Leaders’ confidence levels rise, but cost pressures threaten hospitality’s recovery

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

The exclusive poll of multi-site business leaders shows 65% are 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 has nudged up by two percentage points to 68%.

 

The Survey also indicates improved profitability in the hospitality sector. More than four in five (84%) leaders say their business is currently operating at a profit—four percentage points higher than in the December survey. Only 5% of leaders say they are 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 say they are concerned about inflation in food and drink prices, and nearly as many (79%) are worried about the public cost-of-living crisis. Almost two thirds (63%) are concerned about VAT and the end to relief for the hospitality sector, and there is widespread anxiety about rising costs in energy, labour and other key inputs.

 

Nine in ten (90%) leaders say they have been impacted by higher costs across the supply chain. The large majority have passed, or are planning to pass, some of the costs on to consumers via higher food prices (87%). On average, menu prices are 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 CEO, 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.”

 

CGA’s Business Leaders’ Survey is conducted in association with Fourth. The research was undertaken between 9th February and 21st March 2022.

 

For more information about the Business Leaders’ Survey, including bespoke analysis to help suppliers and operators optimise strategies for recovery, email ted.mulcauley@cgastrategy.com

 

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