It should be no surprise that hospitality is the latest industry to appear to be falling foul of the cost of living crisis and increased pressure on consumers. Rick Smith, MD at Forbes Burton, an insolvency expert, looks into why.
According to Big Hospitality, we have hit a level of hospitality insolvencies not seen in a decade. This is especially alarming when you consider just how much work went into protecting the industry in the period of time that COVID was prevalent.
One of the first big names to fall this year was Byron Burger, who are shutting restaurants across the country in a bid to stay solvent. But in total, more than 1,800 restaurants closed last year, an increase of 65%.
The reason? Overheads like energy prices, combined with a squeeze on disposable income means a surfeit of restaurants are now competing for an ever dwindling market share.
With no campaign such as the much-vaunted ‘Eat Out To Help Out’ scheme to ease the troubles with government-supported discounts for consumers, the hospitality trade looks seemingly barren at the moment.
The most at risk part of the industry seems to be midrange casual dining venues where the food costs and squeeze on incomes means the price point at which these chains operate is being challenged by the sheer running costs and cannot competitively be added to the existing price profile by which this type of restaurant operates.
The competitors to restaurants, hotels and casual dining chains seem to be the ones that are most competitive price wise. Supermarkets are reporting that more people are shopping in stores, which suggests that they want to see what they are buying and seek out more deals. The home delivery market is also seeing a surge as people opt to order from JustEat or Deliveroo to save on the overall cost of dining out.
So what can be done? For example, is there a way to encourage diners to part with their hard earned cash in a situation like this or are these outfits simply walking too much of an income tightrope to be viable forever? If competition has grown to a point where it’s difficult to entice customers at all, is the problem not a squeeze on incomes, but a dizzying amount of restaurants and choice?
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