Discounting blamed for hospitality's productivity drop

06 November 2017 by
Discounting blamed for hospitality's productivity drop

Productivity in the hospitality industry has fallen and discounting has been named as one of the chief culprits.

Software firm Fourth has noted a fall in productivity across the UK hospitality industry, with the key measure of sales per labour hour sitting at £34.01 - a 62p reduction since May 2017, dropping as low as £30.65 when analysing the restaurant industry alone.

The headline number, which was arrived at after examining the hourly pay of thousands of hospitality workers, is blended across the hotel, restaurant, QSR and pub sectors.

Fourth's analysis has also revealed that wages as a percentage of sales have risen 0.9% over the same period.

Heavy discounting across the restaurant and casual dining sectors, with many groups pursuing aggressive discounting policies in the UK over the past four to six weeks, has been blamed for the drop.

The Caterer has already reported on the way in which many of the larger restaurant groups in particular have started employing discount vouchers once again, having tried to wean themselves off them after the credit crunch.

Cost pressures from decreasing productivity have been exacerbated by continued, but steady, wage-cost inflation, with the average hourly wage in the hospitality industry now sitting at £8.28, a rise of 2% since May 2017, which is 3% above the government's target of reaching £8.05 by April 2018.

Mike Shipley, analytics & insight solutions director at Fourth, said: "Our figures show that a domino effect of aggressive discounting in the hospitality industry, particularly the restaurant sector, has taken a heavy toll on productivity as brands compete for custom in a very competitive market place.

"Compounding the issue, the latest figures from the Coffer Peach Tracker, show that managed pubs, bars and restaurants like-for-like sales were down 0.9% in September. This trend is indicative of the wider hospitality industry, with significant cost headwinds taking their toll as operators battle to maintain and build sales.

"Discounting is a quick fix to this complex situation and with Brexit looming on the horizon, it's imperative that operators scrutinize all aspects of their operation to understand where they can cut costs, such as smarter scheduling software and renegotiating procurement deals in line with the market.

"As with all adversity, there is a silver lining and, ultimately, the businesses who successfully navigate this period, streamline their business models and increase efficiency of labour and procurement, will be well placed for growth when the market reverts."

Big casual dining firms bid to lure customers with October discounts >>

Casual dining restaurants return to discount vouchers >>

Small restaurant groups' growth outpaces larger rivals by up to six times >>

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