Rebuilding the Hospitality Industry; new habits require a new approach
Report findings highlight the need for a more refined sales strategy
The hospitality and foodservice sector will lose £30bn of revenues through 2021, achieving only 70% of 2019 income levels, according to a new report.
The “Rebuilding of Hospitality 2021 to 2025” report that has been produced by Simon Stenning, leading sector analyst and founder of FutureFoodservice, forecasts for the industry in 2021 to only achieve £69bn – 70% of 2019 revenues.
Calculations for 2020 are that the industry dropped to only £51bn in total revenues, down from £98bn in 2019.
The 100-plus page report says that for 2022 to 2025, the report forecasts the industry will rebuild slowly, with 2022 regaining 93% of 2019 sales to reach £91bn. It states during the course of 2020 to 2025, the total hospitality industry lost £132.9bn of expected revenue if covid hadn’t happened.
Analysis of the branded restaurant/casual dining market showed a 21% fall in the number of sites that were able to trade in 2020, with the top 50 largest brands dropping site numbers permanently, from 3,706 to 2,935, through re-structurings and CVAs.
Looking at 2021, with this significant capacity coming out of the market, the report expects there will be a rebalancing of the previous scenario of excess supply chasing insufficient demand, part of a “great reset”.
Stenning said: “The hospitality industry faces enormous challenges at the start of 2021 and requires substantial further government support. There are still significant property debts that are outstanding, and business rates are set to be reinstated from April.
VAT is a significant factor for the industry for 2021, and our forecasts are built on VAT remaining at 5% for the rest of 2021. If the government pushes VAT back towards 20% from April, the danger is operators will be forced to implement price rises, which would, in turn, impact inflation, which is something the government needs to avoid. No operator could comfortably accept a 10 or 15 percentage point drop in revenues from their food sales from April onwards, without pushing prices up and have the risk of stifling consumer demand.”
Other economic impacts built into the forecasts for 2021 include unemployment rising to 8% to 9% from April when the furlough scheme is expected to end.
Stenning said: “The forecasts for 2021 are the industry slowly rebuilds through the second, third and fourth quarters, but still ends the year £30bn down on 2019 levels, with a total value of £68bn, taking into account all the impacts and changes. If VAT reverts back towards 20% this forecast will drop further.”
The report outlines that 2021 will end with 2,800 fewer pubs trading than in 2019, and 1,200 fewer trading restaurants.
The forecasts are that fast food will end 2021 with 96% of 2019 sales levels, compared with only 63% for the pub sector.
Stenning added: “Hope remains that locked-up consumer savings from 2020, which have been estimated at circa £100bn, will feed through into boosting 2021 and beyond but, historically, it has taken circa seven years for built-up savings to be spent. As we go through into 2022 and beyond, life and the economy ought to regain their shape, and hospitality will continue to grow and thrive, but it will look different.”
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The report featured in this story is also available to purchase at www.FutureFoodservice.com
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