How has the hospitality sector been affected by the cost-of-living crisis and the pandemic?
- tahliaklein
- May 4, 2023
- 3 min read
It's been a tough couple of years for the hospitality sector, we’ve lived through a global pandemic which forced cafes and restaurants to close their doors for several months and now we’re in a cost-of-living crisis with energy costs skyrocketing, the cost of ingredients increasing and people having less disposable income to spend which means they’re less likely to visit their local coffee shop. I thought we would have a deeper look into how the hospitality sector has been affected and whether any positives have arisen over the past couple of years.
Covid-19:
I don’t think anyone would have seen a global pandemic coming if you had asked us towards the end of 2019. I remember being sat at my Great Aunts house on Christmas Day watching the news about the mysterious virus that was spreading across China, thinking it wouldn’t hit the UK! Of course it did and on 23 March 2020, the UK was put in a national lockdown forcing hospitality to shut its doors without knowing when they would be able to open again.
According to the Office for National Statistics and data from HMRC, just under 1,650,000 employees in the hospitality sector were placed on furlough. Cafes in the city centre were particularly hard hit as once the doors reopened, footfall remained low as people were still yet to return to the office and working from home became the new normal (still to today there are fewer people working in offices). The likes of Starbucks and Prêt À Manger were no longer seeing people grabbing their coffee for the commute to work or picking up a salad to have at their desks. A study by the World Coffee Portal found that 87% of UK coffee shop owners said that “the coronavirus pandemic has negatively impacted their business” and their main concerns were about cashflow and being able to pay rent.
When cafes were allowed to open their doors for takeaways I remember heading down to my local coffee shop to buy a coffee. There was a long queue waiting in front of me as people recognised the importance of supporting independent businesses and were also eager to grab their hands on a barista coffee that they’d been unable to have for months!
Cost-of-living crisis
We thought the hospitality sector had been through enough as a result of the pandemic, but no they’re facing yet another crisis - the dramatic rise in the cost of living and soaring energy prices! Inflation has been at an all-time high, and people have less disposable income so they’re looking to make cuts in their outgoings. Unfortunately one of the first cutbacks people might make is a visit to a restaurant or a cafe, choosing to make a ‘fakeaway’ at home instead of ordering from their favourite curry house or Chinese restaurant. A survey by UKHospitality discovered that 77% of the hospitality sector saw a decline in the number of people eating out and many business owners were feeling pessimistic about the future.
Part of the cost-of-living crisis has been driven by the increase in the cost of energy bills, inevitably having an impact on hospitality who use a lot of energy to make coffee and food. An article written by Sally Guyoncourt from inews spoke to a cafe owner who saw annual electricity bills increase from £10,000 to £55,000, putting the cafe at risk of closing. As costs increase, people have less money to spend if wages aren’t going up with levels of inflation. This has led to strikes across different industries in the UK, with rail strikes having a serious effect on hospitality - the strikes cost the sector £1.5 billion in December 2022 as people were unable to travel, leading to a decline in footfall in hospitality.
Are things really that bad?
Despite the hospitality sector struggling during the pandemic many businesses looked to adapt their business model to overcome the difficulties. Some cafes turned into delis and convenience stores so they could remain open and started selling flour (does anyone remember struggling to find flour?), eggs and other kitchen essentials. The same article from the ONS has shown that as the hospitality sector adapted to the restrictions, the proportion of businesses temporarily closing fell from 81% in the first lockdown to 54% in the early 2021 lockdown.
Although hospitality in the city centres were particularly affected, cafes and restaurants in neighbourhoods were not hit quite as badly. With people working from home it meant they were more likely to visit a local cafe to pick up a coffee.
To conclude it has been tough for hospitality, but they have proven that they can be resilient, adapt and overcome the challenges they face. Although the future is uncertain I think that the sector can pull through and come out of the other end, continuing to serve people in the local area and city centres - I would never down the opportunity for a coffee if I knew I could help an independent business out!
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