2008 – Hospitality news review of the year

18 December 2008
2008 – Hospitality news review of the year

Through the first half of 2008, operators were hit by the effects of food inflation, with food commodity prices rising by 40%, compared with 2007.

Factors such as poor harvests, bio-crop cultivation and political instability drove up the price of dairy products, while cereal-based foods were affected by the global shortage of grain. Meat prices rocketed owing to Argentina's self-imposed bans on beef exports, and foot-and-mouth concerns in Brazil also impeded exports.

In September, the meltdown of US mortgage lenders Fannie Mae and Freddie Mac propelled the global economy towards recession. The UK Government's £500b bank bail-out the following month came too late for buyâ€'toâ€'let hotel group GuestInvest, which went into administration as HBOS withdrew its backing.

Also in October, consultant PricewaterhouseCoopers reported a 95% increase in hospitality insolvencies in less than two years, many in the third quarter of 2008.

Some operators turned the downturn on its head, benefiting from the emergence of the "Aldi effect" - the boost to the budget sector caused by consumers trading down.


At the start of the year, hotels were bullish, with Von Essen pledging to acquire 10 more hotels in the first half of the year (unsurprisingly, it didn't) while August saw Hilton release plans for its first boutique brand in the UK.

A potential merger between budget hotel rivals came close when Whitbread discussed merging its Premier Inn brand with Travelodge in what would have been a £3b tie-up, creating a group of 800 hotels. But talks came to nothing.

Another, rather more unlikely pairing occurred when Travelodge announced that it had teamed up with low-cost supermarket Aldi to develop mixed-use hotels-and-retail sites. The move was described as "bizarre" by some, but was defended by Travelodge as a way of capitalising on the downturn, and it quickly followed with a similar deal with Lidl.

It was later in the year that the credit crunch took its toll on hotels, with figures in October revealing that 18 closed in the third quarter. Two companies went into administration within days of each other, Folio Hotels failing because of a sharp decline in trading, and hotel property investor aAim calling in the receivers owing to price slumps.

The year ended on a tragic note for two of India's largest hotels, the Taj Mahal Palace and Oberoi Trident, which were at the centre of the Mumbai terror attacks in November.


A year of fighting the consumer slowdown - with more people drinking cheap supermarket booze at home - plus continued fall-out from the smoking ban and above-inflation rises in beer duty helped to create a pub closure rate of five a day.

The Government's hikes in alcohol tax, plus more licensing regulations and legislation, have angered the industry all year long, with further ire being raised at yet more alcohol duty increases in the Pre-Budget Report. The "meaningless" drop in the rate of VAT proved more trouble than it was worth.

The debate on binge-drinking ran on, with a newly emerged "temperance movement" - the Alcohol Health Alliance (AHA) backed by the British Medical Association (BMA) - lobbying the Government to raise duty.

Two of the country's largest pub companies, Punch and Mitchells & Butlers (M&B), discussed an £11b mega-merger deal in February that would have seen them in joint control of one in six of the UK's pubs, but talks fizzled out.

Early in the year, M&B bosses came under fire after a botched property deal led to an eye-watering £247m loss.


The overall value of the UK's eating-out market fell by 13% to £29.3b in the year to September, according to consultancy FMCG, although the casual dining market proved buoyant, with double-digit growth.

The row over tips reignited as The Independent and the Daily Mirror launched "fair tips" campaigns, on the back of a long-running Unite union action, to end the practice of topping up the minimum wage with tips.

Industry warnings that the requested changes could cost businesses as much as £73m a year were ignored by the Government, which in turn has proposed outlawing the toppingâ€'up practice next year.

It was a rollercoaster year for Gordon Ramsay Holdings (GRH) and its boss, with the opening of protégé Jason Atherton's Maze Grill, the acrimonious departure of Marcus Wareing, the launch of restaurants fronted by another protégé, Angela Hartnett, at the York & Albany and Murano - and, of course, claims of Ramsay's own alleged adultery.

Michelin-starred chef Tom Aikens was one of the most high-profile casualties, losing financial control of his restaurant empire in October after a management buyout. This led to a row with suppliers who feared being left thousands of pounds out of pocket.

Meanwhile, the capital saw an influx of French chefs, with Hélène Darroze and the two-Michelin-starrred Jean-Christophe Ansanay-Alex opening in London. Irish chef Richard Corrigan announced plans for Lindsay House to close next year, and opened his long-awaited eponymous restaurant in Mayfair.

Contract Catering

School meals remained a contentious issue among caterers as nutrient-based standards came into force at primary schools.

Many caterers believe the implementation of the new standards to be unnecessarily draconian and, with uptake at secondary schools in England still heading south (37.2% this year), they fear that the rate of decline at secondary level could snowball.

Compass Group lost its trophy contract with investment bank Goldman Sachs - estimated to be worth £10m a year - to rival Aramark, but could console itself with a £350m deal with the Royal School of Military Engineering.

September saw the shock departure of Elior managing director Lynn McClelland, the second managing director after Andrew Mortimer to leave in a year, compromising the contract caterer's 2007 restructuring.

In October, the Scottish Government banned private contractors from tendering for future NHS catering and cleaning contracts.


United industry pleas to the Government to take "decisive action" to save tourism came at the end of another tough year.

Bob Cotton, chairman of the Tourism Alliance, cited regulations on employment, food labelling, tipping and licensing as deterrents to visitors, and called for a Government funding injection similar to Spain's €400m.

Earlier in the year, similar comments made by Phillip Green, chairman of trade group UKinbound, caused tourism minister Margaret Hodge to storm out of a reception at the House of Commons. Hodge, who in September attacked the quality of British hotels in an interview, was replaced by Barbara Follett in October.

The Government's tourism strategy came under more scrutiny when VisitBritain chief executive Tom Wright resigned in November just weeks after the head of Visit London, James Bidwell, also stepped down.

The Government's decision to reduce funding by 18% at VisitBritain, and staff cuts, were thought to be major elements in both resignations.


All in all, it has been a notably tough year for all sectors of the industry. But with even grimmer predictions for 2009, operators may look back at the past 12 months with rose-tinted glasses by the end of next year.

JANUARYChickens - Hugh Fearnley-Whittingstall launches campaign for free-range poultry.Michelin stars - no new two- or three-starred restaurants are announced by Michelin in the UK.
FEBRUARYHand Picked Hotels - the collection of country house properties snaps up three new hotels for an estimated £25m-£30m. Midsummer House in Cambridge - forced to close owing to attacks from anti-foie gras protesters, the restaurant takes the delicacy off the menu.
MARCHWelcome Break - the motorway service provider is brought by Appia Investments for £500m.Illegal caviar bootleggers - as Westminster Council carries out random checks on restaurants.
APRILJamie Oliver - announces fifth branch of casual-dining venture Jamie's Italian. - Mitchells & Butlers - the future looked uncertain for M&B as rival Punch Taverns bows out of merger.
MAYThe Skelwith Group - York-based developer unveils plans to build a £100m luxury hotel in Yorkshire, with 300 rooms, three helipads and buy-to-let rooms. Gordon Ramsay Holdings - Marcus Wareing announces his split from mentor Ramsay after 15 years.
JUNESam and Eddie Hart - the brothers' reincarnation of the legendary Quo Vadis restaurant in Soho proves a hit with the critics. Dakota Sherwood hotel - the Nottingham hotel goes into liquidation after part-owner David Coulthard petitions a move to sell the hotel's shares and assets.
JULYRoux Brothers - Albert and Michel are the big winners at the Cateys, walking away with the Silver Catey award.Elior, threatened with legal action - caterer came under fire from Cornwall council after pulling out of a school meals contract weeks before it was to begin.
AUGUSTWaiting staff - Government announces that it will axe the practice of topping up minimum wage with tips as of next year.Boris Johnson - mayor backtracks on pre-election pledge to promote only operators paying London Living Wage.
SEPTEMBERRick Stein - chef picks up the Lifetime Achievement Award at the AA Centenary Awards. - The economy - public ownership of Fannie Mae and Freddie Mac and collapse of Lehman Brothers send shockwaves across the globe.
OCTOBERPizza/Pasta Hut - announcement to "change the name" of Pizza Hut to Pasta Hut is hailed a marketing coup. Tom Aikens - Michelin-starred chef's Tom's Kitchen and Tom Aikens restaurants go into administration after Tom's Place shut in August.
NOVEMBERRichard Corrigan - move to London's Mayfair is broadly well received by the critics. Gordon Ramsay - allegations surface of a seven-year affair with mistress Sarah Symonds.
DECEMBERJoÁ«l Robuchon - wins four more Michelin stars in Hong Kong and Macau, bringing his total to 24.Hotel finance - Folio Hotels and hotel investor aAim go into administration within days of each other.

By Rosie Birkett

E-mail your comments to Rosie Birkett here.

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