Where does the hospitality sector go from here?

25 March 2020

During the first week of March I had lunch with two restaurant and food service operators and we discussed how the restaurant sector had ridden the casual dining crunch and why there was a lot to be optimistic about for the future of the sector. Two weeks later and the Hospitality sector had been turned upside down in the wake of the Coronavirus outbreak. On Friday 20 March the Government ordered all restaurants, pubs and bars to close until further notice. A few days later, hotels were asked to close as part of the nationwide lockdown.

This is a seismic shock to the whole sector and whilst there is hope that the shock will be short-lived, many businesses will suffer and some may never recover – those that do will probably be in a different form to what they were before.

According to Open Table, restaurant bookings started to decline from the second week of March – now they have evaporated completely. A small lifeline has been offered by allowing restaurants to convert to take-away operations only. Others are running more delivery services to customers’ homes to keep going.

The Government has also introduced a series of measures which will help hospitality businesses manage their costs and cash flows, ranging from a year-long business rates holiday, suspension of rent payments to landlords for at least three months, and payment of up to 80% of salaries within limits (up to £2,500 per month) for those employees who would otherwise have been laid off, to encourage firms to keep staff on the payroll. In addition, businesses with a rateable value of less than £51,000 will be eligible for a cash grant of up to £25,000 to help them through this period. These measures are all very welcome, but it is a sticking plaster approach and relies on a recovery in the short term. Eventually businesses will just run out of cash, unless investors or banks are willing to support, which is increasingly unlikely.

There has to be hope for the future though. The sector will recover, although somewhat scarred perhaps. The sector will need leadership with a mix of experience, creativity and entrepreneurship to rise from the abyss. It will create opportunities for a range of start-ups coming through the pipeline which will be able to attract new funding from investors as and when the storm passes. Customers will also remember those operators who have acted honourably during the crisis, such as the healthy fast food chain Leon, which continues to keep its sites open to customers where NHS teams and essential workers still rely on its services and staff members are happy to continue working.

Coronavirus will change the hospitality sector forever, but it will rebuild by putting its people first. Hospitality is about being friendly and welcoming to visitors and guests. This attitude is needed most in these extraordinary times.

If you have any more questions regarding the hospitality sector, please contact Martin Jones or your usual UHY adviser.