Hospitality can still make money during the credit crunch

14 February 2008 by
Hospitality can still make money during the credit crunch

Hospitality operators and industry observers have attempted to quell the rising panic over the credit crunch by insisting that there is still money to be made, despite uncertainty over consumer spending.

Companies such as Clapham House, Regent Inns, The Restaurant Group and Greene King have been all hit by the credit crunch, prompting fears that leisure spending across the board is set to slump.

But not everyone is suffering, with some operators taking advantage of their size. Stuart Hawthorn, co-founder of Heartstone Inns, an operator based in the South-west with four pubs in its portfolio, revealed that trading during December had been "reasonable" while January had been "really strong".

"We do not feel we are suffering the effects of the worsening economic climate," Hawthorn said.

"The main effect has been on planning. We have revised our budgets downwards as we want to have sensible, accessible prices for our customers. It is easier to bob and weave when you have four pubs not 4,000. You can make changes very quickly."

And it's not just the smaller operators that are still feeling confident. Graham Turner, chief executive of Café Rouge owner Tragus, said that his expansion plans were still on track for 2008. "It is tougher out there - there is definitely tightening of belts. But we are not in a situation like the late 1980s or early 1990s," he said. "We're still planning to open 30 outlets this year and 25 the next. The demand is still there for new sites, so the economy cannot be that bad."

Robert Barnard, partner at hotel consultancy PKF, agreed that the market was definitely not in early-1990s territory. "If you compare that with today, even if there are little nudges of inflation, we are in fact in very benign economic conditions," he said. "Yes there is the credit crunch, but that cannot last forever."

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By Christopher Walton and Nic Paton

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