Hospitality leaders’ confidence falls as cost-of-living crisis starts to bite

The confidence of restaurant, pub and bar leaders tumbled over the second quarter of 2022 after costs soared for both businesses and consumers.
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CGA and Fourth’s second-quarter Business Confidence Survey reveals that only 23% of leaders are now confident about the next 12 months for the general market—barely a third of the total of 65% at the last survey in March.

 

The proportion of leaders feeling confident about their own business, while falling by 15 percentage points since the last survey, remains much higher at 53%. This may reflect a greater optimism among the multi-site leaders making up the survey cohort, in comparison to the less financially stable independents which make up much of the wider market.

 

The Business Confidence Survey shows most of these larger businesses remain profitable for now. Nearly nine in ten (88%) leaders report that their company is currently operating at a profit, and half (53%) say profitability is at or above pre-COVID-19 levels.

 

However, business leaders anticipate that cost inflation will compromise consumers’ spending. On average they predict a 6% drop in sales and a 12% impact on profit margins over the next 12 months.

 

The Survey also highlights the labour shortages that continue to beset hospitality. Leaders say an average of 11% of their roles are currently vacant—up by two percentages since the first quarter of 2022. Competition for staff has pushed up pay levels too, by an average of 10% in the last 12 months alone.

 

Karl Chessell, CGA’s director – hospitality operators and food, EMEA, said: “After a solid first half of 2022, this Survey shows the squeeze on hospitality businesses is tightening. The full impact of the cost-of-living crisis remains to be seen, but leaders are aware that it is likely to reduce guests’ visits over the rest of the year. While many hospitality venues currently remain profitable and popular, businesses that have been left fragile after COVID-19 lockdowns will now be seriously concerned by the impact of rising costs over the coming year.”

 

Sebastien Sepierre, managing director – EMEA, Fourth, said: “With the constant barrage of challenges hospitality businesses have to contend with, it is a testament to the skills and dedication of leaders and their teams that so many remain successful in the face of this.

 

“However, this Survey highlights just how incredibly delicate the situation is. Confidence is dropping among business leaders, whose operations are swamped with pressures from all angles, not least rising costs and labour shortages.

 

“Smart solutions and ingenuity are required to navigate these challenging times and ensure hospitality businesses continue to provide customers with the enjoyable social experiences they crave whilst remaining profitable.”

 

CGA’s Business Confidence Survey is conducted in association with Fourth. For more information about the Business Confidence Survey, including bespoke analysis to help suppliers and operators optimise strategies, email charlie.mitchell@cgastrategy.com.

 

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