Cost of living crisis and staff shortages threaten £0.75bn hospitality and leisure growth
The hospitality and leisure sector’s post-pandemic recovery could be severely hampered by the cost-of-living crisis and a widespread lack of staff, a new report warns today.
“UK Hospitality’s Next Challenge”, a study from Barclays Corporate Banking, shows that the release of pent-up consumer demand for socialising, holidays and experiences following the pandemic has given a boost to the sector.
Over three quarters (82%) of H&L operators from Northern Ireland are confident of growth this year and had predicted an average 30.80% uplift in revenue compared with pre-pandemic levels. This equates to a £0.7bn rise in annual turnover over 2019, and a £0.7bn increase on 2021.
However, the predicted growth could be stifled by soaring supplier costs and a scramble for talent. Hospitality and leisure businesses in Northern Ireland report that their utility bills have already spiked by 28% year-on-year on average.
Meanwhile, over nine in ten (94%) hospitality and leisure businesses in Northern Ireland are struggling to recruit personnel, with vacancies for cleaning staff (24%), masseurs (20%) and fitness instructors (18%) causing the most issues. There are particularly acute shortages of cleaners in the East Midlands and the East of England (28%).
Almost a fifth (16%) of bars and restaurants are finding it difficult to hire waiting staff, and over two fifths of gyms and leisure centres (42%) cannot find fitness instructors. Recruitment issues also extend to back-of-house and C-suite roles: 17% of operators are having trouble sourcing finance staff and 16% said the same about senior management positions.
In response, H&L operators in Northern Ireland are establishing new incentives to recruit and retain talent. Introducing bonuses (28%) is the most popular measure, followed by reduced working hours (22%) and increased wages/salaries (20%).
Almost one in five employers (19%) have also increased wages given to staff. Senior managers are set to receive the biggest boost to their pay packets, with an average increase of 7.7% – equivalent to £2,014³ a year for a full-time worker. Delivery riders and drivers will receive an average increase of 7.5% (£1,616 per year for a full-time worker), followed by housekeeping staff (7.4% / £1,642), bar staff (7.3% / £1,145) and finance staff (7.3% / £1,936). Kitchen staff will receive a 6.9% rise on average, equivalent to a salary bump of £1,196 for a full-timer.
One striking finding of the research is the industry’s plans to offer employment to Ukrainian refugees. In Northern Ireland, 88% of surveyed businesses plan to hire refugees.
Barclays’ report also shows that, for the time being at least, the industry’s finances allow for pay rises and other investments. Profit margins of H&L operators from Northern Ireland are now at 28.70% on average, compared to 35.10% pre-pandemic. Caravan parks have enjoyed the biggest rise in profitability, from 37.1% in 2019 to 48.0% today.
Adrian Doran, Barclays Head of Corporate Banking in Northern Ireland, commented: “The hospitality and leisure industry was undoubtedly one of the hardest hit by prolonged periods of lockdown during the pandemic. In the early part of 2022 however, in a society free from restrictions, the sector enjoyed strong sales, leaving many confident about their growth prospects.
“The worsening cost-of-living crisis is now a serious threat to that growth, with the latest Barclaycard Consumer Spending Index showing that restaurants, bars, pubs and clubs have all seen a slight decline in May 2022, compared to the month before.
“Crucially for the industry, our research shows that talent shortages are also a major concern, with businesses in every vertical finding it challenging to fill their vacancies. It means there is now an added imperative for hospitality and leisure firms to find new and novel ways to recruit, reward and retain their staff.”
Another key result from the research shows that almost a quarter (23%) of hospitality and leisure firms are offering more sustainable products and services than they were before the pandemic, and 32% say that an increased focus on sustainability has been their biggest learning from the past two years. To counter rising costs, 23% of businesses are applying price rises to less sustainable or ethical products.
Other notable findings from the “UK Hospitality’s Next Challenge” report include:
- Over a third (34%) of firms have invested in new customer relationship management (CRM) technology to offer a better customer experience, while 32% have started opening earlier.
- Two in five (38%) have started accepting new payment methods, such as Apple Pay and Google Pay and almost half (45%) of restaurants have introduced additional payment terminals, as have 42% of pubs.
- Almost one in three (30%) restaurants continues to diversify by introducing home delivery options, such as meal kits
- A quarter (26%) of H&L operators say they are selling more ‘value’ product ranges this year, followed by 23% who say they’re selling more locally sourced produce.
This report is based on bespoke market research conducted by Censuswide among 605 senior managers within UK-based hospitality & leisure businesses. The sample covered businesses with 10 or more employees operating in a range of sub-sectors. The research was conducted between 8th April and 25th April 2022.
Barclays worked with Development Economics to assess the annual turnover of the hospitality and leisure sector based on ONS data and responses to the Censuswide research.
Potential annual salary increases were modelled by Development Economics based on official data from the ONS, with the exception of delivery staff, which used hourly wages for Deliveroo drivers as reported by jobs website Indeed.