Hospitality leaders’ confidence rises though soaring costs still loom

Hospitality leaders remain “cautiously optimistic” despite soaring costs still threatening weaker businesses, according to the 2023 Business Leaders’ Survey from CGA by NielsenIQ and Fourth. The poll found that 47% felt confident about their business prospects over the next 12 months, up from 29% in CGA’s last survey three months ago. Despite this, 20% of leaders admitted to feeling pessimistic, however. Nonetheless, 30% of leaders felt confident about the eating and drinking out market in general. While significantly higher than the 8% recorded previously, this was still down from the 65% that was recorded in January 2022. Despite tough trading conditions, the survey seemed to reflect a “resilience” in the sector, as 84% of leaders said their business operated at a profit last year, while nearly half (51%) were more profitable than in 2021. However, the CGA said many businesses remain “extremely vulnerable” after three years of disruption from Covid-19 and fast-rising costs, with 14% of leaders saying their business is at risk of failure in 2023. The research from CGA and Fourth “emphasises the many inflationary pressures facing hospitality”. Nearly all leaders said they have experienced higher costs in food and drink (96%), energy (91%) and front-of-house labour (91%), which have led to average increases of 12% and 10% in food and drink menu prices respectively in the last 12 months. The CGA said the survey also highlights the “pressing need for government support for hospitality in 2023”. Four in five (81%) leaders want to see a cut in hospitality’s rate of VAT, and significant numbers would welcome help with business rates reform (61%) and more generous support on energy costs (46%) Karl Chessell, CGA director - hospitality operators and food, EMEA, said: “After battling through three relentlessly challenging years, hospitality leaders are rightly upbeat about their long-term prospects. Pubs, bars and restaurants have coped admirably with the pressures forced on them, and consumers remain as keen as ever to eat and drink out when they are able. “However, business confidence still lags well behind pre-COVID levels, and with few signs of respite on costs it is very clear that 2023 will be another difficult year. Hospitality is a dynamic and resilient sector, but thousands of fragile businesses need support on tax and bills if they are to ride out these immense challenges.” In response to the findings, UKHospitality CEO Kate Nicholls said: “The optimistic attitude on show from leaders in hospitality demonstrates the resilience and positivity of our sector, even in the face of enormous challenges. “With the cost of doing business crisis showing no signs of slowing down, there is urgent action needed to tackle the root causes of inflation and clear support among leaders for UKHospitality’s asks of Government in the Budget.” She added: “If the Chancellor acts to extend more energy support, reform the broken business rates system and reduce the sector’s rate of VAT, the Government can harness the spirit of hospitality businesses to see off current challenges, drive economic growth and lift the nation’s economy.”