Hospitality confidence slides in the face of fresh cost fears

Hospitality leader confidence has tumbled amid fears about operating costs and consumer spending, the latest Business Confidence Survey from NIQ and Zonal has revealed.

The recent poll of industry leaders, who together represent more than 15,000 hospitality sites, has shown that only 37% feel optimistic about prospects for their business over the next 12 months. This is a sharp drop from the figure of 51% in February, when operators were feeling upbeat after robust Christmas and New Year trading.

The number of leaders feeling optimistic about the future of hospitality in general also fell over the second quarter, by 10 percentage points to 21%.

The research has shown particular fragility in the independent hospitality sector. Just 16% of leaders of single-site operators said they are optimistic about the prospects for their business in the next year. This is partly due to the Middle East conflict and resulting shocks to fuel prices, which raised fresh fears of inflation.

The results also reflected British consumers’ weak confidence, which has reached its lowest level since 2023, according to the GfK Consumer Confidence Barometer.

The survey also revealed the immediate impacts of slower spending in hospitality. More than a third (36%) of leaders said their revenue in the latest quarter fell year-on-year – the highest number since the start of 2024. Higher costs have also squeezed margins, where 34% of leaders reported lower profits.

Inflationary pressures are set to intensify, the survey indicated. More than four in five (82%) leaders said they are concerned about higher food and drink prices in the next 12 months, while three-quarters (75%) were worried about increased employment costs. Taxes are another major burden, with the large majority of leaders concerned about levels of VAT (73%) and rates (67%).

Karl Chessell, director – hospitality operators and food, EMEA at NIQ, said: “A dip in hospitality leaders’ optimism was inevitable after geopolitical turmoil and domestic economic concerns in the second quarter. The confidence of operators and consumers alike is bumping along the bottom, and relentless pressures on costs are threatening the future of businesses and jobs across the sector.

“The case for government help on tax, employment and costs is now more compelling than ever. Support would unlock immediate economic benefits by freeing up businesses to invest in their venues and people, and to revisit prices for their guests. Hospitality is at the heart of the UK’s economy, job creation and local communities, and the arrival of a new prime minister is an opportunity to give the sector the support it deserves.”

Research conducted by CGA by NIQ between 19 May and 9 June on behalf of UKHospitality, the British Beer & Pub Association, the British Institute of Innkeeping and Hospitality Ulster revealed that one in six hospitality venues are at risk of closure within the next 12 months.

Meanwhile the latest figures from the NIQ RSM Hospitality Business Tracker showed sales across 118 of Britain’s leading hospitality groups edged up 0.4% in like-for-like terms in May – marking the 13th consecutive month that the sector had grown behind inflation.