Sector leaders optimistic about winter growth

Hospitality and leisure operators remain optimistic about the prospects of long-term growth, despite accepting the bleak outlook for Summer 2020, according to Barclays Corporate Banking Survey.

Just 6% of more than 300 business executives responding to the survey said they were confident about growth this Summer, and only 30% anticipate growth this Autumn, but 83% think they will be able to grow in Winter 20/21.

Although the ‘staycation summer’ has provided a noticeable boost in earnings for over three quarters of businesses (79%), they are predicting a 41% year-on-year decline in sales compared to 2019.

Furthermore, nearly two fifths (39%) said they have been ‘kept afloat’ so far by the government’s VAT cut – a figure that jumps to 55% for cafes – and 40% described the move as a ‘lifeline’ for the sector.

With rent an ongoing issue for many, over a quarter of respondents (26%) said they will be having conversations with landlords in the near future, with 18% aiming to move to a turnover-based rent model.

Other rent proposals include an extension of payment terms for backdated rent (16%), a move away from upward-only rent reviews (15%), offering landlords shares in the business in exchange for rent (13%) and a move towards a shared ownership scheme with landlords (10%).

To boost their prospects in the ‘new normal’, many operators have been investing in new technology post-lockdown, and nearly a third (32%) said the coronavirus has accelerated a ‘technological revolution’ in the sector.

One in four (25%) of retail businesses have embraced data analytics for the first time since lockdown, and 32% of leaders surveyed said there will be an increase in data sharing among companies at a local level going forward.

One in seven (17%) have also introduced new apps – 24% of restaurants – and over a fifth (22%) have made upgrades to their websites to accommodate more digital sales (36% of restaurants).

The trends correlate with the uptick in restaurants offering delivery for the first time (18%) and 20% offering a new click and collect functionality.

Businesses have also adapted their operation in more physical ways, with 44% of cafes, 30% of restaurants and 25% of pubs opening food preparation areas so they’re more visible to customers, while 20% of bars and 19% of hotels have moved to a ‘dark kitchen’ format where food is prepared off-site.

“The hospitality sector has been one of the hardest hit and the road ahead is tough,” said Mike Saul, head of hospitality and leisure at Barclays Corporate Banking. “The government schemes, particularly the Eat Out To Help scheme has given the industry a massive and much needed short term boost. Whilst many bosses in the industry have essentially written off this year it is pleasing to see they are feeling more confident in the run up to winter and into next year.

“Despite the headwinds and uncertainty, this is a highly resilient sector that hasn’t stood still. To fulfil their long-term growth ambitions, companies used the lockdown period as an opportunity to innovate, refresh their business models and adopt new technology. Hospitality and leisure are full of smart, inventive, resourceful leaders who will ensure the future is bright and the present is as good as it can possibly be.”