Hospitality numbers stable in second quarter but costs crisis threatens recovery

Britain’s licensed sector has stabilised in the second quarter of 2022, the latest Market Recovery Monitor from CGA by NielsenIQ and AlixPartners reveals.
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Download the Report

It shows there were just under 106,000 licensed premises at the end of June 2022—almost exactly the same number as in both June 2021 and March 2022. CGA’s research recorded nearly 1,000 closures over the second quarter of 2022, as some operators found trading unsustainable—but virtually the same number of new openings as other businesses swiftly took their place.

 

However, the Market Recovery Monitor suggests more net closures are possible in the second half of 2022 as cost pressures mount for both businesses and consumers. Sharp rises in food and energy prices, labour shortages, supply chain issues and high consumer inflation are all likely to threaten many venues that have been left fragile by two years of COVID-related challenges.

 

 

The research from CGA and AlixPartners also highlights key contrasts in fortunes in the licensed sector. They include a stronger performance for managed operators, whose sites have increased by 1.8% in the last 12 months, than for independents, where numbers dipped 0.4%. The casual dining, bar and bar restaurant segments all grew in the last year, while the number of restaurants fell by 1.2% in the same period.

 

The new report has a special focus on London, which has been slower than other cities to recover from COVID but has been in fractional growth over the last 12 months. Analysis reveals a robust performance in northern and eastern parts of the capital, where many businesses have benefited from the growing number of residents working from home. However, parts of central London have suffered from a shortfall of office workers—including the City, which now has 14% fewer sites than in March 2020.

 

Karl Chessell, CGA’s director for hospitality operators and food, EMEA, said: “These numbers are a welcome indicator of stability in hospitality, and proof that operators have built back well from the turmoil of COVID. But this solid recovery is now under severe threat from a powerful combination of inflationary pressures and other challenges, and we are likely to see a lot more churn of openings and closures over the second half of 2022. Hospitality’s long-term outlook remains very positive, but it is clear that many businesses have a bumpy road ahead.”

 

Graeme Smith, AlixPartners’ managing director, said: “In the context of the past two years and the shock of Covid, the stability of overall numbers (of hospitality venues) revealed in this latest study is very welcome.

 

“Clearly, after the challenges of the pandemic, the industry is still in recovery mode and adjusting to various challenges, such as clear shifts in demand, brought about by some significant changes to the operating landscape.  This is graphically illustrated with the impact evolved working patterns and indeed the work-from-home culture has visibly had on bar and restaurant numbers in business districts, such as the City of London.

 

“While the fundamental, longer-term outlook for the sector is strong, there are clearly some near-term challenges and it is highly likely a higher degree of volatility will return. Many businesses are experiencing a significant step change in their cost base, and with the Bank of England forecasting recession, consumer discretionary spending will likely come under further pressure, too.  For the sector, this inevitably means more closures and more churn, but significant market share opportunities for the best businesses and brands.”

 

The full July 2022 edition of the Market Recovery Monitor from CGA by NielsenIQ and AlixPartners is available now – download the report

 

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