Between the lingering impact of the COVID lockdowns, inflationary pressures and labour shortages, the hospitality sector has navigated a series of sharp shocks to its operations in recent years. Earlier this month, a Bloomberg report highlighted how a planned tax hike would force the hospitality sector to “drastically cut jobs” and put some businesses at risk of closing down.
Over 200 hospitality bosses signed a letter from the trade body UKHospitality, detailing how changes to national insurance contributions would impact the sector, with ‘conservative’ projections estimating that the move, along with changes to the national minimum wage, could cost hospitality £3.4 billion a year.
“There is no capacity to pass the costs on to customers,” UKHospitality CEO Kate Nicholls wrote in the letter. This will force businesses to reconsider investment and “drastically cut jobs.” The letter recommended the creation of a new national insurance contribution band with a lower rate of 5% for those earning between £5,000 and £9,100; or of an exemption for those working less than 20 hours a week.
Sharing insights into some of the key challenges he’s seeing impact the hospitality industry today, John O’Hara, hospitality director at Verlingue, also emphasised the economic pressures facing these businesses. Between minimum wage increases, food inflation and rising fuel costs, hospitality firms are facing economic concerns from every angle, and more recent budget pressures on national insurance are only adding to the burden.
“General inflation is impacting on people dining and going out more often,” he said. “There is a feeling that people are now switching to dining out only for more special occasions, but, when they do, they are spending more. Meanwhile, staff shortages are continuing to cause trouble post-Brexit.”
A recent report into the hospitality sector from Marsh also highlighted the impact of staffing shortages, and recommended that hospitality companies should identify and address wage and worker satisfaction issues to increase employee retention and maintain the level of service customers expect.
The report detailed how ‘dramatic changes’ in visitor behaviour, spending power, and consumer expectations are affecting both leisure and business travel – and are expected to influence the hospitality industry for years to come. The broking giant also highlighted the impact of guest-facing technology. “Technology is expected to be incorporated across operations as a means of enhancing the guest experience. In addition to making updates such as digital keys and room controls, businesses must contend with increased cybersecurity vulnerabilities, including attempts to compromise reservation systems.”
Legislation changes to topics such as allergens are also proving complex to navigate, with a report from Pinsent Masons highlighting that hospitality businesses in the UK can expect new and emerging regulation to impact their operations going forward. These new duties pertain to venue safety, new rules relating to the sale of alcohol, changes to worker pay requirements, and wider environmental and property-related measures.
“There are also political challenges,” O’Hara said, “with the threats of terrorist incidents affecting the high street. That’s not just about damage to a business’s own premises but also the loss of appeal should other businesses be affected in the vicinity.”
As to whether the lingering ‘headache’ of the COVID crisis is showing any signs of abating, O’Hara noted the main aftershocks he has been seeing are around the fluctuation of sales during the week with the slow return of employees back to offices. “Overall sales are holding up for restaurants and bars, but Thursday has become the new Friday in most towns and cities.”
Sharing some of the ways in which brokers can support their clients through these challenging conditions, he said that Verlingue is seeing clients trying to manage costs, and not let costs escalate through poor claims records. “We have been working with more clients on claims defensibility as a way to manage overall claims costs that helps keep these costs to a minimum but also provide a more targeted cover approach ensuring the cover is focused in the right areas.”
As to what hospitality clients want and expect from their broking partners today, he noted that clients are looking for trusted advisors who will provide them with “peace of mind”. That peace of mind comes from knowing you have the right covers, values and limits in place to respond should the unfortunate happen, he said, and also that their broker will be there at their side to support them all the way. “It is about much more than chasing the cheap deals.”
On balance, O’Hara said he does feel very positive about the future of the UK hospitality sector but it is a constantly changing landscape. “It is important that hospitality operators keep up with the constantly changing demands of the demographic,” he said. “I am sure some weaker brands will fall by the wayside and others will blossom.”
