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Morning Briefing for pub, restaurant and food wervice operators

Wed 26th Jul 2023 - Hospitality loses one in 18 sites in latest 12 months as costs crisis bites
Hospitality loses one in 18 sites in latest 12 months as costs crisis bites: Britain has lost around one in 18 of its licenced premises in the last 12 months – that’s 5,736 pubs, hotels, restaurants, bars and cafes – the new Hospitality Market Monitor from CGA by NIQ and AlixPartners reveals. It showed 5% of pubs, restaurants, hotels and cafes have closed in just one year, and means since the start of covid, the market has seen nearly 15,000 venues close. Many of the businesses lost, and still being lost, are independent. In the three months to June 2023, Britain’s number of licensed premises dipped 1.1%. The drop represents 1,139 net closures in the second quarter – equivalent to 12.5 per day. Smaller businesses have borne the brunt of closures, and the independent segment has shed 7% of outlets in the last 12 months – in sharp contrast to fractional growth of 0.1% in the managed hospitality sector. However, the monitor also reveals signs for cautious optimism. Net closures across the first half of 2023 (1,895) were less than half the number seen in the second half of 2022 (3,841), and some units vacated recently have been repurposed by other operators including emerging groups. The casual dining segment is now 5.6% smaller than 12 months ago, but food-led pubs (down 2.9%), high street pubs (down 3.1%) and community pubs (down 4.1%) have all recorded notably fewer closures than the sector as a whole. Britain’s city centres are meanwhile showing growing resilience, with a 4.2% net fall in licensed premises in the 12 months to June 2023 – a better figure than the drops of 5.9% and 5.4% in large and small towns respectively. Karl Chessell, CGA by NIQ’s business unit director – hospitality operators and food, EMEA, said: “It’s been another tough quarter for hospitality, with soaring energy, food and labour costs squeezing businesses’ margins and inflation and interest rate rises sapping consumer confidence. Against that backdrop, managed groups have been impressively resilient in many segments and areas, and there are welcome signs that city centres in particular are back to their pre-covid vibrancy. More venue closures are sadly inevitable while costs remain so high, but the outlook for well-resourced, distinctive and customer-focused groups remains good.” Graeme Smith, AlixPartners’ managing director, added: “While every business lost is a tragedy, many more are managing to navigate their way through. We are all waiting for this margin-compression cycle to turn, and when that switch comes, the market will, from an investment and lending perspective, right itself quickly. Investors will return, with businesses that have delivered stability and are able to demonstrate growth, top of the agenda.”

Managed group sales rose 6.7% in June for ninth successive month of year-on-year growth: Britain’s managed restaurant, pub and bar groups overcame widespread challenges to record a ninth successive month of year-on-year sales growth in June, the new Coffer CGA Business Tracker shows. The Tracker, produced by CGA by NIQ in partnership with The Coffer Group and RSM UK, reveals total like-for-like sales increased by 6.7% in June. The hot weather brought consumers out to drink in pubs, especially those with beer gardens and terraces, and sales in this segment were up by 10.8% on June 2022. However, some of this growth came at the expense of restaurants, where sales finished 3.2% ahead year-on-year. The bars segment completed a difficult first half of 2023 with an 8.4% drop in sales. Combined sales growth remains just below the level of inflation, though the gap between the two has closed over the first half of this year. Growth was even across the country in June, the Tracker indicates, with managed groups’ like-for-like sales growth within the M25 at 8.1% as London continued its post-covid recovery, just ahead of 6.7% beyond the M25. Karl Chessell, director of hospitality operators and food, EMEA at CGA by NIQ, said: “These numbers highlight the impressive resilience of managed hospitality groups, despite rising costs for businesses and consumers. More interest rate rises may dampen consumers’ confidence and cost pressures remain for operators, but the long-term outlook for the sector remains good.” Mark Sheehan, managing director at Coffer Corporate Leisure, said: “The warm weather in June saw strong growth, especially in pubs. Hospitality sales continue to show growth and following the better-than-expected slowdown in inflation strong signs that the worst of cost increases are behind us. We may be moving towards a period where we may see real growth.” Saxon Moseley, partner in RSM UK’s leisure and hospitality, added: “While restaurant like for likes remained stubbornly below inflation, the fact they continue to grow in the face of rising mortgage costs is a testament to the resilience of the sector and consumer appetite for eating out. With food price inflation falling for the fourth consecutive month, operators will be hopeful that margins begin to improve as we head into the summer holiday season.”

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