‘New normal’ means hospitality needs more government assistance

Catherine Livingstone

By Catherine Livingstone

The ‘new normal’ of consumer behaviour post-Covid, with the widespread switch to hybrid working patterns, means that more and permanent government assistance is needed to help the hospitality sector survive an increasingly challenging business environment.

In addition to this, the cost-of-living crisis and tax increases announced in the Autumn budget means that consumer spending is likely to reduce due to disposable income simply being lower.

And while the recent budget offers support to the hospitality sector in relation to business rates support, it is unlikely to have done enough to persuade many licensees who have struggled throughout the last three tortuous years, to sell up and seek alternative, more stable, sources of income.

Having reviewed many hospitality sector business accounts over the summer months, it is evident that levels of trade are down significantly on pre-pandemic levels.

And while some rural hotels and restaurants benefited from a marked rise in the number of ‘ staycations’ throughout the period of the pandemic, the emergence of a ‘new normal’ has seen many such businesses struggle to manage on sustained lower levels of trade.

With VAT payable back up to pre-pandemic levels, this latest budget is needed to provide much more in the way of assistance to the hospitality sector to prevent many more operators going to the wall over the winter months.

To counter that gloomy prognosis, it is encouraging that the outlook for this year’s festive season is far more favourable than last year’s, which was devastated by Covid restrictions. With such restrictions highly unlikely to be repeated this year, booking levels over the festive period are already encouraging and seem unlikely to face cancellation.

Yet the ‘new normal’ has seen a permanent shift in consumer behaviour with Thursday becoming the new Friday, as more and more office-based businesses adopt hybrid working systems with many employees opting to work from home on Mondays and Fridays.

This has had a significant impact on hospitality sector businesses, many of which no longer open seven days a week, and have suffered a loss of Friday end of working week get-togethers.

This ‘new normal’ suggests that short-term temporary support is unlikely to solve the many problems confronting the hospitality sector. Rather, more permanent measures, perhaps through VAT cuts, are required.

As we have seen, many restaurants no longer open seven days a week — and while there has been a temporary cap placed on energy costs, fuel bills are still far higher than they have been previously — so that measure is unlikely to be a sufficient incentive for such restaurants to revert to seven days a week operation.

It does feel like the hospitality sector has been lurching from crisis to crisis over recent years and some operators should consider if they remain viable or whether they should consider an exit plan.

Whether they are planning to survive or planning to exit, they should take professional advice to help them make some difficult decisions.

We can assist. For further info, call me on 0141 566 7000. Catherine Livingstone is a partner and head of the business advisory services team at Wylie & Bisset.