Inflation pilfers December gains for hospitality

By Jo Gilbert

Published: 18 January, 2023

Britain’s leading managed pub, bar and restaurant groups enjoyed their best December trading in three years, the latest data from CGA has revealed. However, thanks to double digit inflation, sales remain well below pre-Covid levels in real terms, demonstrating the double pronged impact of the cost-of-living crisis and Covid recovery on UK businesses.

The Coffer CGA Business Tracker, which is produced by CGA in partnership with The Coffer Group and RSM UK, shows like-for-like December sales were 15% ahead of December 2021, when festive trading was hit by concerns about Covid’s Omicron variant. However, sales were only marginally ahead of December 2019 (2%) and after adjustments for double-digit inflation, are actually significantly behind.

“After two bleak Decembers, solid Christmas trading helped many pub, bar and restaurant groups to end 2022 on a high,” Karl Chessell, director for hospitality operators and food, EMEA at CGA (owned by NielsenIQ), said.

“However, it is clear that sales remain well behind pre-Covid levels in real terms and fragile consumer confidence and rail strikes made for tough trading conditions. With the costs of energy, food and other key costs continuing to soar, operators’ sales and profit margins are under severe pressure as we move into 2023.”

Pubs enjoyed the strongest sales: like-for-like revenue finished 19% ahead of December 2021 as consumers’ concerns about Covid eased and the football World Cup drove fans into venues. Year-on-year growth was more modest in restaurants at 9.1%, while sales in bars were up 11.9%.

Overall, December marked the 15th consecutive month of falling eating out like-for-like sales in real terms.

The tracker also highlights the ongoing recovery of London’s hospitality sector after Covid, which is some way ahead of the wider trade. December sales within the M25 were 22.8% ahead of 2021, when Omicron curtailed parties and celebrations across the sector. This year-on-year growth was sharper than outside the M25, where sales were up 12.9% year-on-year.

Train strikes took their toll on the sector, too. The walkout by employees struck hospitality on several key trading days throughout December.

However, Mark Sheehan, MD of Coffer Corporate Leisure, sounds a note of optimism. Despite disruptions, he said “trading was solid and many operators especially pubs and bars traded better than expected. Cost pressures remains challenging, but there is some optimism amongst many operators”.

Paul Newman, head of leisure and hospitality at RSM UK, added to caution to the mix.

He noted that the headwinds facing the leisure and hospitality sector “show little immediate signs of abating”, with significant rent and VAT outflows due at the end of March coinciding with the end of energy support and the start of Covid loan repayments.

“These factors will undoubtedly lead to more restructurings, providing consolidation opportunities for well-funded operators to capture market share from faltering rivals.”

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