Beneath the veneer of normality

Sitting in the back of a black cab in a traffic jam, and you know you are going to miss your train out of Euston. Yep, London feels like it’s back to normal. 

There are people on the pavements, people in Pret. The trains, when you catch them, seem more crowded too.

But, earlier that day I had been with a company that was explaining how they were using commute times to decide their flexi-work policy, whether their staff should be back in the office for two or three days each week.

Despite the air of day-to-day normality, patterns of life have changed – and not just in our big cities. The business landscape, in particular, has been transformed.

Commuter trains may feel busier; standing is back. But that could well be down to fewer services. Station car parks at the likes of Northampton and Milton Keynes are filling up, but are still nowhere near back to pre-pandemic levels of use. You can safely expect to have a choice of spaces to park in.

Latest Coffer CGA Tracker data for March shows that like-for-like sales across pub, bar and restaurant groups were 4% up on 2019. This is positive news, and well-funded managed chains do look best placed to take advantage of the post-pandemic recovery. But sales in London remain flat, and competition, certainly in terms of sites, has shrunk considerably over the past two years.

According to the latest Market Recovery Monitor from AlixPartners and CGA, Britain now has 9,200 fewer licensed premises than it did at the start of lockdowns, around an 8% decline. And that looks like being a permanent Covid scar on the hospitality sector, as net openings and closures now appear to be flattening out.

Although major cities like London have seen multiple site closures, every part of the country – rural, suburban, as well as urban locations – has witnessed businesses shutting up shop.

On the plus side, the daily newswires are full of stories of new openings and ambitious new entrants into the market – often taking advantage of attractive landlord deals. Surveys also show increased optimism among industry leaders about future prospects, not just for their own businesses but the market overall.

Yet, behind those headlines there is still a steady stream of failures, or to be precise site closures. This might be down to smarter operators being quicker to close down struggling locations before they start hemorrhaging cash, which makes good business sense.

But the truth is that in the year to this March, against 5,350 new site openings, there were 6,028 closures, according to the Market Recovery Monitor. You might call that a dynamic market. On the other hand you could call it unstable. What is undeniable is that a high rate of churn is now a market feature.

While managed pubs and restaurant chains have seen an early year sales boost, the same is not true of the wider economy. The ONS has reported retail sales down 1.4% in March, driven by big declines in online and fuel sales. The ONS has also revised February’s sales numbers down – and let’s not forget inflation is running at 7%.

Easter trading will be an important barometer for the out-of-home market when the numbers come out. Good weather will increase optimism, certainly among pub operators with outdoor spaces, if not the casual dining groups.

April figures will also be studied closely as the cost of living increases start to bite and the government takes a bigger slice of income through the VAT hike.

Life is different, and that includes what’s on board agendas. Leaders are having to get their heads around the realities of living in the digital world, and ahead of that there’s always the continuing people crisis.

And for the first time in my many decades in the sector, the start of a conversation now all too often revolves around the supply chain, and the spiraling costs of energy and food.

As one senior pub and bar operator quipped the other day: “Remember when the only thing we had to worry about was the late-night levy?”

The next few months, if not the coming year or so, are going to be tough as the economic clouds gather. The industry can be encouraged by current trading patterns, but new routes will need to be charted and navigated.

Ambitious operators will need to explore new, agile and inventive strategies to grow, rethinking the old models for funding, property and much else. Just don’t expect anything to be normal anymore, no matter what it might feel like.

The accleration of digital

One area where change has been massively accelerated has been in the digital space, driven in many cases by the move to on-line trading. Getting closer to and better understanding customers has been a crucial part of this, with concepts like life-time value now part of the hospitality sector’s business lexicon. Marketing has been transformed from being the promotion department into a strategic data-driven top-table necessity.

So it’s interesting to see which companies are setting the pace. One that has recently caught the eye is Fridays. Just over two years ago, and in the middle of the Covid crisis, it appointed Erica Livermore as its chief technology officer. This month it hired Rhiannon Scarlett as chief marketing officer, who arrives steeped in the value of data, having worked for Dunnhumby on Tesco Clubcard among other projects. Watch this space.