advantage of any upturn that might come once the Brexit stalemate is resolved one way or the other.”

Harder to make a profit

The cross-sector survey also reveals that 46% of SME owners believe it has become harder to make a profit in the past year, despite most reporting static or improving sales. Whilst Brexit uncertainty was the main reason given for this, one in three (33%) SME owners also blamed ‘more competition from multinationals and other large corporates’.

“SMEs are feeling the heat of competition and some believe the larger players have scale and market dominance on their side,” added Dave Gosling.

Challenges facing hospitality and leisure firms

Commenting on the challenges that lie ahead, SME owners in the hospitality and leisure sector identified their top six challenges as follows:

• ‘Predicting future demand’
• ‘Managing or controlling costs’
• ‘Cash-flow forecasting’ and ‘staying focused on customer service delivery’
• ‘Brexit-related uncertainty about tariffs and trading relationships’
• ‘Knowing whether to invest or not’
• ‘Staying up to date with regulation’

SME advantages and disadvantages

SME owners identified five key advantages that corporates have over them in the current climate as follows: ‘bigger budgets to invest in technology’; ‘better access to credit and finance options’; ‘bigger budgets to attract talented people’ and ‘they can afford to take a long-term view’ and ‘better access to strategic advice’.

Two thirds (63%) of SME owners also know they have some advantages compared to large corporates. The top five were identified as follows: ‘lower operational overheads and fixed costs’; ‘quicker decision-making ability due to a lack of shareholders’; ‘better equipped to react to market changes’; ‘less red tape and compliance risk’ and ‘fewer legacy issues’.