The past few years have undoubtedly provided some of the most challenging conditions for businesses since the financial crisis in 2008. Sectors from all corners of the UK business landscape have been impacted, but it is the hospitality industry that has really stolen the headlines with a reported five restaurants closing each day.
Despite pandemic recovery being better than anticipated, the hospitality industry has continued to face crippling obstacles at all levels in the UK. From issues across the supply chain due to the crisis in Ukraine and the continuing impact of Brexit, to reduced consumer demand at the expense of the cost of living crisis, pressure is mounting. If you are a business owner in this space, understanding the following main challenges faced by the hospitality industry in 2023 is the vital first step towards weathering the storm and strategizing towards success.
Inflation
Inflation is arguably the biggest challenge facing the UK hospitality industry at the moment. According to the latest Consumer Price Index, UK inflation is currently 6.8% and the impact this has on businesses is huge. Rent, supplies, utilities and wages all rise during periods of high inflation and this means that overall business costs will increase.
Most hospitality businesses have responded to this challenge by increasing their prices. This is a fine balancing act, however, as customers have also cut back on non-essential hospitality spending due to high inflation. Ultimately this leaves the sector experiencing tighter or reduced profit margins which can have a devastating impact on long-term business viability.
Alcohol Duty
Recent reform to alcohol duty in the UK is one of the most pressing challenges faced by any licensed premises at the moment. Alcoholic drinks have previously been taxed by type (beer, wine, cider or spirits), but the new system sees all drinks taxed on their alcohol content, regardless of type.
The new alcohol duty rates came into force on the 1st of August 2023 and businesses have had to respond immediately. Most will try and absorb some of the tax hikes; however, many will have to pass on some of the increase to customers. It is still too early to tell how demand has or may change but it is likely that customers will further cut back hospitality spending rather than sustain their current demand at a higher price.
Staff Shortages
Staff shortages are also one of the most significant challenges faced by the hospitality industry in 2023. EU workers historically made up a significant portion of the hospitality workforce in the UK, but this pool of workers has drastically shrunk since Brexit. In addition, the COVID-19 pandemic saw many workers decide the leave the sector. With fewer workers wanting or able to take hospitality jobs, many businesses have vacant roles which eventually create worrying staff shortages. This is one of the most pressing challenges faced by the hospitality industry, as a lack of the right staff or the right skills may force businesses into reduced operating hours or, worse, closure.
Sustainability
Sustainability is also an increasingly important challenge faced by the hospitality industry in the UK. Consumers are asking businesses to be vocal about their attitudes towards sustainability as their preferences shift towards environmentally conscious choices. This means that many hospitality businesses are having to adapt their practices and procedures and implement sustainable initiatives such as minimising food waste and reducing single-use plastics. While these efforts can align with vital long-term environmental goals, they can also pose significant upfront costs and investment in training which many businesses may simply not be able to afford.
How Can The Hospitality Industry Overcome These Challenges?
The challenges faced by the hospitality industry mean that the sector is more competitive than ever, and business owners must act quickly and effectively to adapt. There are a number of things that you can do if you are worried about the viability of your business in 2023, from taking measures to reduce overhead costs to focusing on training and employee retention. Many businesses are also using this challenging time to refine their brand positioning and focus on how their offering can better competitors.
If debts are rising or you are generally concerned about how your business is responding to the challenges faced by the hospitality industry, seek professional help. Our team of experienced business rescue specialists can help your business to understand its current challenges and work out the best way to respond to current market conditions. Get in touch today to discuss your options.
