Feeling the pulse

The UK hospitality industry is gaining in confidence, with sales rising and nearly half of all operators planning to increase staffing levels. This is the picture painted by Caterer & Hotelkeeper's Market Pulse report, a unique new business "barometer" tracking the health, concerns and activities of UK hospitality, through a panel of more than 1,200 senior and middle-ranking decision makers across all branches of the industry (see panel, page 48).

In the first of a series of quarterly reports based on the views of this panel, Market Pulse reveals an industry looking forwards rather than backwards, with plans to develop and extend menu offerings, refurbish premises and give a higher priority to marketing and promotion. Operators are also facing up to the challenges that come with improving trading conditions, particularly the growing struggle to retain and develop existing staff and, increasingly, recruit new employees.

More optimistic
Just over half of our panel tell us that they're more optimistic about general trading conditions for their business than they were three months ago. Fewer than one in 10 say they are less optimistic, while the remaining 40% say their level of optimism is about the same as it was three months ago.

The growing mood of optimism extends to all parts of the UK. Operators in London report the biggest increase in optimism, but then trade in London was disproportionately hit by the post-9/11 slump. This increasingly bullish mood is undoubtedly fuelled by the steady improvement in overseas visitor numbers, which rose by 6% during 2003. This increase in tourist trade has helped to drive up sales levels across the industry. Nearly two-thirds of our panel members say that current sales are higher than a year ago, and fewer than one in seven report lower sales levels.

Encouraged by this demand, a growing number of food service operators are risking price rises - more than a third of our panel expect to increase menu prices over the coming three months, and very few expect prices to fall. In the hotel sector, nearly two-thirds of our panel expect revenue per available room (revpar) to go up in the coming quarter.

Staff training, development and motivation are the issues at the top of the agenda of most operators, according to our panel. Growing skills shortages are putting pressure on operators to get as much value as possible from existing staff, and discourage them from seeking new opportunities elsewhere.

As trading conditions improve, the issues which dominated operators' minds in the downturn, notably reducing costs, are dropping down the agenda. And, despite the heat and noise generated over social and political issues such as recycling, the requirements of the Disability Discrimination Act and the demand from some quarters for more government support for the hospitality industry, these issues fail to make it into the top 10 priority list according to our panel.

Extending offerings
Operators looking to grab a slice of the growing hospitality cake are developing and extending their offerings. Three-quarters of our panel's members say they plan to extend their food offering in at least one service period during the next three months, and more than half plan to extend their offering of "healthy eating" choices, such as low-fat alternatives, organic options and vegetarian meals.

The publicity surrounding the Atkins diet and other low-carbohydrate regimes has encouraged a sizeable minority of operators to try to cash in. More than a quarter of our panel say they plan to increase their offering of low-carb options, and half of these operators say they are putting these low-carb items on the menu for the first time in 2004.

Expanding the working day is another way in which a growing number are seeking to boost share of increased spending. A third of our panel expect to extend their hours of service during the coming three months.

Perhaps the most controversial developments highlighted by Market Pulse are operators' expected changes to smoking policy. Currently, most operators allow smoking on their premises, either throughout or in designated smoking areas. By the end of this year, however, more than half of our panel expect smoking to be banned throughout their premises. The proportion that expects to ban smoking entirely varies between the different sectors of the industry, but in all sectors the proportion enforcing total bans is expected to rise dramatically.

Market pulse - some highlights

• More than half of all operators are more optimistic now than they were three months earlier. The hotel sector has seen the biggest shift in favour of optimism.
• Sales are up year on year across all sectors of the industry.
• Staff training, development and motivation are the top issues facing operators.
• More than half of all operators plan to introduce or increase their offering of specialist menu options such as "healthy eating" choices or children's meals.
• A significant minority of operators plan to put low-carbohydrate options on the menu for the first time this year.
• The use of pre-prepared foods is expected to grow in 2004.
• A third of operators expect menu prices to rise in the next three months.
• Nearly half of operators plan to increase staffing levels in the coming quarter.
• About a third plan to extend their hours of service during the next three months.
• More than half will refurbish some part of their establishment in the first quarter of 2004.
• The proportion of operators enforcing smoking bans is expected to more than double during 2004, to exceed half of all operators by the end of the year.

Market Pulse - The barometer of the Hospitality Industry Market Pulse is an exciting new initiative from the Caterer Group, which publishes Caterer & Hotelkeeper magazine. Based on a panel of more than 1,200 decision makers in all branches of the hospitality industry, Market Pulse for the first time provides an accurate, up-to-date barometer of the state of this vital sector of the UK economy, and tracks the priorities, concerns and activities of the people who drive and work in the industry.

Our panel consists of senior and middle-ranking executives in operators across all arms of the industry, including hotels, restaurants, bars, contract caterers and in-house catering operations. We poll the panel regularly, to produce reports that are used both by Caterer to track the needs of readers, and to lobby on their behalf, and also by operators, suppliers to the hospitality industry and others who need to keep their fingers on the pulse of the UK hospitality sector.

Panel members get free executive summaries of the Market Pulse reports, plus other exclusive benefits. For more information about Market Pulse, including how to get a full copy of the report, go to www.caterer-online.com.