United Kingdom
Leisure and Hospitality companies must address new cost challenges in 2010 - John Le Poidevin
There are many in the leisure and hospitality sector that will be very happy to see the back of 2009. Apart from the awful trading environment that has seen upwards of 2,500 businesses in the sector fail, the industry has also had to cope with a growing tax and legislative burden.
The industry is used to having to deal with a plethora of regulation and legislation, but this has been compounded by new rules concerning the treatment of tips, to looming new charges linked to pensions and the business rates revaluation, the cumulative impact of new regulations should not be underestimated.
For example, the government has conceded that the changes governing tips alone will lead to an estimated £60m in extra costs to ensure the legislation is implemented properly – particularly as the new code will lead to higher National Insurance payments. The British Hospitality Association estimates the new rules could lead to an additional £130m in costs.
However, happily at a trading level the gloom is not universal. As our latest Restaurant and Bars Report shows (link to report) operators who have adapted to the changing habits of the consumer have been rewarded with a modest uplift in sales. Although trading remains far from easy, we do seem to have reached the bottom, with patchy signs of a modest recovery.
According to the latest industry figures, sales on a like-for-like basis across the major operators have been positive throughout the summer and autumn. Although our conversations with operators paint a more mixed picture, there are encouraging signs and we do believe that trade and margins have now found a sustainable level.
Looking forward to next year, the big challenge is sustaining this positive momentum while maintaining tight control over costs. This won’t be easy, but as we fight our way through the recession there are now realistic hopes that things will look better in 2010.
View the full BDO restaurant & Bars report.
If you would like more information on how BDO's leisure and hospitality team can help you, please contact John Le Poidevin, Partner - Head of Leisure & Hospitality or your local BDO adviser.