Hospitality Sector: Confidence and Challenges Amidst Revenue Growth

Wednesday, May 15, 2024

The UK hospitality sector faces a delicate balance as leaders express cautious optimism amidst revenue growth, according to the latest CGA by NIQ Business Confidence Survey.

Despite an increase in positive sentiment, only 34% of leaders feel confident about the hospitality market's prospects over the next year – a decrease from 41% in February.

The confidence level for individual businesses also saw a decline, dropping from 57% to 53%.

This marks the second consecutive quarter-on-quarter drop following four straight quarters of growth.

However, encouraging signs include a two-thirds increase in leaders reporting higher revenue in Q1 2024 compared to Q1 2023.

Wage pressures remain significant, with nearly all leaders (97%) reporting an increase in wages over the last year, averaging 8.8%.

Although labor costs continue to be a burden, some cost pressures have eased – energy costs have decreased for 38% of leaders and food and drink costs for 31%.

The survey results show a decrease in vacancies, with only 6% of roles currently open (down from 10% in February).

As wage pressures persist, other areas such as consumer spending and investment plans begin to show positive trends.

Consumers have shown a cautious uptick in spending confidence this year according to CGA's Cost of Living Pulse, while leading managed restaurant, pub and bar groups reported above-inflation sales growth of 5.2% in March.

Half (50%) of leaders plan to increase investment over the next year, outnumbering those planning to reduce it by almost double.

Karl Chessell, CGA by NIQ's director – hospitality operators and food, EMEA, emphasized the importance of these positive trends, stating: "The encouraging signs in consumer spending and cost pressures are starting to build confidence and speed up investment plans for the future."