UK hospitality businesses show strong growth as Covid restrictions ease

Hospitality businesses outpaced the rest of the UK economy during September 2021, according to new figures.

The latest Lloyds Bank UK Recovery Tracker shows that tourism and recreation — which includes pubs, hotels, restaurants, leisure facilities and travel agents — was the fastest growing sector for the first time in more than nine years.

The sector benefited from strong consumer demand for large-scale events, such as concerts and music festivals, as well as the easing and simplification of international travel rules in England, which led to a rise in people booking holidays abroad and more tourists visiting the UK.

There was also a strong rebound in the transport sector following a loosening of travel restrictions and more people commuting.

Overall, 10 of the 14 sectors monitored by the Tracker saw output rise in September, up from nine in August.

However, materials and staff shortages caused the output of three key manufacturing sectors to contract.

The monthly report also revealed that the rate of input cost inflation during September was the second highest in the Tracker’s history, as energy prices spiked and demand for labour intensified.

This led all 14 UK sectors to raise their prices, with transport operators and manufacturers of chemicals, food and drink, industrial goods and metals and mining products recording the sharpest month-on-month increases.

“Tourism and recreation outpaced other sectors in September because it continues to benefit from relaxations in Covid-19 restrictions and resurgent consumer demand,” commented Jeavon Lolay, head of Economics and Market Insight at Lloyds Bank Commercial Banking.

“As the UK economy continues to inch towards its pre-pandemic peak, logistical challenges, higher energy prices and uncertainty relating to the path of the virus as we head into winter are key risks. Policymakers will need to tread carefully in order to safeguard the recovery, with important fiscal and monetary policy decisions due in the coming weeks and months.”

Premier Inn owner anticipates UK holiday boom

Premier Inn owner Whitbread plc has reported a £1bn annual loss but said it expects strong demand for holidays in the UK this summer.

In its financial results for the year to 25 February 2021, Whitbread reported a 71% drop in revenues compared with the prior year, reflecting the impact of Covid-19 restrictions. Lockdown rules designed to help stop the spread of coronavirus forced the company’s hotels and restaurants to close for substantial periods of the year.

Chief executive Alison Brittain said that last year was “one of the most challenging in our 279 year history”.

Whitbread – which also owns the Beefeater and Brewers Fayre restaurant chains – benefited from around £270m worth of government support during the year, including the furlough scheme and business rates relief.

This year the company plans to invest over £350m, which will go toward room refurbishments as well as new advertising featuring comedian and actor Sir Lenny Henry.

However, it also intends to cut an additional £100m in costs.

Under plans to further ease the pandemic restrictions in England, hotels are due to reopen for leisure stays from 17 May, alongside the full reopening of restaurants.

“The vaccination programme in the UK means we can look forward to the planned relaxation of government restrictions as we move into summer, with the first major milestone being the return of leisure guests to our hotels and the full reopening of restaurants from 17 May,” Brittain said.

“We expect a significant bounce in leisure demand in our tourist locations during the summer, followed by a gradual recovery in business and event-driven leisure demand.”

Pubs ask for reopening plan after £7.8bn drop in beer sales

The beer and pub sector has urged the UK government to give a clear timeline and date for when pubs can reopen.

It comes after trading restrictions and lockdowns led to a drop of 56% (£7.8bn) in sales of beer last year.

What’s more, up to 87 million pints of beer are thought to have been wasted since the coronavirus pandemic started. At an average cost per pint of £3.81 in a pub, it means that pubs have lost £331m in revenue on beer that they have been forced to destroy because of the three lockdowns and tier restrictions.

Setting out a recovery roadmap to reopen pubs after the current lockdown, the British Beer & Pub Association argued that once the most vulnerable have been vaccinated, “pubs must reopen when non-essential retail and other parts of the hospitality sector reopen”.

The trade association added that mandatory trading restrictions — such as alcoholic drinks served only with a substantial meal, no mixed households and the 10pm curfew — must be removed when pubs reopen. And it said that further financial support will be needed to help businesses stay afloat.

The government has said that it has a plan for reopening the economy which it will reveal after 22 February, BBC News reported.

Homeworking costs London’s hospitality sector £2.3bn in lost lunches and after-work drinks

Already hit hard by Covid-19, London’s economy could see a huge knock-on effect from people continuing to work from home after lockdown.

The widespread shift towards homeworking as a result of coronavirus has “sucked the life out of many central locations”, according to Pablo Shah, a senior economist at the Centre for Economics and Business Research (Cebr).

Google mobility data shows that at the peak of the lockdown in April, the number of people going to places of work on weekdays in London was 77% lower than before the crisis. More people were going out to work by June, but numbers remained around 60% lower than the benchmark period of 3 January – 6 February.

Based on the Google data and the average spending by employees near their workplaces of £202 per month — including lunch, after-work drinks, coffee/tea, snacks, stationery and other office equipment — Cebr calculates that the pandemic resulted in £2.3bn of spending in shops and food/drink establishments near London employment hubs being lost or displaced between March and June.

The economics consultancy has estimated previously that when the ‘new normal’ emerges in 2021 it is likely that 30% of employees in London will still be working at home on any one day, compared with only 11.9% of employees before the crisis.

“Scaling from this, the capital will continue to lose out on around £178m per month compared to what was previously spent by employees near their places of work,” Shah said.

And if employees and businesses are driven away by London ceasing to be “fun”, the effect on the capital’s GDP could be many times more, he concluded.

Many Scottish shops and hotels at risk of going under, R3 report claims

Hundreds of retailers and hoteliers in Scotland are at risk of going out of business in the next 12 months, a new report claimed today.

Business recovery organisation R3 said that there was a “high risk” of failure for 274 retail businesses and 30 hotels in Scotland. A further 1,238 retailers and 137 hoteliers are vulnerable to failure over the same period. This means that more than a quarter of shops and nearly a fifth of hotels across the country are at some risk of failure in the next year.

The retail sector is suffering from a lack of consumer confidence as well as changes in way people buy products. The ongoing shift to online shopping is impacting retailers, many of which have not effectively moved online, Scottish R3 spokesman Iain Fraser said.

Retailers that fail to respond to the changes in the sector will cease to exist, he warned.

Compounding the problem of changing retail conditions is the poor state of the economy. Consequently, retailers offering niche or non-essential products will struggle until the economy recovers.

Meanwhile, the hospitality sector also remains vulnerable to the economic gloom because consumers can cut back on their leisure travel and business travel remains subdued. Fraser commented that hotels face the challenge of maintaining reasonable occupancy levels without heavily discounting room rates.

He believes the high capital costs involved in the hotel sector make it likely that many hotel businesses will continue to go under until the market recovers.