According to numbers from Lumina Intelligence, consumer behaviour has shifted towards value-led decision making in response to fiscal pressure. Its figure of 78% is up three percentage points year on year (YoY). To manage spending, habitual food routines are being modified, with a focus more on food-only occasions, dropping the purchase of drinks.
FTG is also enduring a slow recovery. While the UK’s economic outlook has started to improve, with GDP no longer expected be in negative growth in the first half of 2023, there is continued pressure on household spending power, while inflation remains high.
External factors such as train strikes and political turbulence have had a substantial impact. Tube and national route travel only averaged around 75% of 2019 volumes, while penetration increased by just +0.7%, and frequency was down by -2% YoY [Lumina].
Inflation has forced operators to increase prices, resulting in a +12% increase in average FTG spend. However, there is a positive outlook for the second half of the year, as energy prices are predicted to fall.
This is reflected by figures from CGA by NIQ and Fourth. Optimism among leaders of Britain’s top hospitality groups has risen since the start of 2023, according to the latest Business Confidence Survey. The quarterly poll shows more than half (54%) of leaders feel optimistic about prospects for their businesses over the next 12 months – a healthy increase of seven percentage points from the January survey, and well over double the number (22%) who feel pessimistic.
The proportion of leaders feeling confident about the eating and drinking market in general has risen even more sharply quarter-on-quarter – by 10 percentage points to 40%.
Leaders remain more positive than the independent market, where confidence in general (23%) and in their own businesses (33%) is lower, influenced by falling profits and higher rates of closure seen in the latest Hospitality Market Monitor.
All figures remain below the levels seen before the Covid-19 pandemic, and the Business Confidence Survey reveals the ongoing impacts of inflation on hospitality. A quarter (25%) of leaders say their business operated at a loss in the first quarter of 2023, while profitability was below last year’s levels for 23%. Post-pandemic, more than a quarter of leaders (28%) now have less than three months’ worth of cash reserves, with one in seven (14%) saying their business is at risk of failure in the next 12 months – unchanged from January.
Karl Chessell, CGA by NIQ’s director - hospitality operators and food, EMEA, said: “These figures highlight the impressive resilience of pubs, bars and restaurants. Consumers remain eager to eat and drink out when they can, and business leaders are rightly confident about the long-term outlook for hospitality. Nevertheless, the relentless rise in bills leaves many firms and jobs extremely vulnerable.”