Spiralling costs mean operators have no choice but to increase prices, writes Wylie & Bisset partner Catherine Livingstone
Although the licensed trade has definitely entered a much-needed period of recovery, many licensees continue to suffer a financial hangover from the debts accumulated due to the restrictions imposed by the pandemic.
If they are to survive and prosper from the long-anticipated recovery, they need to put firm recovery plans in place as a matter of urgency.
A critical element of such plans should be to raise prices in response to rising inflation and operating costs.
Inflation is at the highest it’s been for decades while operating costs are rising too.
Not only has a rise in the minimum wage raised staffing costs at a time when there is a shortage of staff across the licensed trade exerting upward pressure on wages, but heating and electricity bills are rising significantly while the cost of buying produce is rising too.
That means that many licensees will be forced to pass on many of these rising costs onto the prices they charge consumers for their service. That will inevitably have an impact on footfall.
I would advise licensees to undertake a detailed scenario planning and costing review to determine by how much they need to raise their prices.
Staffing is also a major challenge facing the sector over the coming months which must be addressed. Trading-wise, January was quiet on the back of a dismal December, with operators desperate to retain staff while cutting back on their hours because customer demand was so low.
The challenges for the licensed trade are re-staffing and attracting cautious customers back through the doors.
While many licensees have been able to maintain a skeletal staff and should now be able to increase their hours, some operations, such as nightclubs, which have been closed throughout the duration of the pandemic, will not have been able to do that and so will be looking to rebuild their team from scratch.
I would urge licensees to review their pricing structure and address any staffing issues as a priority as the hospitality sector goes through a period of recovery.
• Catherine Livingstone is a partner and head of the business advisory services team at Wylie & Bisset