Generally, I believe that doing business in tough times can make businesses better. You are forced to think about how your model works, how it can be more effective and efficient, with every decision made through a very tough filter. The challenges might not be new, but how we deal with them is different – largely through harnessing technology. I see this as both exciting and daunting.
When I think about what has changed since the first Covid lockdown in March 2020, those of us who have been around in hospitality for a while know that we have had to radically revise the model of Profit & Loss (P&L) in our heads. It has always been (and remains) first and foremost about sales, but today we require an unrelenting focus on the cost of people – something magnified by last October’s budget.
Businesses are now being forced to navigate the very tricky path between the cost of their workforce and maintaining and improving customer service. And inevitably, cost pressures are leading to a reduction in the numbers employed, along with less flexibility around part-timers, due to the new lowered National Insurance Contribution (NIC) threshold.
The most obvious knock-on effect of this has been the introduction of more self-service screens, replacing the person behind the counter, together with the rapid adoption of labour productivity models. Without such tools, the myriad forms of hospitality that service our communities, our high streets and city centres won’t survive.
But hospitality is, above all, about human contact: that moment of connection with the person behind a bar or a coffee machine, or serving you in a restaurant or nightclub. How we preserve that feeling at the heart of the customer experience is something we all have to think hard about.
So, understanding the implications of all the cost increases is critical, while preparation is key.
Anyone not prepared for the shock of April’s payroll will be forced into a knee-jerk reaction, such as closing on certain days: a slippery slope, as it allows people to change their behaviour and go elsewhere – undermining hospitality’s role in welcoming and enhancing customers’ daily lives.
Businesses must mitigate the increases: we have seen investment reduced sharply, staff hours cut, venues closing for longer and laying people off, and that new extension or restaurant isn’t being opened. And the most obvious lever to pull in the face of all these stresses and strains, is price.
Over the past five years, we’ve seen prices on average rise by 15% to 20% and they will need to increase more. But to survive, you can’t just increase a price without anticipating the consequences – our whole industry has seen covers and volume decrease but like-for-likes hold up in the main due to price hikes.
Pubs, in particular, worry about price rises, seeing them through the lens of their customers, especially their regulars. Yet, there really is no other way than to put prices up in a careful manner, while making sure you look at every single line in your P&L to ensure you are as efficient as possible – with no wastage. Also, if we are to succeed, we are going to have to harness technology, digitalisation and AI.
Along with labour scheduling, one area automation can really help is with forecasting sales. It’s the one thing that a lot of businesses aren’t very good at, cutting and pasting figures from one week into the next. But AI can be trained – using historic sales data, traffic, local events, holidays and weather – to really help with accurate forecasting. It’s not all there at the moment, but it will come. And, of course, it will allow you to deploy your people to the best possible advantage.
As with most things, investment in technology comes down to resources and SMEs [small and medium enterprises], often don’t have those – they are simply too busy running their enterprises day-to-day. But SMEs are the lifeblood of our industry, while also comprising the majority of businesses in hospitality.
As an industry, we collectively need to think more about the various hospitality businesses and how we can best serve them – giving them access to the tools they need. This is something the Hospitality Sector Council (which I co-Chair with the Minister responsible for our industry) is focussed on through its Innovation Working Group, chaired by Jane O’Riordan.
I believe it is incumbent on larger businesses, such as the pubcos, to develop the tools to help their operators. I know pubcos are already doing much to help their publicans, with good stock control systems, which help in terms of maintaining margins, as well as tools to support sustainability – to help save electricity and water consumption, which are important for many reasons. However, to thrive as a sector, we also need to collaborate more.
We all need to think about partnerships, because we can’t succeed with the old-fashioned relationships where it was all about compliance, telling people to do this and that. In the modern world, it’s about collaboration and having the right tools to keep cost lines where they need to be.
It must be less about ‘me’ and more about ‘us’, to allow our sector to thrive.
Hospitality is the lynchpin of our communities, our city centres and our high streets. It creates the areas where people want to work, visit, shop and live. It literally lights up our high streets – you only have to think back to lockdown, when you’d walk down a dark street without the light of the pub spilling onto a pavement or a restaurant’s lit window, warm and inviting.
Hospitality is the foundational part of everything we do, whether that’s going to see a movie, go shopping, watch a football match or meet friends for coffee, a pint or something to eat. It employs large numbers of people in a flexible manner, with jobs that work for parents, students and those involved in the creative industries amongst others, and offers many people their first jobs, with opportunities to quickly progress. It teaches very important social skills, upweighting confidence and spotlighting leadership ability.
I believe we need to talk more to Government about the critical role of hospitality in the foundational economy and the positive effect it has on adjacent sectors and on work, raising questions and finding answers about how we make sure it thrives in the future, remaining world-beating and a continuing reason to visit the UK.
Successful hospitality businesses create memories. They forge a form of emotional connection with customers, whether that’s through the person behind the bar chatting to them about their day, or explaining a menu or ingredients of a dish. It’s about care and connection.
Having confidence in your offer, knowing what your model is, and being consistent in its delivery all comes back to knowing where to deploy your people, at the times that matter, in order to be able to offer hospitality in the truest sense of the word.
Even in these tough times optimism should remain: we are needed and we are loved. The hard truth is that not every business will survive, but preparation and understanding your customers, your business model and the implications of the cost increases will help you do so.
Hospitality people are fuelled by passion. It’s what makes our industry innovative and entrepreneurial. And pubs are one of the most resilient parts of the sector, literally reinventing themselves dozens of times over many years to ensure they continue to serve customers in 2025, and beyond.
The proverb that necessity is the mother of invention springs to mind in the current circumstances. It forces us to find better ways to do things and to be more creative and more focused on what we offer our customers, and how we show the care that is hospitality’s hallmark. Out of this, good things will happen.
