opinion
Pubs in a recession: how hospitality can cope with economic downturn
A pub quiz or a Sunday roast are a regular fixture in plenty of people’s weeks, and one’s nearest pub’s designation as ‘the local’ is telling of how pubs fit into neighbourhoods and communities.
Sadly, however, more than 32 pubs closed every month of 2022 in England and Wales – this is surprising, as at the start of the year, the general perception of the hospitality sector was that the worst of times were behind us. Lockdown and social distancing were over, and pubs were once again open for business, yet thousands lost their local last year.
The challenges that threatened pubs in 2022 still remain, but now the spectre of recession looms large over the nation’s public houses. How would a recession impact these challenges? And what can pubs do to safeguard their own futures and ensure they survive to see 2024?
Pub tribulations
Energy prices were a major cause of woe for pubs in 2022, with the wholesale price of gas increasing 404% in the past 12 months, including a rise of 70% in just the past three months. Hospitality businesses like pubs typically run on very tight margins, so significant increases in the cost of doing business can quickly bring their books into the red.
The Government’s energy bill support scheme for businesses promised relief to ailing enterprises, but was slashed at the start of 2023, with subsidies scaled back almost 85%.
Staffing also remains a prominent issue for businesses, and while vacancies have dropped since last quarter, they remain 63% higher than pre-pandemic levels. What’s more, the rising cost of goods and threat of consumer spending being stifled by inflation and the cost-of-living crisis could leave unlucky pubs unable to pay their bills, staff their floors or move enough trade to break even.
Battling through
The outlook for pubs in 2023 may seem bleak, but hospitality businesses have withstood a great deal in recent years, and there is still light at the end of the tunnel. Given their low margins, pubs cannot afford to be wasteful – optimising all their business flows will be essential, from changing suppliers and minimising food waste and spillage to using energy-efficient fittings and equipment.
Customer loyalty will be vital in 2023, so businesses need to connect with their regulars however possible. Running low-cost events like quizzes and open-mic nights give punters a reason to come back, while promotions like lunch specials can ramp up business in the off hours.
Food is typically less low margin than drink in pubs, so those with kitchens have an opportunity. Ensure menus are clear and appealing, and if possible, turn to the lucrative world of takeaways. Peckwater Brand’s own research revealed that 68% of food-service pubs expanded their menu offering in 2022 to combat falling profits, but only 20% began offering takeaway services.
Taking full advantage of a pub’s kitchen facilities by offering its own menu or a secondary virtual food brand is an invaluable extra source of revenue at a time when things have never been harder for pubs – many can’t afford to ignore it.
What’s next for pubs?
All signs indicate this will be a tough year for pubs and for hospitality in general, but they are not powerless to help themselves. Pubs that are resilient and inventive, that run themselves as efficiently as possible, and that take advantage of all available opportunities will have a far better chance of seeing out the year.
