Riding the Waves: UK Hospitality’s Transformative Four Years

Over the past four years, the UK hospitality industry has weathered a storm of challenges, from the disruptive uncertainties of the pandemic to escalating inflation, a cost of living crisis, labour shortages, and unexpected disruptions like train strikes. It’s been a rollercoaster ride with numerous highs and lows, and just when optimism surfaces, another curveball seems to be hurled into the mix.

Rather than delving into the intricacies of the challenges faced during this period, let’s take a moment to rewind to 2019—a time that, in the grand scheme of things, feels not so distant. Reflecting on this period allows us to gauge the substantial changes that have occurred and ponder their implications as we look ahead to 2024.

One useful metric to gauge this evolution is the consumer “share of wallet” across different sectors of the hospitality industry. Leveraging HDI’s card spending data, which tracks the purchasing behaviour of 10.2 million people across the UK hospitality sector, insights from the 12 weeks ending 5/12/23 paint a revealing picture. Delivery emerges as the frontrunner, claiming 12.5% of UK hospitality sales—a significant leap from its 6.5% share in 2019.

Coffee & Sandwich shops follow suit, securing 12.7% of hospitality sales with a 2.0% increase. This shift means an additional £8 out of every £100 spent on hospitality now flows into Delivery and Coffee & Sandwich shops. Meanwhile, Casual Dining has seen the most substantial drop in spending, with its share down by 3.3%, with Pubs & Bars collectively attracting 4.8% less spending than they did in 2019.

On the brand front, delivery aggregators understandably emerge as key winners. However, in the realm of bricks and mortar, Greggs shines as the standout performer, with almost £2 out of every £100 spent in UK hospitality finding its way to their shops, up from £1.60 previously.

Other notable winners include Loungers, Craft Union, and the broader category of “Competitive Socialising” venues. Conversely, late-night, city-centric venues have faced challenges, seeing a decline in their share of the wallet—a struggle exacerbated by shifting socialising patterns since the pandemic.

Analysing the success stories prompts the question: What lessons can we glean from these brands? The pace of opening new sites clearly plays a pivotal role in overall share growth, and with Greggs recently opening a record 17 shops in one week, they’re clearly not going to be slowing down anytime soon!

However, I believe that the ability to scale businesses is intricately tied to delivering a relevant consumer proposition consistently, with the ability to really understand their customers and tailor their offers effectively to local markets being key differentiators for the most successful businesses.

Whether it’s Greggs’ commitment to quality and affordability, Loungers’ mastery of all-day hospitality, or Craft Union’s demonstration of sustained demand for traditional pubs at the heart of communities—the common denominator across these very different business is having a relevant consumer proposition executed with brilliance.

As we gaze into 2024, my sense is that the broad shape of the hospitality sector is going to remain relatively stable. While significant shifts in socialising and working patterns have occurred, they’ve largely stabilised, and we’re unlikely to witness further dramatic changes in how people engage with the hospitality sector in the coming years.

Despite inevitable challenges, such as further inflationary pressures with the National Living Wage increase in April 2024, businesses can now adopt a more strategic approach and plan for the future.

A standout feature of the last few years, even with the cost of living challenges, is the fact that consumers are increasingly demanding experiences and are willing to pay more for quality – the rise of competitive socialising venues and the phenomenal growth of world lagers offer some very clear examples of this in action.

However, growing visit frequency and attracting new customers is likely to continue to be a significant challenge for hospitality businesses. Against this backdrop, being able to maximise spend per visit through optimising price, mix and menu architecture is more important than ever for operators; which is where investing in customer insight work to help operators better understand their customers, competitors and local markets will really pay dividends.

Quite simply, operators cannot afford to leave value on the table when it comes to tailoring their offers.

As we chart the future of UK hospitality, lessons from the past four years are clear: stability is on the horizon, but challenges persist. In 2024, success hinges on data-driven decision-making, understanding customers, and strategically optimising offers.

Embracing these insights will be key to navigating the evolving market and seizing opportunities in the year ahead.

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.