Hospitality’s recovery slowed by inflation and staff costs, CGA finds
As a result of these concerns, businesses have been forced to pass on some price increases to the consumers, with food menu prices rising by an average 13%
Hospitality’s post-Covid recovery is threatened by rising prices in multiple key areas, the latest business confidence survey from CGA by NIQ and Fourth has revealed.
The poll shows that half of senior-level operators are now very concerned about inflation in food and drink prices.
In May, the CGA prestige foodservice price index showed price increases to 21.6%. Now four in five leaders have seen increases in the price of eggs (85%), chicken (80%), and many have experienced hikes in the cost of beer (79%) and red wine (74%).
The research shows that payroll costs are increasing as well. In the last 12 months, hospitality leaders have raised pay for workers by an average of 11%, driven by increases in the national minimum wage and national living wage from April.
Rising labour costs have also been fuelled by staff shortages: across hospitality, 9% of roles are now vacant and only half of leaders feel confident about recruitment in the next 12 months.
In addition, the survey shows that four in five leaders are concerned about energy prices and contracts while 59% feel the same way about business rates and VAT (54%).
As a result of these concerns, businesses have been forced to pass on some price increases to the consumers, with food menu prices rising by an average 13%.
Moreover, just over half of hospitality leaders now feel optimistic about prospects for their business over the next 12 months, 28% say that they currently have less than three months’ worth of cash reserves and 14% say their business is at risk of failure within the next year.
Sebastien Sepierre, managing director EMEA Fourth, said: “This data highlights the continuing challenges that operators are facing, with the rise of food and drink prices becoming particularly hard to swallow. With these cost pressures impacting on profitability, it’s essential that businesses make the most of technology to help control costs and increase efficiencies across both labour and supply, enabling them to adapt to changing circumstances in this period of uncertainty and beyond.”
Karl Chessell, CGA by NIQ’s director, hospitality operators and food EMEA, added: “This is a resilient and resourceful sector and businesses have steadily built back from the turmoil of Covid-19, but relentless inflation means many of them are now operating on extremely tight margins. Rising prices throughout the food and drink supply chain and enforced increases in pay levels have left few companies unscathed, and some are now very fragile.
“Hospitality’s long-term outlook remains good. Consumers are keen to eat and drink out when spending allows, and there are some signs that inflation may ease in the second half of 2023. However, in the meantime the sector needs targeted support on tax, energy, labour and other areas if it is to help power the UK’s much-needed economic recovery.”
