If the rumour that Rishi Sunak is set to extend the furlough scheme into the summer is true, this will come as welcome relief to businesses across the country. Whether we believe the government is providing enough support to the industry or not, it is evident that what they are doing is critical. With things likely to get worse before they get better, what impact could even tighter restrictions and a decline in government support have on operators across the hospitality sector?
In the latest Lumina Intelligence Hospitality Leaders Poll, we asked 267 board level operators running pubs, restaurants and food to go operations on their survival chances if they are forced to shut down until May, the impact a ban on takeaway/collection would have on their operations, whether they have been investing money to make improvements and whether they will need to borrow money in order to survive. Here’s what they told us…
Four-in-five reliant on government support to survive until May
The official end to Lockdown 3.0 is yet to be announced, with many predicting that it will remain in place until March. Even then, with the tiered system set to take its place, it is likely that the majority of regions will remain in the highest tiers and be subject to tight restrictions that will continue to limit their ability to open. As a result, there is the potential that many operators will be forced to remain shut into early Summer.
When asked about this possibility, it is evident that the vast majority of operators will be reliant on government support in order to survive – 79% highlighted that survival was dependant on support from government schemes. Just 5% of operators said that they would be able to survive without government support if the shutdown lasts until May. Unfortunately, 7% of operators said that they would not be able to survive, even with government support.
A ban on collection will force most to temporarily close
With the infection rate remaining high, there has been a debate on whether restrictions would tighten, with a potential ban on takeaway/collection and only allowing delivery to encourage people to stay at home. This would have a significant impact on hospitality businesses, with 84% stating that delivery would not be a viable option for them if takeaway/collection was banned. It is clear that a significant injection of government funding would be needed should this be imposed.
Recent data from Lumina Intelligence’s Eating & Drinking Out Panel highlights the opportunity that click & collect and on-site purchases to takeaway offer to hospitality businesses in the UK. Throughout November and December 2020, click & collect accounted for 16% of all out of home food and drink order and on-site purchases to takeaway accounted for 56%. Although a ban on takeaway/collection would likely result in an uptick in delivery, it will also result in a significant loss in revenue.
65% of operators investing in their businesses this lockdown
Despite the challenges faced, the majority of hospitality operators are investing in their businesses in some way. 16% are investing at least £10,000, with 27% investing between £1,000 and £10,000 and 21% investing less than £1,000. Despite the challenges, investment will be key to business growth, with key investment areas including outdoor space and digitalisation.
The recent Lumina Intelligence UK Pub Market Report 2020 highlighted key areas of investment that pub operators were focusing on in 2021. Outside space was the most popular investment area. Outdoor space is set to become increasingly important in 2021, particularly as we move out of lockdown and back into the tiered system. Consumers will be keen to meet with friends and return to the hospitality industry and operators must be ready.
Two-thirds of operators have either borrowed or will borrow money to survive
Over half of hospitality operators have already had to borrow money in order to survive, with a further 16% stating that they will need to borrow money. With 15% of operators unsure if they will need to borrow, that leaves just 16% who believe that they will be able to survive without having to borrow any money.
Due to the length of the pandemic, operators are becoming more reliant on government support and borrowing in order to survive. The next few months will be critical. If operators are forced to keep their dine-in operations closed until the summer, then we should expect to see more casualties.
The Lumina Intelligence Hospitality Leaders Poll surveys board level operators running pubs, restaurants and food to go operations across the UK.