From Festive Highs to January Lows: Charting the Path Forward for Hospitality

When I wrote my last opinion piece, back in early December, the hope was that we’d enjoy a bumper Christmas, with the positivity continuing into 2024.

The much anticipated strong Christmas period materialised as expected, with year-on-year growth ramping up over the 3 weeks leading into Christmas, and Pubs, Bars & Restaurants enjoying improved growth over this period. However, we were soon in January and the headlines seemed to be dominated by talk of quieter trade and generally sluggish performance.

HDI’s card spending data, which tracks the purchasing behaviour of 10.2 million people across the UK hospitality sector, shows that Coffee & Sandwich, Delivery and Fastfood & Takeaway were the biggest winners in January, gaining an additional £2.82 out of every £100 share of our hospitality spend over the 4 weeks ending 30/1/24 when compared with the spend over the same 12 week ending period. Notable winners here included the Delivery aggregators (Deliveroo, Just Eat & Uber Eats), independent cafés, and the likes of Greggs, McDonald’s and Costa. In contrast, Pubs, Bars and Restaurants saw their “share of wallet” squeezed; the very sectors which enjoyed such strong performance in the run up to Christmas.

So, what does this all mean for the predictions I made back in December, that the broad shape of the hospitality sector is going to remain relatively stable and that businesses could now adopt a more strategic approach and plan for the future?

Well, the good news is that I still believe that this is absolutely the case! January is typically a quieter month for hospitality, with many of us inclined to reign in our spending after the excesses of the Christmas period, with hospitality coming back to life in February with key occasions such as Valentine’s Day and Half Term, and the days becoming noticeably longer.

As always, there’s challenges on the horizon, not least with the rise in the National Living Wage in April, which brings further inflationary pressures to businesses which have seen unprecedented levels of inflation over the last two years. HDI’s tracking of headline price movements in Managed Pubs & Bars shows that the average cost of a main course is up by 20.8% (+£2.01) and the average cost of a drink is up by 17.2% (+57p) over the last 2 years.

With such significant price increases already passed through to consumers, it’s understandable that operators are cautious about pushing price even further. Investing in customer insight work to better understand your customers, competitors and local markets will really pay dividends here, helping inform where price can be pushed, or conversely where a more cautious approach would be advisable.

When considering how to navigate the inflationary challenges, there’s also another way beyond pushing price and/or looking to drive efficiencies. I recently delivered a workshop with Karen Turton from Purple Story, during which one of the attendees commented that “it can’t just be about saving costs. We have to focus on increasing our market share.” Growing your way out of a challenge rather than cutting your way out is surely preferable, but what does this mean in practice?

I believe that there’s a significant opportunity here for Marketing & Operations teams to work even more closely together to identify opportunities to drive further growth – one of the things that’s struck me on my travels in recent weeks is the contrast between businesses that are sweating their space, successfully catering to a whole host of different occasions across the week and those who are seemingly missing opportunities. Loungers are a great example of a business that have mastered all-day hospitality, whilst Caffè Nero are also tapping into the opportunity to drive footfall and make the most of different occasions throughout the week, aptly demonstrated by a recent email inviting me to “make sure to pencil in a work from Nero session this week.”

In summary, it may feel like there’s big obstacles for the hospitality sector to overcome, but time and again the sector has shown that it’s adept at taking on even the most challenging of obstacle courses. Looking ahead, there’s plenty of cause for optimism – to quote Steve Holmes, CEO of Azzurri Group from his interview with Propel earlier this week, “2024 might be a year that as you progress through gets better…there is some light at the end of the inflation tunnel.”

And of course, the fact that the quiet month of January is now well and truly behind us should provide even more cause for optimism!

Mark Bentley is the business development director of Hospitality Data Insights (HDI), provider of card spending insight and pricing data to the UK hospitality sector. He is a former category management controller at Molson Coors Beverage Company and a qualified beer sommelier.