Hospitality sales bounced this month with an increase of 3.2% across the sector. Both London and non-London sites saw wet-led growth, totaling a 5.5% growth which was to be expected as many poured into pubs to catch the World Cup. The capital saw the most uplift, as figures lifted by 11.8% compared to November 2021, albeit against a low base point.
Last week I attended Propel’s quarterly multi club conference, ‘New Ways of Working’ to catch the latest industry insights. Unsurprisingly, the consensus swayed closer to concern than confidence for the sector’s future. From discussions around inflation and VAT, to workforces, consumer confidence and Government support, the multi club was full of talking points as pressures bottom out.
The first thing I wanted to write about was the main talking point – the big energy bills. On the opening ‘Money Talks’ group, one panellist said, ‘the best will survive and thrive”, suggesting costs and inflation are not as much of an issue for the top 25% and that businesses aiming at richer markets in the South-East of England will likely do better. But what does this mean for the smaller operators? If we look back at the last two years and the relentless toll they had on the industry, can we look forward now at the effects of VAT and see these businesses fighting another two years? The truth is, we don’t know what will happen. We know that consumer confidence is lower, there’s an issue around labour, and inflation in energy of 500 or 600% certainly won’t make it an easy fight.
Is Government intervention a viable consideration or a hopeless dream? One speaker suggested that the new Prime Minister could have a positive effect for the sector, noting how during the pandemic, Hospitality’s importance to the economy was recognised. This attention from the Government did a lot in the way of exposing how many people are directly and indirectly employed by the sector. The sense I got was an extremely cautious optimism, with the hope of help underpinned by a message to not rely on the Government and assume that the support could fall away, and costs will flow through.
Whilst these concerns are ever-present and should be talked about, the discussions around labour took centre stage for me. All of these issues in one way or another circle around the fact that we are a people-based sector. It is an indisputable truth, and one that will be the sector’s saving grace. When we talk about people, we are talking about customers, but equally, we are talking about workforce. Running a high-labour business is becoming more and more complicated, and it will begin to hit returns and margins. In a sea of cost crises and demand impact, now more than ever it is crucial to tackle struggles around labour availability, costs, and retention. Alleviating these concerns should form the foothill of every business plan. The fundamentals haven’t changed: the team experience influences the guest experience. Consumers are less forgiving about service – they are out less and so now more than ever operators need to ensure excellent service. I found that Turtle Bay appeared to really take this message on board. Recruiting hard and building a workforce with a ‘One love Culture’ that centered on diversity, inclusivity, retention, and development was their core competence, and this freedom within a framework works wonders for business. Many operators may ask: what steps can I take towards creating a culture of happiness for my staff and customers? My advice would be to start with the basics: understanding your trading patterns and organising your rota accordingly makes the world of difference. Staff are not overworked and feeling the stress of an understaffed team, and customers are not experiencing long queues and bad service. Opening up platforms for your staff to express their thoughts and feelings at the end of a shift creates a culture of honesty and safety in the workplace. As Alex Reilley, Chairman of Loungers suggested, we need to make “commitments to change” – it is too easy to assume you lose people because of pay, and actually, it’s about letting people challenge you. That should be the real employee-value proposition.
October marks the second month in a row of a significant drop in Hospitality sales. Compared to the same period in 2021 sales were down 7.1% (September -6.9%), this is despite a better trading week over half term of -1.5%. These figures show a downtrend in consumer confidence as the cost of living crisis bites. London fared better with a decline of only 0.9%, albeit up against weak trading in 2021.
Richard Hartley, Chief Innovation Officer at S4labour, commented: “It is worrying to see two consecutive months of decline in hospitality spending which feels like a combination of cost pressures felt through the current crisis. Operators should take heart from the better performance at the end of the month suggesting consumers are saving for big events especially with the World Cup and Christmas coming up.”
Hospitality sales faltered last month with like-for-like turnover down by 6.9% versus the same period in 2021. The biggest contributor to this figure was food sales, which saw a drop of 12.7% this year.
London saw an increase of 8.9%, albeit, largely owing to a modest base point in 2021, when much of the Capital was still experiencing low footfall as a result of at-home working.
Richard Hartley, Chief Innovation Officer at S4labour, commented: “These are a sobering set of figures. This is the first significant indicator of a change in out-of-home eating and drinking habits and is a significant concern for our industry.”
Casual Dining 2022. Coined the definitive event for publicans and restauranteurs. After exploring this labyrinth of 200+ incredible suppliers for two days, I’m compelled to say it lives up to the name.
Renowned for its keynotes from big names with invaluable industry insight, Casual Dining shares tales, tips and most notably, a projection of hope. Mark McCulloch, founder of Hospitality Rising UK, the biggest hospitality recruitment campaign going, delivered his drive to “Rise fast, work young.” The consensus amongst operators is that hospitality work is being treated as a stopgap and more needs to be done to attract and retain staff. Only 1/5 young adults consider hospitality as an option after leaving education, and only 2/5 employees in the sector would recommend it as a job. It’s clear there are a finite amount of people in the recruitment pool. Likening his idea for increasing recruitment to the shape of a hockey stick, Mark alluded to getting people into the industry at entry level, ensuring there are opportunities for them to rise quickly in the company. The more room there is for workers to rise, the higher the retention rate. Mark’s second point to ‘work young’ was not a reference to age, but rather a mindset. The idea is simple: be fresh in your approach to your business and your staff. Consider unconventional marketing ideas, increase your online presence, and save time and money by utilising the technological innovations in the industry. Lead according to the demands of your business and its staff, and not the blueprint from way back when. This modernising of the mindset is already happening. The CGA Business Leader Survey 2022 revealed that 47% of business leaders are planning to increase their investment in technology this year.
Alongside the discussion of growing the recruitment pool were talks of growing businesses. 38% of business leaders are actively looking into the option of business acquisition in the next 12 months, up by 20pp compared to Q1 last year. These figures are a testament to the industry’s perseverance, creativity, and passion.
To swim in a sea of incredible people, products and innovations for two days was certainly the highlight of my week. S4labour’s partners were out and about in full force; the team and I caught up with the folks at Zonal, Airship & Toggle, Tenzo, Apicbase, Tevalis and Vita Mojo. Having so many of the industry’s incredible minds in one room is a special occurrence, and one I hope to make more regular.
For S4labour, Casual Dining is and will continue to be one of the most important events of the year. As a company that is run by hospitality people for hospitality people, the opportunity to be face to face with operators is of paramount importance. Not only do these events remind business owners of the support we will give to them, but it reiterates to us how important our role is in supporting the industry.
It may have been my first time attending Casual Dining, but I certainly hope it won’t be my last.
Following significant challenges over the last two years, hospitality is endeavouring to bounce back as restriction-free trading sees a new dawn for consumer demand. However, significant challenges are well documented, such as rising inflation, perilous utility costs and staff shortages, are already stuttering growth, as operators continue to navigate uncertain times.
According to a recent UKH, BBPA and BII member survey (May ’22), energy and the price of goods are first among the cost issues for members impacting margins. Furthermore 1 in 3 members are struggling to meet overheads or debts. Trade campaigning to reform business rates, training investment, access to people and a cut in VAT are being lobbied via targeted campaigns from our three main trade bodies.
The third factor negatively impacting margins is labour costs, an area which always has been and likely to remain operators’ highest variable cost. Indeed, people costs look to steadily increase due to legislation (National Minimum Wage/ Living Wage/ rising NI). However, labour is controlled differently across the industry – partly because hospitality is so diverse but also because knowledge, systems, training and management styles all vary across larger companies, multiple and single operators. This leaves an inconsistent approach and smaller multiple operators; leased, tenanted and single site operators seem to be missing out – generally the operators with the highest cost burden in relation to revenue.
Larger operators (bigger pub companies, well-known pub and restaurant brands) have managed their labour costs, historically by week and over recent years, daily, as part of their KPI’s. How much labour is invested each week is another conversation, with some operators keeping investment tight, others choosing to spend more, investing in service for more sales. Interestingly there’s evidence of increased labour investment (when operators have enough people in the first place) during this period of lower footfall for many but there’s a spend per head and premiumisation opportunity.
S4labour enables single site operators, as well as larger multiples, to view their labour and revenue spend in-week via a till link, hence full visibility of labour costs – by day and by hour. Visibility of labour may prompt shift changes, moving hours to suit weather patterns, unexpected events or enables daily reaction to review sites (Google/ Trip Advisor etc) about service. The ability to move team hours around the rota, to suit trade fluctuations ensures ‘Slack’ hours (too many people) are re-scheduled to ensure minimal ‘Stress’ (not enough people) during service. Forecast till revenue helps guide the future, while reporting an accurate labour performance in the past – from previous days till data, previous weeks and against last year for a like-for-like view.
Bigger operators are using versions of this technology via their head office teams – now it’s time for multiples, leased, tenanted and Free Houses to have access to a labour tool which suits smaller businesses. A digital rota saves time – time which can then be used to manage people around service peaks and troughs, for more sales. Teams also like to view their shifts via a modern, simple app – with additional functionality to swap shifts if needed – it’s a modern, professional way of working with your teams and ready for all the new people that will hopefully be attracted to our industry.
S4labour are launching a campaign for operators to ‘Get to Grips with your daily labour spend’ – the 3rd highest but controllable cost. Operators currently spend time and investment controlling food and drink margin, food GP, drink yield and wastage – the industry is historically tuned to those areas. Spending a few minutes monitoring labour hours versus revenue and allocating accordingly is a much bigger prize. It’s also a data driven approach using site specific till data, while being really simple to implement and making a huge difference.
‘Smart tech’ should solve real problems, save time, or improve productivity – S4labour does all three:
S4labour help sustainable businesses ensure longevity in these turbulent times – there’s no reason why smaller players shouldn’t be embracing the opportunity to ‘Get to Grips with your daily labour spend’ – to be on at least the same playing field as the bigger players.