Market Recovery Monitor – Omicron threatens hospitality’s fragile recovery, as venue numbers grow in Q4 2021

The emergence of the Omicron variant late last year was an untimely reminder for the hospitality industry that the pandemic remains a clear and present danger, despite promising signs of recovery overall in the final three months of last year.

January’s Market Recovery Monitor has revealed that the sector saw growth of 1.6% in Q4 2021, with the total number of licensed premises rising by 1,672 to 106,880. This data encompasses modest net growth in numbers across all areas of the market, though it has been slightly higher in food-led segments such as casual dining rather than in pubs. Some of the most striking growth has been seen in bars and nightclubs, thanks to the return of the late-night market during the final quarter of the year after well over a year of restrictions.

However, these positive short-term trends cannot disguise the scars that COVID-19 has left on hospitality. Since the effects of the pandemic began to be felt in March 2020, there has been a net decline in numbers of 8,228 sites - equivalent to a net drop of around 13 venues every day. The number of casual dining restaurants is now 17.3% lower than in March 2020, while other restaurants have dropped by 10.1% and nightclubs by 17.0%.

Despite the fourth-quarter growth, the future of more hospitality businesses is now under continued threat after a serious dent in sales was inflicted over the Christmas and New Year period. As concerns about the Omicron variant spread, more than 16,000 sites in Scotland and Wales – equivalent to 15% of the GB licensed market – were impacted by the restrictions introduced.

Significant challenges remain as the industry faces into inflationary cost headwinds and grapples with the exit from the remaining COVID restrictions. The full cost of this for the industry will only become clear as the UK emerges from the pandemic, but with 8,000 fewer sites in the sector than March 2020, it is clear that the UK’s hospitality landscape has dramatically changed.

The operational pressures, including rapidly rising food and energy costs, staff shortages and supply chain issues threaten hospitality’s recovery just as it was gathering momentum. There are, however, signs of light on the horizon, after the UK Government announced its decision to reduce isolation times for those testing ‘positive’ and return to "Plan A" in England in the coming days.

Ultimately, when the sector has the oxygen of being allowed to trade without restrictions – as was the case in England between July and mid-December – demand is strong, providing hope for a sustainable recovery.