Growth in overseas tourists could hide fall in domestic business

A boost in business within the hospitality sector from foreign tourists could be masking a slowdown in spend by domestic customers, according to accountancy firm KPMG.

The fall in the value of the pound following the EU referendum has led to an increase in the number of visitors from overseas, providing a welcome injection of cash into the sector at a time of wider uncertainty for UK businesses. Some 3.5 million visits by foreign travellers, spending £2b, took place during May 2017.

However, while hotels are benefiting from increased trade from abroad and a boost in staycations, there is concern that the increased revenues are not being enjoyed by restaurants and pubs. Last month saw sales growth of only 0.6% across pubs and restaurants despite good weather, according to the latest figures recorded by the Coffer Peach Tracker.

Will Hawkley, head of leisure at KPMG, said that there is growing caution among UK customers, who are cutting back on spending due to creeping inflation and a slowing down of real wages and disposable income.

"Looking at pub and restaurant takings in the UK over the past 12 months you will see that not much has changed," he said. "Revenues remain flat, with numbers occasionally tipping over in to minus figures and I believe that sadly the problem is potentially more serious than is evident at first glance.

"The injection of cash from inbound tourists could be seen as creating a false sense of security among leisure proprietors. If you were to suddenly remove this layer of sales you would see that the real decline in UK leisure spend by UK nationals has been masked.

Hawkley added that to order to grow in "this tough marketplace", restaurant and pub operators must "focus on reducing costs and encouraging more custom" and, in particular, look at increasing their use of data and technology.

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