COLUMN | Business conditions proved more challenging than we expected, or hoped for, during the first half of this year. There are now some encouraging signs, with July producing the strongest hospitality sales growth we have seen for some time.
That growth was geographically widespread, although, as we have come to expect, some regions continue to fare considerably better than others.
We have become pretty adept at searching out the good news stories, and any improvement is welcome. But the conversations we are currently having with members do not yet suggest that things feel much better.
Many are still telling us their revenue is below where it was a year ago. Others may be seeing some sales growth, but profitability remains the bigger concern.
There are understandable reasons for that disconnect.
Menu prices were 3.1 percent higher in June than a year earlier, so some of the improvement in sales reflects the increases businesses have needed to make as costs have risen across their operations.
Even then, businesses remain reluctant to pass every increase on to customers while discretionary spending is subdued. Food, wages, rent, insurance, council charges and compliance costs are continuing to erode margins, including for businesses whose sales are slightly ahead of last year.
Perhaps the more useful question now is not simply whether sales are improving, but what is sitting behind that improvement.
Is growth coming from more customers, a higher average spend or menu price increases? More importantly, is any of that additional revenue reaching the bottom line?
That is something operators will need to keep a close eye on if the recent improvement continues.
There is also summer to consider.
If demand does continue to strengthen, businesses will need to think about what their staffing requirements may look like and allow enough time to recruit. That is not always an easy call when operators are still cautious about adding cost before they know whether stronger trading will continue.
More than a third of our members expect conditions to improve over the coming year, which gives us some reason for optimism.
This is not about assuming the difficult period is behind us. One strong month of sales does not make a trend, and for many businesses the pressure on profitability remains very real.
But there is a difference between being appropriately cautious and remaining permanently in survival mode.
We are not there yet. If the recent signs continue, however, businesses may finally have a little more room to start looking ahead again.
Nicola Waldren
General Manager
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