The hospitality sector has endured significant challenges throughout the 2020s, with the COVID-19 pandemic, rising energy costs, and inflation taking a toll on pubs, restaurants, and hotels. However, amidst these adversities, business owners have showcased remarkable creativity in their efforts to sustain their establishments. As the hospitality industry aims to recover, the collaboration between accountants, banks, and support systems becomes vital. This article explores insights from Allica Bank’s Market Briefing and discusses how accountancy firms like Plus Accounting can support the recovery and growth of Brighton’s hospitality, food, and drink sector.
The Challenge of Rising Energy Costs:
Energy costs have emerged as a primary challenge for the hospitality industry. The surge in prices has severely impacted profitability and sales. Allica Bank’s approach to addressing this challenge involves sensitising energy costs based on discussions with clients and their accountants. Providing comprehensive information on energy prices and consumption reduction efforts can strengthen a business’s case for support. Various approaches to mitigate energy consumption have been adopted, including the use of energy-saving lightbulbs and innovative solutions like utilising alternative heat sources. Some establishments have also taken measures such as reducing opening hours or closing off sections during lean periods to minimise energy expenses.
Support Available for Hospitality Businesses:
While government support for the hospitality sector as a whole may be limited, there are opportunities for assistance at the local or regional level. Many councils, including those in Wales, have offered grants and encouraged the implementation of energy-saving models in Local Authority buildings. Accountants can play a pivotal role by exploring available support options from councils on behalf of their hospitality clients. Reducing energy consumption not only helps businesses cut costs but also aligns with the increasing focus on environmental sustainability.
Addressing Staffing Shortages:
The current labour shortage poses a significant challenge for the hospitality industry. Suitable staff are scarce, leading to rising labor costs and inflationary effects on overall expenses. To address this issue, some businesses have turned to automation to minimise reliance on staff. For instance, spas and leisure facilities have reduced room capacity and incorporated automated systems, yielding long-term cost savings and improved gross margins. However, smaller hospitality businesses may find it financially unviable to invest in automation, creating a dilemma between cost-saving measures and maintaining high-quality customer experiences.
Inflationary Pressure and the Lending Market:
While reduced demand has affected certain areas of the hospitality sector, the impact has been less severe than initially anticipated. Staycations have remained strong and above pre-COVID levels, contributing to consistent consumer spending. Lending to the hospitality industry has historically been challenging, with many incumbent banks showing little interest in the sector. However, Allica Bank actively seeks opportunities to finance experienced operators and individuals seeking to acquire or refinance businesses. Their approach involves considering cost savings that can be achieved through existing sales, marketing, and finance functions within the acquired businesses, ultimately bolstering profitability.
Support and Advice for Hospitality Business Owners:
Developing a strong network is crucial for hospitality business owners. In addition to focusing on providing excellent customer experiences, having a firm grasp of financial matters is essential. Accountants, valuers, and consultants can offer valuable support by staying informed about the industry and providing real-time market insights. Accountants, in particular, are well-positioned to assist hospitality clients in navigating financial challenges, identifying cost-saving opportunities, and improving the overall financial performance of their businesses.
The hospitality sector has demonstrated remarkable resilience in the face of numerous challenges. As the industry seeks to recover and grow, the collaboration between accountants, banks, and support systems becomes crucial. By addressing challenges such as rising energy costs, staffing shortages, and inflationary pressure, accountancy firms can play a vital role in supporting the recovery and long-term success of Brighton’s hospitality, food, and drink sector.
Author: Chris Morey, Director, Plus Accounting
Contact Chris Morey on 01273 701200 or email firstname.lastname@example.org.
Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
Date published: 14 June 2023