Hospitality Market Monitor – One Closure Per Hour in Q3 as Cost Challenges Rise – Hotels & Hospitality

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The UK licensed sector – the universe of pubs, bars, restaurants, cafes and hotels – saw a net decline of one closure per hour in the third quarter of 2022.

Our latest Hospitality Market Monitor reveals that there were just under 104,000 approved establishments at the end of September 2022, a net drop of 2,230 since June, which represents an average of just over 24 closures per day, or more 150 per week.

This is obviously an extremely difficult and trying business environment, and some independent businesses are clearly facing an existential crisis. For others, the challenges are crucial but not insurmountable. For a few, current conditions will herald significant opportunities to consolidate and expand their position.

Closures in the last quarter follow a sharp rise in energy, food and labor prices, and this trend is expected to continue through the rest of 2022 without urgent additional government support .

The report reveals a stark contrast between the fortunes of managed hotel groups and independent operators. While the number of managed sites is 3.0% below pre-COVID levels, it has increased by 0.9% (+179 sites) over the past three months. However, the independent sector contracted by 2.6% (-1,751 sites) over the same period, reflecting the greater resources and purchasing power of large companies compared to small companies, many of which are now very fragile.

It’s telling that smaller, independent companies — those that typically have less scale, financial firepower, and coping mechanisms — are already suffering. Some have succumbed to the chronic cost crisis that is stifling or completely eradicating profits and undermining once viable business models. However, the reality is that these closures came before any visible slowdown in consumer spending or visitation frequency which, if materialized, would further threaten viability.

There are so many uncertainties involved that it is difficult to predict the shape of any downturn or the impact on leisure and hospitality spending. However, it seems reasonable to assume that this degree of volatility will inevitably trigger market activity as some companies are forced to restructure. Well-run companies with strong balance sheets will, as always, weather the storm, seize the opportunities and grow stronger.

All eyes are now on the Christmas trading period, which last year was badly affected by the Omicron outbreak. This year, it could offer a silver lining if it is a period without constraints or restrictions. Hospitality and socializing provide respite from personal concerns and challenges, as it always has and will continue to do.

Hospitality market monitor

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