What next for the hospitality sector? - Resolve Group UK

What next for the hospitality sector?

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What next for the hospitality sector?

As news headlines suggest an average of eighteen restaurants and ten pubs are closing every week it would be easy to assume that the hospitality sector should be despondent.

Recent research suggests that while the headlines are negative this may not be the complete story. Ninety percent of the 41 respondents to the 2019 haysmacintyre UK Hospitality Index remained optimistic about their own futures with annual average turnover growth amongst respondents similar to last year at 4.2%.

However, only 39% were positive about the outlook for the sector as a whole with the challenges of reduced consumer spending, increased cost of goods and enticing and retaining staff suggesting the pattern of closures could be set to continue.

Eighty three percent of respondents believe Brexit will have a negative impact on their ability to recruit staff, compared with two-thirds last year, and many believe this uncertainty will continue to have a significant impact. A rise in the average hourly wage by 7.5% has meant labour costs average 31% of turnover this year, compared with 29% in 2018.

ReSolve has extensive experience in the hospitality sector having recently worked with:

  • Calabrese House Limited, operators of popular late night venues Wringer + Mangle, The Hangar and The Hoxton Pony
  • Bumpkin, a chain of British inspired cuisine
  • Eclipse, long-standing bars in West London
  • Protein Haus, a small chain of protein focussed drinks and food
  • Hummus Brothers Limited, a chain offering Levantine cuisine
  • Crab Tavern, a restaurant in the City of London

In the above cases, some of which are currently live, ReSolve has sold businesses or assigned leases for premium values, even in this climate of rapid change for the industry.

In addition, ReSolve has offered short-term finance for an operator of managed and tenanted pubs in Northern England – facilitating the restructure of its group – and are advising on a number of other casual dining operations, principally across London.

Resolve Group UK

What does the future hold?

Growing demand for delivery services has opened up new revenue streams, with 52% of respondents now using a delivery service compared with 39% last year. Just under a third of respondents said delivery has had a positive impact on profits, with around a half stating it had a positive impact on turnover.

With McDonalds planning to open off site kitchens to cater for the increase demand in delivery services, operators perhaps need to be cautious about the jump in overhead in meeting this delivery demand.

Just over two thirds of respondents have seen an increase in demand for low or non-alcoholic drinks with 43% now offering low or non-alcoholic spirits compared with 20% last year. The growing desire for more healthy drinking and eating options is demonstrated by the rise of vegan and vegetarian trends. Pret’s acquisition of EAT proving this concept may only be in its infancy.

Business rates remain a headache and respondents continue to call for a fundamental reform. The rate at which pubs are closing has halved since last year, due in most part to a combination of the introduction of business rate relief for a limited number of smaller pubs, and also new measures that make it easier for communities to oppose developers’ plans to demolish or convert pubs.

To survive and prosper pubs, bars and restaurants need to constantly review and improve their offers, respond to consumers’ changing lifestyles and finances, and continue the drive for sustainable practices.

Our demonstrable expertise in the hospitality sector enables us to achieve the best possible outcome for the benefit of any such businesses experiencing difficulties.

If anyone in this sector would like to discuss options, without charge or obligation, please contact us.

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