Editor's comment: are we seeing a cautious return to growth?

Could consumers be starting to spend again? It’s been a slower start to 2024 than most hospitality businesses would have liked, particularly when margin is so hard to maintain, but the economy might just be gaining some momentum.

So encouraging have the signs been for Rishi Sunak that the prime minister has grasped the opportunity of falling inflation and called an election, banking on increased economic optimism.

He will have been buoyed this week by the latest Lloyds Bank business barometer, which found that business confidence is at its highest level since November 2015, up by eight points to 50% in May.

With inflation now at 2.3%, tantalisingly close to the Bank of England’s 2% target, there’s a case to say that with room rates and menu prices stable following months of necessary increases, hospitality businesses might just be able to look at their profit line again without wincing.

Speaking to global economist James Pomeroy this week, ahead of his session at our free Maximising Revenue Summit on 13 June, he was certainly optimistic that a recovery in real income growth will feed directly to hospitality businesses.

He said: “Suddenly you’re going from a 6% real wage squeeze to a 2% real wage gain. That flip is a very powerful situation in terms of who’s able to spend.

“There has been a combination of the wealth effect from those who saved during the pandemic and the wage improvement now, that people feel like they have a little more money that they can spend on discretionary leisure.”

Though he conceded that there had been some push back on the rising costs operators have needed to pass on to guests, businesses should now be able to find some stability.

“The broader macro environment is much more favourable in a world where there remains employment growth and now wage growth,” Pomeroy added.

“There’s a balancing act where we’ll find a happy medium on prices, but the underlying demand is there. We’re confident that the discretionary leisure side of the economy is where people want to spend more money.”

His analysis will surely be music to hospitality operators’ ears. To hear more as you prepare for a busy summer, do join us at the Maximising Revenue Summit.