Worsening consumer confidence coupled with increasing unemployment will give rise to the UK hospitality industry's biggest challenge yet as 2012 brings a fourth year of cutbacks, according to Horizons.
The food service consultancy said that the country's 260,000 eating out establishments, which generate about £42b of sales a year, will have to work harder than last year to tempt people to spend their money on eating out despite the influx of visitors expected for the London Olympic Games and the Diamond Jubilee.
"High street restaurant operators will continue offering customers discounts, meal deals and money-off vouchers to improve traffic, which will depress their profit margins, although the anticipated fall in food costs this year will help counteract the cost of discounts," said Horizons managing director Peter Backman.
"The Olympic Games is likely to bring an uplift in sales for some food service outlets - most notably those with contracts at Olympic venues. However, operators outside the Olympic venues could see visitor numbers drop. If the UK sees 10% fewer visitors this year, compared to a normal year, the UK eating out market will be £100m worse off."
But on a more positive note, Backman praised the food service industry for its ability to reinvent itself and embrace change.
Since the downturn began, many operators boosted customer levels by extending opening hours or offering new services such as breakfast, mid-morning coffee and free Wi-Fi. Others opted for refurbishment, investment in staff training or new menu styles, such as sharing plates, smaller portions and healthier options.
"The businesses that don't embrace change are those that will suffer this year," added Backman. "But outlets that adapt to the demands of the new consumer by offering something different, focusing on good quality for a reasonable price, are those that will survive the year ready to focus on growth when consumer demand improves."
By Janie Stamford
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