Will the hospitality sector see an end to the cost of living crisis?

Can you tell me about yourself and your experience in the hospitality industry?

September 2023 will see my 25th Anniversary of working in hospitality. Having started out as a KP and waiter in a motel I quickly realised what a remarkably diverse and interesting world of hospitality was. I left school with good grades and knew I wanted to pursue Catering Management, so I joined a course at Bournemouth College. I left with a further 2 A-Levels and multiple NVQ’s level 3 and 4.

Since my early years, I have developed my leadership and management skills across many roles in various operations, each presenting its own set of distinctive hurdles and intricacies! From international chains to privately owned properties. Personal highlights for me would be running our own Georgian Town House Hotel in the Cotswolds with my wife for over three years and, of course, being general manager at the distinctive Balmer Lawn Hotel for just over eight years.

Having worked in, and managed, multiple establishments and organisations over the course of 25 years, I’ve amassed some diverse experiences that have collectively provided me with a comprehensive understanding of the hospitality landscape.

How would you describe the current state of the hospitality industry amid the cost-of-living crisis?

Undoubtedly, the hospitality industry has navigated its way through a challenging trajectory over the past few years, marked by successive trials that have tested its resilience. Initially grappling with the unprecedented upheaval caused by the global pandemic, Covid-19, the sector displayed remarkable adaptability in the face of widespread uncertainties.

Now, however, we find ourselves in the midst of another formidable hurdle – the cost of living crisis. This chapter in the industry’s narrative presents a complex set of circumstances that warrant careful consideration. As a seasoned observer and participant in the hospitality landscape, I know that hotels are generally the last thing people think about when there is a squeeze on family finances – often being one of the first sectors to be impacted, feeling this type of impact the longest.

Due to the cost-of-living surge, hospitality businesses are encountering increased expenditures from ingredients, provisions, utilities and even staff costs. To remain sustainable, we’ve had no choice but to increase our prices correspondingly. Yet, in turn, the prospect of excessive price hikes carries the potential to curtail customer demand further, leaving the industry with the ongoing question of how to balance customer interest with profits.

Balancing these factors is undeniably complex. The ramifications are felt not only by business owners and operators but also by the dedicated workforce that tirelessly ensures the functioning and prosperity of our establishments.

I have also witnessed some incredible image and credibility growth within hospitality over the last 25 years and it’s fantastic to see the sector going to such lengths to provide real-world support along with long-term prospects for employees. The present cost of living crisis hits our most precious element – our staff – the hardest and like the Balmer Lawn, Hotels are putting their staff at the heart of their business. Yet again, the industry illustrates a best-foot-forward approach as well as a collaborative and people-first mentality in challenging times.

As a general manager at Balmer Lawn Hotel, what have you done differently to soften the blow of the cost of living crisis on the business?

Our rural hotel, functioning as a destination retreat, faces a dual challenge. Situated in an area with a limited population, we contend with a geographical and socio-economic predicament that many rural, family-owned establishments face. Additionally, being an independently operated establishment without an extensive network of affiliated properties, we lack the advantage of cost-sharing. As a hotel operating within a constrained income, our cost structure is escalating more rapidly than we can counterbalance through revenue growth.

This is where our focus turns to consumer awareness. While we’ve had to shoulder a significant portion of the costs, there comes a point at which we must responsibly transfer some of these costs to the consumer, ensuring it aligns with reasonable and justifiable pricing. On top of this, at Balmer Lawn Hotel, we provide substantial compensation to our employees, reflecting a remarkable surge in wage increments – a development we wholeheartedly welcome. Our baseline hourly rate for individuals aged 16 – 18 is £10.50, with seniors (12 months experience or more) set at £11. This is emblematic of our ethos of valuing and rewarding our workforce but is also in line with the area’s offering.

Balmer Lawn is a hotel with a family feel and purpose, there are excellent levels of senior-level pay, work-life balance, and a genuine prospect for everyone’s future development – but none of this is new. These are long-term and deeply rooted values which support Balmer Lawn employment offering locally and regionally. On top of this, they help the product offering really stand out to guests as a USP. Outside of the workforce themselves, our diverse assortment of packages, each tailored to different price tiers, ensures we remain flexible in customising these offerings. Within reason, we make a conscious effort to adjust our packages based on our understanding of our customers’ spending preferences.

An additional approach through which we attract guests and visitors is via our commitment to sustainability initiatives. We channel any residual profit towards sustainability efforts, aligning with, not just the desires, but the expectations of customers. What was once merely a buzzword has now evolved into an indispensable aspect crucial for the viability of many industries. Striking the right balance between nurturing talent and managing operational costs becomes an intricate play that requires innovative solutions and strong leadership.

Do you see the cost of living crisis ending for the hospitality industry anytime soon?

Unfortunately not. Although, estimating when the hospitality sector will overcome the cost of living crisis is challenging. The situation depends on various factors like economic trends and policies. While it’s hard to give an exact timeframe, industry experts and officials are working together to address these challenges daily which is fundamental for improvement.
Recovery and stability will rely on how well these efforts work and the broader economic conditions. It’s important to be cautiously optimistic while acknowledging that finding comprehensive solutions might take some time.

The lingering impact of escalated mortgage payments, rent expenses, as well as rising costs of essential commodities such as food and fuel, reverberates through the fabric of the hospitality industry. These financial burdens borne by consumers inevitably cast a considerable shadow over the sector. It goes without saying that everyone is feeling the pinch. As individuals grapple with the strain of increased financial obligations, their disposable income is inevitably constrained. Across the board, this manifests as a shift in spending patterns with potential guests re-evaluating their leisure and travel choices. The hospitality industry must keep navigating these altered preferences with insight, adaptability, and innovation.

In essence, the prediction of a conclusion to the cost of living crisis is marked by a degree of uncertainty within the hospitality industry. Yet, the industry bodies’ active engagement in devising collaborative solutions proves its commitment to navigating these complexities with a blend of pragmatism, resilience, and collective determination.

What additional factors are impacting the industry and what areas in the industry have been mainly impacted?

I’ve long said the government’s Brexit immigration policy wasn’t fit for a post-covid world and amid the ongoing impact of Brexit, the shortage of summer staff for many businesses has emerged as a pressing concern. The call by former government minister George Eustice to allow EU workers into the UK reflects the urgency of addressing the workforce deficit.

The industry’s relationship with offering European workers employment has been a key component in meeting seasonal demands and maintaining seamless operations. The shortage of these workers has been felt across entire segments of the industry and potentially influencing the overall customer experience. Furthermore, the call for over-50s to fill staff shortages demonstrates the industry’s need to explore all solutions. The suggestion recognises the vast pool of experienced individuals who may possess the skills necessary to contribute effectively to the hospitality sector.

Encouraging older individuals to re-join or transition into roles within the industry taps into a demographic with a wealth of life experience and customer-centric skills. At Balmer Lawn Hotel, one such approach to this issue is to ensure we are nurturing our own in-house talent – this has resulted in a dramatic decrease in staff turnover alongside enviable rates of retention in hard-to-recruit sectors life cheffing and spa therapists. Our dedication to training and investment in qualifications has paved the way for certain team members to swiftly evolve from trainee supervisors to accomplished leaders and managers.

It goes without saying that the direct impact of the rise of costs of gas and electricity has had devastating and destructive consequences for profitability in venues of all sizes within hospitality. This is a battle to fight collectively; speak up, share information and don’t be afraid to explore new ideas. Invest into the future of your energy consumption where possible, and in the meantime stop at nothing to turn over every stone to get into an affordable contract. Another top tip from me would be buying consortiums.

Where do you think the sector currently stands in its recovery from the current economic squeeze?

While strides have been made towards recuperation, the path remains uneven and dependent upon a multitude of variables. The sector has displayed incredible resilience, adapting operations and embracing innovative approaches to navigate the economic squeeze induced by various factors.

While progress has been achieved, the hospitality sector is engaged in a delicate balancing act as it navigates the intricate terrain of economic hardship. The last few years have forced the sector to become responsive, developed, and even nimble. It’s made business owners think and prepare for the unknown. 2023 has its own personality for sure and whilst it’s a sign that what stands before us is potentially ‘more of the same’, there are many illustrations of success, growth, and diversity. All of which, to some degree, we can all take something from and even emulate in our own businesses.

What is the way forward for hospitality businesses?

Staff recruitment, retention, and development are key for this. Investing in the development of your staff is a type of growth strategy which ensures the long-term stability of the business. It creates a harmonious relationship between employees and employers, and actions have a more powerful impact than words. There’s nothing more disappointing than receiving promises that aren’t followed through.

Utilise your local community, too. An impactful approach to community engagement involves forging connections and alliances. Network and build relationships with local businesses, educational institutions, and tourism organisations. One major benefit of schools and colleges is the effort that they can put towards recruitment drives, laying the foundations for things like apprenticeship and internship initiatives to support the industry’s growth. Local and National Affiliations and memberships are important to navigate out of this. They encourage collaborative strength and almost all provide access to vital business resources – it’s a lifeline in a time of need. From local hotel associations and the Federation of Small Businesses to the Institute of Hospitality and UK Hospitality, we are supporters and members of many and can state first-hand the direct benefits.

As I mentioned earlier, sustainability is paramount to the success of any sector. Sustainability is a driving force that not only aligns with consumer values but also bolsters a hospitality business’s bottom line, competitiveness, and resilience in a rapidly evolving marketplace. It’s a pathway to success that combines ethical responsibility with practical benefits, positioning businesses for sustainable growth and prosperity. Finally, in the grand scheme of things, maintaining a realistic perspective and avoiding excessive overthinking is crucial. Instead, take a step back and return to your fundamentals.

Examine your core strengths and concentrate on refining them or even accentuating them! Delve into your areas of expertise and strength, pinpoint what sets your business apart and capitalise on those. It’s critically important to explore specific aspects of your operations where cost reductions are still feasible. This involves a thoughtful assessment of your expenditure and resource allocation. Are there segments of the business where you could streamline processes, optimise resources, or potentially find more cost-effective alternatives?

Similarly, consider areas where wastage might be occurring. Whether it’s excessive material usage, energy consumption, or inefficient workflows, addressing these pockets of wastage can lead to significant savings and a positive environmental impact. Ultimately, this holistic strategy not only reinforces your business’s resilience but also fosters a sustainable path towards growth and success.