There are challenges, but it’s not last orders!
The hospitality sector plays a vitally important role in our society.
It employs c70,000 people in Northern Ireland (c1 in 12 jobs) and often provides the youngest in our society with their first taste of the working world.
It supports a vivid supply chain across many sectors and the indirect employment this creates is significant to our local economy.
But it also provides us the customer a place to meet new people or a place to catch up with old friends over a coffee, a drink or a meal. In a world where too much social interaction is done through a screen, the importance of providing a venue for this face to face meeting in a relaxed hospitable setting cannot be understated.
Current Position
Unfortunately, behind the scenes there are issues coming to a head. The wider hospitality sector is under serious financial pressure. It was hit harder than most during the pandemic, albeit there was limited government support at this time, providing some respite and what has followed has been arguably harder for the sector. Below I highlight some (not an exhaustive list) of the most pertinent challenges currently facing the sector:
Recruiting and retaining staff has never been harder.
Increases in salary costs when margins are already being pressed.
The rates system is punitive to the sector and needs overhauled.
High energy costs appear to be here to stay.
Customers tightening discretionary spending.
Venues are not generating enough margin to fund required capital expenditure to stay ahead of the curve.
Interest rate increases making debt servicing significantly more expensive.
Draconian licensing rules impact how and when venues can trade.
A significant change in consumer habits.
There is no silver bullet to fix all these challenges. It will take a mix of government policy, sector leadership, support from employees, lenders and customers to ease these challenges and give viable venues a long term sustainable future.
Most of these factors are beyond the business owner’s control, but what can these business owners do that is within their control?
What can hospitality businesses do?
It is a cliché, but the only thing hospitality businesses can be certain of over the next few years will be uncertainty. Therefore, now is the time for them to act and plan for the future. Each business should consider the following:
Prepare a robust set of financial projections, with appropriate contingencies built in.
Critically analyse the current business model and challenge medium and long-term viability.
Sweat your space. Establishment costs are significant within the sector, can the space be used outside of your businesses’ core hours or be better utlised to drive revenue?
Invest in your staff and their training, which will reduce staff turnover and increase customer satisfaction.
Proactive marketing. Social media has been a game changer and done correctly, can be a hugely effective way to drive footfall (often for minimal costs).
Focus on the customer at all times and deliver an experience.
Embrace technological developments.
When profit margins are squeezed, proper inventory management and stock control is essential. Put a robust process in place.
How we can help?
We have recently assisted four significant Belfast based venues with CVAs allowing them to continue to trade on, protect jobs and deal with their historic liabilities. Each of these businesses had different challenges, however, due to the drive and commitment of their proactive Management teams and the support of their creditors, we are able to assist their turnarounds.
These businesses had viable futures, however, we’ve also recently had to deal with other hospitality businesses across Northern Ireland that don’t have viable futures. These have been closed and the properties sold. The indirect impact on these local communities will take time to fully show.
Conclusion
It’s not all doom and gloom nor is it last orders for the sector. Yes, there are pressures across the sector, but there are businesses which are adapting to these challenges and performing well. Management teams need to be agile and seek out the opportunities to drive growth. Like with any sector, standing still is the worst thing a Management team can do.
When faced with a challenge that they cannot fix on their own, early engagement from Management is key with their advisors and key stakeholders to ensure there is time to explore the wide variety of financial and operational options available.
As consumers, let’s get out and support the sector, where we can.