Hospitality faces a crunch year
Hospitality faces a crunch year
A trading revival promises a brighter future for operators that can survive the economic tailwinds in 2024
At the start of last year, I wrote about the consistent and relentless headwinds the hospitality sector has faced over the past few years which have bruised and battered the sector. As we start to look to the year ahead, those challenges are still very much present however ‘tailwinds’ seem to be a more fitting description as the end is nigh, if a challenging 2024 can be navigated.
It would be easy to believe that the sector is completely back on its feet now following the devastation Covid caused (particularly if you tried to get a pint of Guinness in The Devonshire in Soho before Christmas!). At the end of last year, I frequently heard reports of operators trading their ‘best ever weeks’ and already this year I’ve heard reports of tables selling out as soon as reservations have opened. So what is the problem you may ask?
Behind the scenes the hospitality business model has become harder than ever and this has been demonstrated by some very high profile closures with Simon Rimmer’s restaurant ‘Green’s’ located in an affluent suburb of Manchester being one of them. Rimmer himself has cited food inflation, rising energy costs, increasing staffing costs and a 35% rent hike as the reasoning for the closure. There is also a sense of general exhaustion that it’s just all become too difficult. These are the challenges that many are now universally facing as they go into 2024. Operators are now working with a permanent increase in their cost base coupled with a squeeze on household budgets. This isn’t merely a correction as we are now losing good operators who are making the decision to close despite having full dining rooms.
To add to matters, appetite from investors was also weaker in 2023 as operators continued to struggle with the legacy of covid, inflation and the challenges Brexit unleashed and thus hospitality is not viewed as favourably as it was pre-Covid. With an increase in business rates on the horizon for April, the sector needs support from the Government or we can expect to say goodbye to more of our well-loved establishments.
And why is this important? Because as well as being the fifth largest industry in the UK, hospitality is more important to us than ever. Whilst household spending has decreased, there has been a clear reluctance for us to give up our hospitality experiences which feeds us with connection, pleasure and escape from the horrors of what is happening in the world. It’s no coincidence that pubs have been performing so strongly and that some of 2023’s best restaurants opened within pubs. The mood of the nation is that after the uncertainty of the last few years, we are seeking comfort.
Hospitality environments have additionally merged into important community spaces; places we routinely go to socialise, meet and connect. The increase in remote working has fuelled this movement and in doing so has cemented the role of hospitality in placemaking and development. Mare Street Market, which is due to open its second site in Kings Cross this year is a great example as is Kampus in Manchester which is home to multiple quality, independent venues all contributing to the sense of neighbourhood and community as well as being great places to eat and drink.
Hospitality venues are the backdrop to our lives, our experiences and now more than ever are completely intertwined with our cultural experience offering diversity, escapism and exposure of new cuisines which we have witnessed huge demand for. World class dining destination Kingly Court is best in class in this respect. Shaftesbury Capital have continually work hard to diversify the tenant mix and excite the visitor. A re-imagined second floor brought hospitality legends Asma Khan and Imad’s Syrian Kitchen into new larger spaces along with brand new Filipino restaurant Dona; which has recently been cited as the best new restaurant in London. Kingly Court continues to be successful through continually evolving and broadening the tenant mix.
The work we have done at Borough Market recently has seen best in class African, Sri Lankan and Thai operators introduced which has resulted in a dining resurgence for the area. These new restaurants have been named as some of the best in London last year and have strengthened the overall destination.
We have also recently seen traditional cultural venues across London such as The National Theatre, National Portrait Gallery and ICA work hard on their food and drink offering and they have collaborated with some of the best independent restaurateurs to strengthen their overall destination. We at Distrkt are currently working with Somerset House to bring in a collection of exciting new operators to compliment them as ‘the home of cultural innovators’ in 2024. We expect to see more of these types of institutions following suit this year.
In summary, whilst light is at the end of the tunnel, the tunnel has proved longer than any of us expected and the tailwinds are real. There are significant challenges for the sector to overcome this year and without support we could see further loved hospitality venues vanishing only to be replaced by global, faceless operators with deeper pockets. Landlords and tenants as always need to stay close, take the time to understand their respective business models in the face of on-going change. Hospitality is only becoming more integral to our developments and our lives. If we can help the sector get through this year than the future is looking much brighter.