The very essence of hospitality is social interaction, and as such the Covid-19 pandemic is decimating the hospitality industry across the UK.
The hospitality industry is already smaller, and will be significantly smaller in every way as a result of the Covid-19 pandemic.
Estimates of how much smaller vary, but smaller it will be.
As such many industry names will disappear, and many more names that are not so well known will too.
At this point we would like to say to any readers that think this is sounding negative, that we had the same concerns at the beginning of March.
Concerns that our reading of the situation was pessimistic. Here’s one such article – COVID-19 the unwanted solution to hospitality’s people and skills shortages. And here’s another – Hospitality and catering businesses need to immediately recognise Cash is KING. If you read either or both they unhappily were all too accurate.
So, to reiterate, we are generally optimistic but here we are applying some pragmatism to looking forward.
Hospitality adapting to survive – Recognising a problem, and the scale of it is the first step in addressing it.
Any talk of things returning to normal, as it was prior to the outset of Covid-19 are totally redundant. Moving forward hospitality is and will continue to be a different world.
The key to survival will be adaptation, adjusting businesses to changed market conditions, and changed customer needs.
We are glad to report that this is beginning to be realised and businesses like Bartlett Mitchell are leading the way. Future workplace catering forecast.
In order to try and paint a picture of a changed business landscape and customer needs, a macro view is a helpful start.
From this view how to adapt can be best identified.
Hospitality adapting to survive – A Macro View
Macro View: What will the impact from the Covid-19 pandemic be to the world economy?
IMF – World Economic Outlook April 2020International Monetary Fund – World Economic View: The Great Lockdown (Covid-19 Pandemic) will be the worst recession since the Great Depression, and far worse than the Global Financial Crisis in 2009.
European Central Bank – Christine Lagarde, President, European Central Bank president thinks eurozone GDP could fall by 9% in 2020 in a middle-case scenario. In the worst-case scenario it could be as bad as 15%. For comparison eurozone GDP fell by 4.5% in 2009.
Bank of England – The Bank of England has warned that Britain faces its worst slump in at least a century.
Bank of England policymaker Jan Vlieghe warned that the Covid-19 pandemic, and the ongoing lockdown, was having a ‘highly asymmetric’ impact. Doubtless Vlieghe is pointing to hospitality in his asymmetric reference.
Bank of England: Based on the early indicators, and based on the experience in other countries that were hit somewhat earlier than the UK, it seems that we are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century.
So, we know the UK economy is contracting and will continue to significantly.
We also know that the hospitality industry is and will continue to be one of the industries worst impacted.
Hospitality adapting to survive – The Industry View
Let’s now look at how industry body UKHospitality sees things.
Results revealed yesterday from a survey of hospitality businesses sets the scene.
More than one million jobs that are at risk.
The survey’s respondents overwhelmingly expect a slow recovery in the second half of 2020.
Results show a ‘worst-case scenario’ in December down by 61% for the same period last year, and a worrying best-case scenario of a 31% decline.
The shorter-term outlook is yet more severe, with expectations for August 2020, a key month for hospitality, at between an astonishing 82% and 53% decline.
Commenting on the survey results, UKHospitality CEO Kate Nicholls, said: “A bleak outlook from hospitality operators should send shock waves across Government and the economy. Hospitality is a key economic force for the UK, with 3.2m jobs reliant upon it in normal times.
“Social interaction is key to hospitality, so at a time when public health is rightly the Government’s top priority, it is essential that our sector is seen as a special case. For most venues, enforcing full social distancing is financially unviable, though we are undertaking substantial work to get prepare for a return.
“The Government’s generous support measures so far have given many operators real hopes of survival. A continuation of business support is the only way to avoid carnage in hospitality, one of the UK economy’s jewels in the crown.”
So, it is clear that the industry’s leading trade body is genuinely concerned at what it sees, and foresees.
Let’s now look at a snapshot of news from one of the hospitality industry’s biggest companies in the UK, Compass Group.
Compass Group is a UK company and the world’s biggest caterer employing more than 600,000 people. In one of its recent statements it has said that its revenues could fall by up to 30% as a result of the measures being introduced to curb the spread of Covid-19.
Compass also said the vast majority of its Sports & Leisure and Education business in Europe and North America has been closed, and its Business & Industry volumes are “being severely impacted”.
The company said it was implementing “significant mitigation plans to manage costs”, but that its expects revenues to fall by 25%-30% across the business.
Hospitality adapting to survive – The UK Consumer’s View
Last and not least, let’s take the view of the ultimate customer, the UK consumer.
Just over a week ago the results from a survey by YouGov highlighted consumer attitudes to revisiting old leisure habits post lockdown.
The public are clearly averse to visiting places where they are likely to be in close contact with other people.
The entire country has seen most economic graphs go below points never seen before. The hospitality industry graphs read the same.
From a macro view to a relative micro view, cut backs are being made, and will continue to be made.
The UK Government have added liquidity into the UK economy to avoid an even starker shock than we are seeing. Loans, grants and schemes like furloughing workers all help in the short term. In the new economy they will not make good businesses out of bad ones. And they will also have a limit that will be reached sooner rather than later.
The hospitality industry is too big and too diverse to even try to address what to do, as restaurants, hotels, caterers, pubs etc, etc are vastly different businesses.
One thing is for sure, as the market contracts so will the businesses within it. The most painful fact is that many well known businesses will disappear, some have already.
The ones that will have the best chance of survival will be those that adapt, adapting in size will be the first, painful, part of that process.