There are “glimmers of hope” for the hospitality sector following years of intense cost squeezes and unpredictability battering businesses, according to the CEO of UKHospitality, Kate Nicholls.
Speaking at the Arena 2024 Savoy Lecture at the Savoy hotel in London on 22 April 2024, Nicholls delivered a sector update in which she expressed positivity that the challenges the hospitality sector has faced were potentially “coming to an end” with a more positive and predictable economic environment in sight.
“It’s never been harder to turn that top line revenue into a bottom-line profit,” she said, acknowledging that increases in food, water and electricity costs, and the cost-of-living crisis, were having “a real, continued impact” on businesses.
However, she offered reasons for optimism, including the rebounding of global travel and signs of recovery in business, meetings and events, and a projected increase in consumer spend over the coming months, with socialising and eating and drinking out still a priority for consumers.
She cautiously suggested the industry was “potentially over the worst”, with inflation set to ease to 3.2% in March, interest cuts expected later this year, and energy and food prices starting to come down, which should feed into improving consumer confidence.
Nicholls also sat on a panel discussion alongside Pret A Manger CEO Pano Christou; serial entrepreneur, CEO and Non-Exec Director Dame Karen Jones; and BrewDog Bars CEO James Brown. The session was hosted by Simon Stenning, founder of FutureFoodservice.
Dame Karen’s advice to small hospitality businesses starting out in the current climate was to choose the right partnerships. “I have known so many great businesses explode because the partnership falls apart,” she said.
“And know what you’re creating. I do think it’s really important to be able to encapsulate your business in one sentence… if you can’t, I don’t think there’s any reason why your customers should come to you, because how do they understand what you are if you’re not clear?”
She added that it was key for hospitality entrepreneurs to be financially smart, as well as focus on operations, in the current economic environment. “You have to understand how that P&L operates,” she said. “There’s no slack in a P&L these days… you’ve just got to be super smart about how you control every line in your P&L.”
Brown said that, given the current backdrop, operators needed to be giving customers good reasons to go out and spend their hard-earned money. He expects businesses in the sector to bring in aspects of competitive socialising, which he said, “add reasons to visit and reasons to stay”. Meanwhile, BrewDog’s Deskdog co-working offer has also helped bring in custom during earlier day segments.
“Today, there’s probably 250 people in before 10 o’clock working in Waterloo. It’s taken off way more than we could ever have imagined,” he said.
Christou added that operators needed to focus on their core proposition while also keeping a close eye on consumer behaviour: “Our teams are significantly focused on: what can we do to evolve the business model as the customer patterns and trends move? How can we ensure that we evolve the brand, whether it’s through business catering or delivery or the in-store environment?”
Panellists also emphasised the importance of getting the ‘basics’ right – pay, advancement and security – to attract and retain staff. This also includes tipping right, with new legislation being introduced later this year. “Tips is a big part of the negotiation and the value proposition for somebody wanting to go and spend their time working in a pub,” said Brown.
The event was followed by networking drinks, a canapé reception and a three-course dinner, as well as a raffle, which raised over £900 for industry charities the Springboard Charity and Hospitality Action.