The post-COVID-19 recovery of the hospitality industry is facing a significant threat as leaders warn of rising prices in multiple key areas, according to the latest Business Confidence Survey from CGA by NIQ and Fourth. In particular, food and drink prices have become a major concern, with 50% of senior-level operators expressing great concern, 33% concerned, 16% moderately concerned, and only 1% unconcerned.
The inflationary impact is especially severe on key commodities for pubs and restaurants, such as dairy, meat, and alcoholic drinks. The CGA Prestige Foodservice Price Index indicates a continued rise in prices, reaching 21.6% in May. The survey reveals that around 85% of leaders have seen increases in egg prices, while 80% have experienced price hikes in chicken. Additionally, 79% of leaders have encountered rising costs for beer and 74% for red wine.
Another area of concern is the mounting payroll costs. The research from CGA and Fourth shows that leaders have increased pay for both new and existing staff by an average of 11% in the past 12 months, surpassing the rate of inflation during that period. Almost two-thirds (65%) of business leaders express concern over the increases in the National Minimum Wage and National Living Wage since April, which have driven up labor costs.
Widespread staff shortages further contribute to the rising labor costs. Currently, 9% of roles in the hospitality industry remain vacant, and only 49% of leaders feel confident about recruitment in the next 12 months.
The Business Confidence Survey highlights that spiraling costs are impacting various areas. Energy prices and contracts are a significant concern for 79% of leaders, while more than half are worried about business rates (59%) and VAT (54%).
Due to the cost of living crisis, businesses have been compelled to pass on some price increases to consumers, which puts guest spending at risk. According to the survey, food menu prices have increased by an average of 13% in the past 12 months.
The increasing costs have resulted in a decrease in business confidence among hospitality leaders. Currently, only 54% of them feel optimistic about their business prospects for the next 12 months, which is significantly lower than pre-COVID levels. Furthermore, 28% of leaders state that they have less than three months’ worth of cash reserves, and 14% believe their business is at risk of failure within the next year.
Sebastien Sepierre, managing director – EMEA, Fourth, emphasizes the challenges faced by operators and highlights the need for businesses to leverage technology to control costs and enhance efficiency in labor and supply. Sepierre emphasizes the necessity to adapt to the changing circumstances during this uncertain period and beyond.
Karl Chessell, CGA by NIQ’s director – hospitality operators and food, EMEA, recognizes the impact of cost pressures on the hospitality industry. He acknowledges that while the sector remains resilient, relentless inflation has left many businesses operating on extremely tight margins. Chessell stresses the importance of targeted support on tax, energy, labor, and other areas to enable the industry to fuel the much-needed economic recovery of the UK.
The hospitality industry’s recovery following the pandemic is jeopardized by rising prices in various key areas. Leaders express their concerns over inflation in food and drink prices, increased payroll costs, and other expenses. These challenges have diminished business confidence and increased the risk of failure for some establishments. To navigate these difficulties, incorporating technology and receiving targeted support in crucial aspects will be essential for the industry’s long-term success and the UK’s economic revival.
