More than twice as many hospitality & leisure (H&L) businesses are optimistic about the year ahead than are pessimistic, while sector firms say weak consumer demand is the biggest challenge for the sector.
A survey of 100 firms by RSM Tenon found that 46% are optimistic about the year and 19% are pessimistic, with about one third undecided.
However, while 59% are confident about revenues for 2013, only 50% feel the same about profit levels, suggesting that rising costs are a key concern.
Jonathan Perrin, head of the H&L Group at RSM Tenon, said: “For the UK’s hospitality and leisure sector, the start of 2013 has been chillier than hoped in several respects. Economic forecasters now expect GDP growth to be smaller than predicted. However, nearly half of H&L businesses surveyed remain confident about the overall outlook.”
The survey shows that 34% of businesses felt 2012 was worse than expected, with 26% thinking it was better than expected. Almost one quarter (23%) of firms think 2013 will be a turning point for the economy - 37% disagree.
Two years ago H&L businesses concentrated on shedding costs. While cost-cutting remains high on the agenda, with 42% saying they planned to do so, the industry is now focussed on investing in existing offerings, and 66% of those polled said that this would be their core growth strategy.
Meanwhile, 42% said they planned to launch new products and services, 32% were looking to expand into new locations, and 20% wanted to revise their brand or relaunch new brands.
In addition, 18% were looking to refinance or restructure, 15% were looking for acquisitions and 5% wanted mergers or partnerships.
In the survey, 78% of companies cited weak consumer demand as the biggest challenge for 2013, followed by rising costs (59%) and rising economic uncertainty (38%).
Ufi Ibrahim, chief executive of the British Hospitality Association, said: “The Eurozone hasn’t collapsed, the Americans may sort out their fiscal cliff, so the biggest risk may be domestic, that the UK economy will fail to lift enough to give a decent year’s trading.”
The survey shows that 47% of H&L businesses believed they would hit their revenue targets for the first quarter. However, while the profit outlook is not bad, with 45% expecting to hit their goals, it is lower than it has been since the start of 2012.
“Costs are a big issue, particularly the fixed costs and business taxes that apply,” said Ibrahim. “Generating demand is also a real struggle for many hospitality and tourism businesses, particularly in the quieter periods.”
