Hospitality leaders' confidence levels rise, but cost pressures threaten recovery

Restaurant, pub and bar leaders are increasingly optimistic about prospects for 2022, CGA and Fourth’s Business Leaders’ Survey reveals.

The poll of multi-site hospitality business leaders showed that 65% were confident about the next 12 months for the market – an increase of six percentage points since the last survey in December 2021. The number of leaders feeling confident about their own business’ prospects nudged up by two percentage points to 68%.

The survey also indicated improved profitability in the hospitality sector. More than four in five (84%) leaders said their business was operating at a profit – four percentage points higher than in the December survey. Only 5% of leaders say they were making a loss.

However, hospitality’s recovery from the pandemic is being threatened by mounting costs for both businesses and consumers. More than four in five (93%) leaders said they were concerned about inflation in food and drink prices, and nearly as many (79%) were worried about the cost of living crisis. Almost two thirds (63%) were concerned about VAT and the end to relief for the hospitality sector, and there was widespread anxiety about rising costs in energy, labour and other key inputs.

Nine in 10 (90%) leaders said they had been impacted by higher costs across the supply chain. The majority had passed, or were planning to pass, some of the costs on to consumers through higher food prices (87%). On average, menu prices were rising by 8%.

Operators also face ongoing problems in the supply chain, which began after Brexit and accelerated during Covid-19. Four in five (82%) have seen products not turning up and large numbers have faced reduced product lines (77%) and delayed deliveries (64%).

Phil Tate, CGA group chief executive, said: “After two years of Covid-19-related disruption, our survey shows that multi-site businesses are finding their feet again. Hospitality remains a very attractive sector for consumers and investors alike, and as we move into the second quarter of 2022, we can be cautiously confident that sales and profits will continue to build. However, businesses that were weakened during the pandemic now face more fierce headwinds, and inflation is making it tough to achieve real-terms growth. The end of VAT relief and lack of government support in the recent Spring Statement risks stalling hospitality’s recovery just as it gathers pace.”

Sebastien Sepierre, managing director – EMEA, Fourth, said: “While it’s encouraging to see business confidence climb, the impact of rising costs, supply chain issues and the ongoing recruitment challenge continues to be extremely threatening to the sector. These challenges are amplified by the return to 20% VAT rates and the National Living Wage rise – both of which came into force last week and are set to hit finances hard, at a time the industry can ill afford. It’s vital that businesses continue to do everything they can to plan ahead, in order to protect their bottom line and also maximise efficiencies related to their workforce and inventory.”