Business

Adrian Doran: The rollercoaster ride being endured by hospitality

The anticipated recovery of the hospitality sector could now be severely hampered by the cost-of-living crisis and a widespread lack of staff
The anticipated recovery of the hospitality sector could now be severely hampered by the cost-of-living crisis and a widespread lack of staff The anticipated recovery of the hospitality sector could now be severely hampered by the cost-of-living crisis and a widespread lack of staff

THE latest Barclays Corporate Banking report has revealed the rollercoaster being experienced in the hospitality and leisure sector here.

It’s well documented that this sector was one of the hardest hit by successive lockdowns during the pandemic, but on the upside, pent up demand for nights out, socialising and down-time with friends and family have led to a positive bounce back for pubs, restaurants and leisure businesses.

The “UK Hospitality’s Next Challenge” report quizzed hospitality and leisure businesses in mid-April this year.

The results showed that 82 per cent of Northern Ireland hospitality and leisure operators are confident of growth in 2022. Local hospitality providers predicted an average 30.8 per cent uplift in revenue compared with pre-pandemic levels. This equates to a £0.7 billion rise in annual turnover over pre-Covid trade levels in 2019.

Successful pubs, restaurants and leisure facilities have all pivoted, introduced creative thinking, added digital technology and ways to deliver their offering in new ways, from cook-at-home to takeaway cocktail packs and investment in socially distanced outdoor spaces.

However, just when things look set for a post-Covid rebound, the recovery could now be severely hampered by the cost-of-living crisis and a widespread lack of staff. The optimistic growth projections could be stifled as increases in energy costs hit hard, and more than nine in 10 businesses struggle to recruit staff.

Recruitment issues are widespread in the sector, with over nine in ten (94 per cent) of hospitality and leisure businesses in Northern Ireland reporting they are struggling to hire personnel. Vacancies for cleaning staff (24 per cent) and fitness instructors (18 per cent) are causing the biggest issues here. It’s not a problem exclusive to this region, as the report showed that almost a fifth (16 per cent) of bars and restaurants across the UK are finding it difficult to hire waiting staff, and these recruitment issues extend into back-of-house roles including finance (17 per cent) and senior management positions (16 per cent).

So what’s the solution? Having lost experienced staff to other careers during the pandemic, hospitality and leisure businesses are now in a battle to retain and attract new talent. This is forcing a rethink on pay, working conditions and incentives.

The Barclays report revealed that introducing bonuses is the most popular measure (28 per cent), followed by reduced working hours (22 per cent) and increased wages/salaries (20 per cent). UK-wide, senior managers are set to receive the biggest boost to their pay packets, with an average increase of 7.7 per cent a year for a full-time worker. Delivery riders and drivers, housekeeping staff, bar staff and kitchen staff are all seeing raises of around 7 per cent.

For the time being at least, the Barclays report says the industry’s finances will allow for pay rises and other investments, with a little room to manoeuvre. Profit margins of hospitality and leisure operators in Northern Ireland are now at 28.70 per cent on average, compared to 35.10 per cent pre-pandemic.

However, with the effects of energy price rises and increasing food costs starting to chip further into margins, businesses in this sector are going to be monitoring their bottom line very closely in the months ahead.

On the consumer side, as the cost of living hits household budgets further, it is also likely that those businesses which place real value on delivering customer service and a true out-of-home hospitality experience, will be those that stay the pace.

It’s a really turbulent time to be in the hospitality and leisure sector: just as businesses thought things were on the rebound, they’re facing a raft of new challenges which, individually, could be tricky enough to navigate, but coming together present a real threat.

Northern Ireland has some of the best hospitality in the world and it’s a sector we want to see continuing to thrive. Innovative approaches to solve staffing issues, really close financial monitoring and a joined up strategy for the hospitality sector overall will be needed.

:: Adrian Doran is head of corporate banking at Barclays in Northern Ireland.