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The Hospitality Sector – a Covid Catastrophe?

By Alastair Hunter, Hottinger Private Office

The travails of the health and education sectors have been well tabulated through the myriad of media outlets since the onset of the Covid 19 pandemic with a bright light shone on the challenges that the staff and users have faced.  Clearly, these sectors have borne the brunt of this terrible virus.

That said, the impact of the virus extends across the economy and has been keenly felt in the hospitality sector, a sector that in all probability touches us on a daily basis, with potentially long-term ramifications for the well-being of our nation.

If you travel into the centre of any village, town or city, a number of once thriving and bustling eateries, bars, coffee shops and the like simply aren’t trading any longer.  As someone who has worked in London for over 20 years and was always struck by the buzz of our thriving capital city, it has been a vastly restricted city both during and after lockdown.

I am sure this is the same up and down the country. It prompted me to think about how much time I spent frequenting the hospitality sector, for business, family or wider leisure time.

It was quite interesting to look at the different definitions for the hospitality sector – the one I liked was “a range of businesses and services focused on leisure and customer satisfaction”.  Leisure and satisfaction are fundamentally important to us all. As social distancing restrictions have been imposed across society for sound scientific reasons, they have hugely curtailed the ability of the hospitality sector to service our leisure needs.

More than ever we require and desire a sense of escapism that the hospitality sector in part provided. Not only has the sector benefited us all as consumers, but it has also become a major cog in our economy. It surprised me greatly to learn that the hospitality sector by certain estimates is the 3rd biggest employer in the UK, accounting for 3.2m jobs through direct employment in 2017, and a further 2.8m indirectly. The industry generated over £72bn directly to the UK economy, and a further £86bn indirectly[i].

The multiplier effect is a well-known concept within economics, and my suspicion is that the hospitality industry is a key industry for the morale and discretionary spending across the nation. A 2015 study by Oxford Economics suggests that for ‘every £1 million the hospitality industry contributes to GDP itself; it creates another £1.5 million elsewhere in the UK economy’[ii]. Given that it is concerning to see some of the reports over the recent weeks about the lack of velocity of money and low consumer confidence.

Figure 1: Deloitte Consumer Tracker Q2 2020 – estimates UK quarterly consumer confidence[iii]
On the assumption it has been a difficult time for us consumers, one can only imagine what it has been like for staff and owners of businesses across the sector. What has life been like for the expats, here to work in the bars and explore our great country? The student using the hospitality sector to supplement their studies, or the talented and passionate specialists in the sector working crazy long hours in the establishments, furloughed at best, with their long-term future uncertain and unknown.

Some political credit seems to be due to Rishi Sunak and his “eat out to help out” scheme – as with many political decisions of late, it was largely treated with scepticism across the media but if the figures from Barclaycard and others this week are accurate this would seem to a very well-aimed shot in the arm for a sector that has been very hard hit[iv].

But more needs to be done, as this wonderful weather which has by and large prevailed over the lock down period, won’t last forever ( I think I can be confident of saying that!) and the outside spaces that allow for people to eat drink and be merry in a socially distanced manner will be vastly curtailed as we enter the autumn and winter months.  Even if, and that is a giant if, there is a vaccine coming to market the likelihood of it being widely available during 2020 is low.  Therefore, the hospitality sector faces a sustained period of pressure.  Let’s hope all the political groups can put their thinking caps on and find more successes like the eat out to help out scheme. 35 million people and counting seem to have taken up the opportunity and it is a much-needed stimulus.

Will that 35m people be enough of a catalyst for investors to re-engage with the sector though?  It’s clear the sector is in urgent need of funding and beyond that, many owners will need to show resilience and crisis management skills. Surviving businesses will be those quick to adapt their business models to meet the demands of service in an era of social distancing.


[i] https://www.ukhospitality.org.uk/news/408996/130-Billion-hospitality-sector-celebrated-at-inaugural-conference.htm

[ii] http://www.bha.org.uk/nas/content/live/hottingergroup/wp-content/uploads/2015/09/Economic-contribution-of-the-UK-hospitality-industry.pdf

[iii] https://www2.deloitte.com/uk/en/pages/consumer-business/articles/consumer-tracker.html

[iv] https://www.bbc.co.uk/news/business-53699595






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