Hospitality recovers but small venues ‘fragile’

The hospitality sector in the UK is stabilising following the impacts of Covid-19 but independent venues are still at risk of closure, new data has revealed.

The Hospitality Market Monitor, compiled by CGA by NeilsenIQ and AlixPartners, recorded closures of UK-based hospitality venues over three years since the beginning of the Covid-19 pandemic (March 2022 to March 2023), as well as during the first quarter (Q1) of 2023 (December 2022 to March 2023).

The report has revealed that the sector has witnessed ‘hundreds’ of closures of licensed premises since the pandemic, but the rate of closures is slowing.

Graeme Smith, managing director, AlixPartners, said: “While the number of pubs, restaurants and other licensed venues continues to contract in UK hospitality, there is some positivity in this latest analysis of the market, given that the overall cadence, or rate of decline, has slowed significantly.

“Underpinning this is the fact that the rate of closures in all major cities is reducing, as Covid-19 concerns subside, and workers and tourists steadily return to urban centres – even to a degree, on Mondays.”

Venue numbers down 13,793

Research shows Britain has 13,793 fewer pubs, bars and restaurants than it did in March 2020 – a 12% contraction compared to the beginning of the pandemic.

In London, the hospitality sector saw a net decline of 540 licensed premises in three-year period, equating to 15.6% of the city’s pre-Covid total and equivalent to one closure every two days.

The UK government’s support for energy bills has ‘undoubtedly saved many businesses’ but the cut in the support will have a major impact on ‘fragile’ venues. Inflation will impact profit and sales, making closures ‘likely’ for the rest of 2023, the report warned.

The report also found contrasting results between independent venues and larger businesses. While the independent sector recorded a loss of 14.1% of venues in the three-year period, the managed sector suffered a smaller decline of 3.3% of sites.

During Q1 of 2023, the independent sector saw a net decline of 583 sites, equating to a 0.9% fall, while the managed sector gained 54 sites (up by 0.3%).

Smith added: “This latest study underlines the growing divide between larger and smaller operators, reflecting the varied ability to withstand the continued headwinds the sector faces.

“The closure rate of independent businesses – the lifeblood and entrepreneurial driving force of the sector – continues to vastly outstrip the better-funded corporates and the branded operators.

“It highlights the need for government support to be extended, especially on energy costs, if small (often family-owned) businesses are to survive.”

In addition, food-led venues (which fell by 1.1% in Q1 of 2023) have seen more closures than the drink-led side (down by 0.4%).

Overall, drinks-led venues lost 3.6% of sites across the three-year period, yet across the presence of larger ‘managed’ drinks-led venues increased by 4.1% in this time. Comparatively, independent venues lost 4.2% of sites in this period.

The club sector has also fared poorly in the last three years, as Britain has 30.6% fewer clubs than it did three years ago.

Regional performance

The rate of venue closures varies from city to city across the UK.

During the three-year period, Aberdeen (down by 18.9%) and Birmingham (down by 17.1%) lost the most sites of the 15 cities analysed, yet gained back 0.5% and 0.3% of venues respectively during Q1 of 2023.

Bristol and Liverpool lost 1.5% and 2.5% of sites respectively across the three-year period.

Bristol has been the most successful of the 15 cities analysed in the first quarter, having seen a 1.1% increase in established venues in Q1 of 2023.

Closures in all major cities have ‘slowed since the start of the year,’  the report found, as Covid-19 concerns subside and workers and tourists steadily return to centres.

Smith added: “On a 12-month view, the number of closures is still very significant.

“By the end of the year, the total number of licensed venues is likely to fall below 100,000 for the first time in many decades. It reflects approximately 13,000 closures since March 2020, and the many thousands of pubs that have shut in the decades prior.

“This is a trend that speaks to the relative decline of high-frequency drinking occasions, which have in part made way for the explosion in [less frequent, higher spend] dining-led visits, and the rise, in recent times, of (less frequent, higher spend] competitive socialising occasions.”

A report by not-for-profit Be Inclusive Hospitality recently found one in three respondents have experienced discrimination while working in the hospitality sector.