A third of UK hospitality at risk of failure in next year

hospitality

[Credit: Evan Wise on Unsplash]

UK: Data from trade association UKHospitality in association with research agency CGA has revealed that despite 2022 sales topping pre-Covid levels, 32 per cent of hospitality businesses are at risk of going under in the next year.

The UKHospitality Quarterly Tracker has revealed that revenue increased by 4.2 per cent in 2022 (compared to 2019). When inflation is accounted for, revenues are down 13 per cent in real terms. 

A Q1 Hospitality Members Survey, conducted by UKHospitality, the British Beer and Pub Association, British Institute of Innkeeping and Hospitality Ulster, showed that almost one-third of businesses were at risk of failure. Contributing factors involve cost pressures, labour shortages and Covid-19 debt. 

According to data from HotStats and RSM UK, utility costs per available hotel room have increased by 51 per cent in January compared to the same period in 2022. Occupancy rates for UK hotels stood at 56 per cent in January, with ADRs dropping from £155.44 in December 2022 to £121.81 in January 2023.

RevPar for UK hotels also dropped from £98.72 (December) to £68.19 (January) with gross operating profits nearly halving.

UKHospitality is calling on the British Chancellor for intervention in the energy market, Apprenticeship Levy reform, and a new business rates multiplier in the Spring Budget, which is set to be revealed on 15 March.

Chief executive Kate Nicholls said: “These figures show the challenging position the sector is in. The demand from the public is quite clearly there, with revenue exceeding pre-Covid levels, but there is no way venues can take advantage of this demand as they drown amidst price rise after price rise.

“Without action, we can see just how stark the year ahead could be with a third of businesses at risk of failure. Venues are simply unable to pass prices onto the consumer at the same rate they are experiencing their own costs rise.

“Intervening in the energy market to stop unscrupulous behaviour by energy suppliers, reforming the Apprenticeship Levy and tackling disproportionate business rates would signal [the Chancellor’s] commitment to the everyday economy and its ability to lift the nation out of its economic slump.

“People up and down the country want to support their local pubs, restaurants, coffee shops and hotels, to name just a few. If the Chancellor allows those venues to take advantage of that support, we can turn record sales into real terms growth.”

Chris Tate, head of hotels and accommodation at RSM UK, said: “Many hotels have been able to cushion themselves without facing substantial increases to their energy bills, but with the colder weather and some fixed price energy tariffs coming to an end, there are signs these rising energy costs are starting to bite.

“While room rates took a tumble last month, the positive for hoteliers is that they have still been able to charge higher prices than previous years. That said, gross operating profits came under significant pressure in January, which suggests their ability to pass on rising costs may be slowly slipping away.

“Luckily 2022 was a relatively strong year for the sector, so hoteliers have been able to build up a war chest to cover the quieter months of trading. This will be critical, particularly in helping to weather the next few months as consumers are still facing the challenges of the high cost-of-living. Strong consumer demand could make all the difference in preventing a lot of casualties.”

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