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2012 – the challenges and opportunities

05 January 2012
2012 – the challenges and opportunities

Now that the festive period is over and we slip into January's low season, it is time to contemplate the year ahead - a year that promises one or two once-in-a-lifetime opportunities, as well as more traditional challenges

London 2012 Olympics
The Olympics kick off on 27 July, followed by the Paralympics and preceded by a torch relay touching most parts of Britain. Hotels and pubs in London, as well those in locations around the country hosting other events, like Eton Dorney and Portland, are set to benefit. But some London restaurateurs worry that transport issues will drive away trade and there are also fears that foreign tourists may be put off visits to the rest of the country during the games.

Queen's Diamond Jubilee
The Royal Wedding was good for the bigger pub and restaurant operators, although hoteliers did not fare so well. A similar opportunity presents itself in the extra bank holidays for the Queen's Diamond Jubilee in June but there may be less interest from foreign tourists this time, and hotels will need to price more sensibly.

Inflation
Food prices in the summer of 2011 were 6% higher than they were in 2010, due to a combination of shortages of certain foodstuffs, and steep rises in fuel prices, which also forced consumers to cut down on luxuries like going out. Inflation is expected to drop back in 2012, which should hopefully lead to a rise in leisure spending.

Alcohol strategy
The Government's alcohol strategy is due to be published at the start of the year and a ban on the sale of alcohol below tax, targeting supermarkets, may be introduced.

Debt funding
The collapse of several big names in the hotel sector this year was partly due to the lack of finance required to fund transations, enable growth and fund refurbishments. Hoteliers in particular will be hoping for, but may not get, a more forgiving bank manager in the coming year.

The duty escalator
Beer duty continues to rise each year at 2% above inflation, pushing the nationwide average price of a pint past £3. Despite noisy protest from pub industry groups, it looks unlikely that the Government will place a freeze on the escalator in its next budget on 11 March.

Migration cap
The Government has already imposed a strict cap on migration from non-EU countries, which has hurt the £3b ethnic restaurant sector, which can't find enough skilled chefs. The problem could worsen if the Government imposes even stricter limits in 2012, which it is reportedly considering.

Nil subsidies
Contract caterers are forced to operate more commercially than ever as the number of clients prepared to subsidise their on-site food service continues to diminish. But this is good news for innovative operators who can demonstrate that smaller budgets don't necessarily have to mean lower quality.

Live music
Under Government proposals, events will be exempt from additional licensing requirements as long as audiences are fewer than 5,000. The proposals are under consultation.

Responsibility Deal
The Government's scheme to get private firms to assume more responsibility for public health will continue to gather momentum as more caterers, restaurants and pubs sign up to one or more of the pledges.

Licensing
Licensing law changes through the Police Reform and Social Responsibility Act will be introduced progressively. There will be consultations on Early Morning Restriction Orders and the Late Night Levy among other areas. From a budgeting perspective, operators need to plan for fee increases, which have remained unchanged since 2005.

The recovery
With the Government's focus on jobs and growth, there is a real opportunity to tell the Government how important hospitality is to the recovery. Eating and drinking out creates one in 10 of all new jobs and outlets generate an average turnover of £40,000 per job. Establishing this reputation could help in discussions on tax, VAT and red tape.

State of the world economy
The continued problems with the world economy and political wrangling within the Eurozone could continue to cast a shadow over consumer confidence in the next 12 months, particularly outside London. Hoteliers in particular hope that sterling can remain competitive against the Euro to tempt in foreign tourists.

Business rates
Despite protests from the hospitality industry, the Government is planning to raise business rates by an eye-watering 5.6% in April 2012. The British Hospitality Association, British Beer and Pub Association and Business in Sport and Leisure have all called for a rate freeze before the rise comes into force.

Campaign for VAT cut
Calls for a reduction in VAT to 5% are set to gain momentum throughout the year as the British Hospitality Association kicks off a grass roots campaign to promote the interests of the industry. The association sees the high level of VAT as one of the biggest barriers to growth. Sign our petition to slash VAT to 5% at: www.catererandhotelkeeper.com/slashVAT


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