Operating costs now at more than half of turnover

By Nikkie Thatcher contact

- Last updated on GMT

Rising up: utility costs for hospitality businesses have risen to 5.1% (image: Getty/Eoneren)
Rising up: utility costs for hospitality businesses have risen to 5.1% (image: Getty/Eoneren)

Related tags: ukhospitality, Property, Finance, Multi-site pub operators, Christie & co

Hospitality businesses’ operating costs have risen to 55.2% of annual turnover before rent – the highest level for 15 years, it has been revealed.

The 13th​ edition of the UKHospitality Christie & Co Benchmarking Report​, which surveyed operators covering more than 5,000 hospitality companies and covered the six months to December 2021, also showed payroll remained the single most significant cost for operators.

However, this was down slightly by 1.2 percentage points to 28.3% over the course of the year as operators used the furlough scheme.

Overall cost rises were driven by utility, premises and operational costs, representing more than a quarter (27%) of turnover on average.

Biggest rise

Utility costs​ saw the sharpest hike of the operating costs – rising two percentage points to 5.1% for the period covering the second half of 2021 but, the report noted this does not reflect the full extend of the current energy crisis, where many businesses having reported rocketing energy prices of more than 100%.

However, the research also found more than two thirds (67%) of operators increased prices to mitigate increasing energy costs.

Christie & Co managing director of pubs and restaurants Stephen Owens said: “Despite the significant challenges that lie ahead in 2022, new opportunities and ways of operating have emerged over the past few years and with consumers demand returning, there is still reason to remain cautiously optimistic.

“With full year trading returning for next year’s survey, we look forward to updating the sector with an increasingly accurate benchmark against which, operators can compare performance."

Tackling inflationary headwinds

The report also noted a contraction in like-for-like sales of 2.3% compared to the same period in 2019 across the entire survey.

However, certain segments of the market saw top line growth such as accommodation-led firms, which had 9.8% like-for-like revenue growth as they made the most of the staycation boom.

UKH chief executive Kate Nicholls said: “This year’s survey highlights the extreme pressure hospitality operators are labouring under, with costs soaring​ to a new record high.

“We have been working with [the] Government to make clear the harm this is causing to our ambitions for growth, investing in high streets and creating skilled roles.

“It’s imperative [the] Government takes action to help us tackle the inflationary headwinds we face, unlock growth by removing regulatory barriers and creating a tax and investment framework for the future.”

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