Hospitality ‘optimistic’ on prospects but cost pressures threaten recovery

Almost two thirds of restaurant, pub and bar leaders are “increasingly optimistic” about the market’s prospects for 2022, according to CGA and Fourth’s Business Leaders’ Survey.

The exclusive poll of multi-site business leaders found that 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 also nudged up by two percentage points to 68%.

The survey indicates “improved profitability” in the hospitality sector. More than four in five (84%) leaders said their business is currently operating at a profit—four percentage points higher than in the December survey. Only 5% of leaders revealed they are making a loss.

However, the survey indicates hospitality’s recovery from the pandemic is being threatened by mounting costs for both businesses and consumers. More than four in five (93%) leaders said 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 10 (90%) leaders said 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, it found 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.”