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Thursday, December 3, 2020

Lack of financial incentive sees hospitality sector struggling

Whilst initially there were hopes for the flagging hospitality sector to bounce back post lockdown, financial incentives have ended amidst rising practical considerations.

Eat out help out

Eat out help out was a great crutch for restaurants and bars to lean on as they tried to slowly recoup their lockdown losses.

Rob Cameron, CEO of Barclaycard Payments, said: “It’s clear that ‘Eat Out to Help Out’ had a positive impact on restaurant and fast food spend in August resulting in many businesses choosing to extend the discounts into September, even without the government incentive.

“Consumer feedback has also been very encouraging, with almost one in five planning to continue dining out more often to support the industry, and a similar number saying that they will return to restaurants that they would not have visited otherwise. Restaurants across the UK will be looking to maintain this boost in trade, especially with the Christmas period now in sight.”

Despite this optimism Eat out Help Out did expire on the 31st of August, and despite calls for the treasury to extend the scheme does not look to be returning anytime soon.

This has led to a quick rise in Consumer Price Index (CPI), with prices rising 20 times faster for catering Services between August and September, than in the preceding two months.

The UK inflation rate rose from 0.2% to 0.5% in the same period.

The hospitality sector was among the hardest hit during lockdown and with the new tiered approach to Covid-19 it seems unlikely that restaurants will be able to recover anytime soon.

10 PM Curfew

This applies to all three tiers and has had a negative impact both socially and economically.

According to data released by Paymentsense, sales have been falling. Head of customer insight, John Knott stated:

“Our payment data, across the whole of the UK, shows that on the first day of the curfew- the 24th September – UK card transactions in restaurants, bars, and pubs across the country fell by 16% and overall sales by 13%, based on the previous week’s data.

“This shows a decrease in transactions and revenue, another adversity that the hospitality industry is facing. Businesses must pivot and adapt as they did to survive the trading challenges that the national lockdown brought. The average transaction value has increased by 3% compared to the week before and 6% compared to the same time last month. The data shows that consumers are likely to be ordering more on the last round due to the increase in the value of the transaction”.

So not only has this decreased overall sales, but it has incentivised consumers to buy more alcohol per round, increasing risks to health, safety and potential work for police dealing with public drunkenness.

Impact of the Tier system

The tier system is also likely to drive a large dent into sales for restaurants and bars.

Tier 1 is fairly unrestricted provided you stick to a group of six people maximum and obey curfew. However even this restricts the size of tables and with social distancing measures making seating arrangements awkward.

So even at the baseline level of restriction restaurants and bars have limited seating, a curfew and have to juggle table sizes to fit the maximum amount of customers whilst complying with regulations.

Tier 2 restrictions further limit potential customers to only enter restaurants with either people from your household or your support bubble.

The definition of a support bubble encapsulates only a person who lives in a single adult household meaning only someone who lives alone could potentially meet you at a bar or restaurant, and only that person, you aren’t allowed multiple bubbles.

Most tier restrictions are in place in major British cities, where it is the norm to flat share to save money, further reducing the chance of single adults being able to bubble at a restaurant.

London's Best Bottomless Brunches | 26 Ace Boozy Spots
Bottomless brunch and late working lunches will soon be a thing of the past. Source.

Bottomless brunch and late working lunches will soon be a thing of the past.

Finally, in tier 3 restaurants and bars must serve a substantial meal with the purchase of alcohol or will be forced to shut.

So essentially this means you cannot visit a pub for a couple of drinks unless you have the appetite of a horse.

This is the next best thing to imposing a drink limit on pubs and bars and will seriously affect profits.

Added to this is the threat of local closure of any pub or restaurant unlucky enough to be in an area where the threat level from Covid is deemed to be too high.

These measures have been introduced to try to contain the spread of Covid and keep consumers safe, but if the measures don’t include a safety net for businesses affected by them, it is unlikely that they will survive.

Support

Chancellor Rishi Sunak will be unveiling a new rescue deal for jobs and firms affected by this new system, but what information has been released is already coming under heavy criticism.

Tier 3 affected employees will be eligible to receive 67% of their wage from the government with no input required from an employer. Whilst this takes the pressure off of employers, employees are still facing a 33% reduction in wage.

Tier 2 support is slightly better for employees, but too costly for many employers as it necessitates that the government and employer split the cost of paying an employee for unworked hours.

Yotam Ottolenghi, a London-based Chef described the tier 2 situation as “cursed”. He said that prior to the tier 2 lockdown his restaurant had been operating at 50% capacity, already not a promising figure.

He went on to say that with the new measures introduced that number had fallen to just 10-20%.

This dramatic fall in business may force many firms unable to pay the cost of tier 2 to lay off their workers or close altogether.

The chancellor’s spokesperson said: “What we have always said is that our package of support is always flexible, and always up for review, to make sure that it is dealing with the situation as it evolves.”

One can only hope that better measures are drawn up ahead of the schemes launch on November 1st.

Sources:

https://www.bbc.co.uk/news/business-54626729

https://www.bbc.co.uk/news/explainers-53431026

https://www.bbc.co.uk/news/business-54639713

Data Shows Positive Impact Of Government’s ‘Eat Out To Help Out’ Scheme

Payment data reveals depth of 10pm hospitality curfew impact

Tier 1 – medium alert

Tier 2 – high alert

Tier 3 – very high alert

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