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Graeme Smith
Partner & Managing Director, EMEA Leader, Risk Advisory
London
Closures in Britain’s hospitality sector slowed from eight sites a day in 2023 to four a day in the first quarter of 2024, the latest Hospitality Market Monitor from AlixPartners and CGA by NIQ reveals.
The research indicates a 0.4% decline in total numbers between the start of January and the end of March – the third smallest quarter-on-quarter drop since the start of the pandemic.
The current total of 98,745 hospitality venues (pubs, bars, restaurants, hotels, and other forms of licensed premises) means the market is down by 2.5% year-on-year, equivalent to one in 40 venues shutting in the past 12 months. However, the latest three-month snapshot provides cautious confidence that a slight easing of cost pressures may be starting to put the brakes on business closures.
The economy and the hospitality sector have been impacted by many different and significant factors in the past three years, whether that be the disruption from rapid inflation or the longer-than-anticipated recovery period from the pandemic.
This has been visibly illustrated by hospitality openings and closures. These headline rates have always been among the most meaningful proxy for assessing the overall health of the industry and the operating climate. While the number of venues continues to tick down overall, the slowing rate is a further sign of the easing of some of these big market pressures. Operating conditions are clearly not easy, but the volatility of recent years has calmed.
Another key indicator for the hospitality market is M&A activity, which is building momentum, partly on the back of this easing of market pressures, and also as interest rates stabilise and financing markets open up. Debt is available – albeit more expensive than it used to be. As a consequence, we expect these more stable conditions to continue to translate into fewer closures and more M&A deal activity.
On the back of this stabilisation, we’re thankfully returning to a world where the value of hospitality businesses is driven by operational performance and growth prospects, which are particularly encouraging for small but ambitious restaurant groups. Businesses with distinctive and good-value concepts have been scaling up by occupying vacated units, often on more favourable rental terms than were previously available.
While significant pressure on certain parts of the market remain – as can be seen by recent high-street bar and nightclub restructuring activity – if inflation and interest rates continue to ease, we expect that market confidence will build. If that happens, it should feel like a significant corner has been turned and better times, fuelled by margin expansion and growth, lie ahead.
Read our full Hospitality Market Monitor report below:
