This article provides a summarised overview of the "Business Outlook 2024" report by Christie & Co, focusing on the evolving dynamics within the UK hospitality sector. The report sheds light on the trends, challenges, and opportunities anticipated in the restaurant, pub, hotel, and leisure industries in 2024.
The Restaurant Industry: Adjusting to New Realities
The report highlights significant changes in the UK restaurant industry. Mid-market casual dining has been struggling, with a notable shift in consumer preference towards quick service restaurants (QSRs) and takeaways, primarily driven by the rising cost of living. Over 2,000 restaurant closures in 2023 signified this trend, emphasising a growing demand for value and convenience.
Quick Service Restaurants: Dominating the Market
QSRs have emerged as a dominant force, with sustained growth and a steady demand for delivery services. International brands like Sushi Shop, Chozen Noodles, and others are eyeing the UK market. Christie & Co reported £6.75 million in total restaurant sales in 2023, with leases comprising 85% of these sales.
Pubs: Steadfast in a Changing Landscape
Despite economic challenges, the pub sector demonstrated resilience. The second half of 2023 saw an uptick in transactional activities, with a noticeable shift in buyer demographics. Pubs with accommodation offerings benefited from the popularity of staycations, a trend that Christie & Co expects to continue.
Hotels: A Resilient Investment Choice
The hotel sector has maintained its position as a strong investment asset. 2023 witnessed a rebalancing in the market, with transaction volumes improving and larger investors seeking value-driven opportunities. The report predicts increased transactional and refinancing activities in hotels for 2024.
Leisure Market: Adapting to Consumer Preferences
The leisure sector adapted well to changing consumer spending habits. Christie & Co's report notes that experiential and outdoor activities, as well as holiday parks and garden centres, remained popular choices. The sector is expected to continue adapting to economic uncertainties and shifts towards the luxury and value segments.
Economic Pressures: The hospitality sector continues to navigate through increased food and utility costs, which have compressed margins. However, the report notes a decline in food inflation and lessened staffing concerns, providing some relief. Innovative strategies like menu price adjustments, menu simplification, and reduced operating hours have been implemented to recover profit margins.
Consumer Trends: The report emphasises a significant shift in dining habits, focusing on value and convenience due to the changing work patterns, such as the ongoing trend of working from home. These shifts have led to a resurgence in suburban and residential area dining while city and town centres are adjusting to new trading patterns.
Sector Funding: Financing remains a complex issue, with lenders exhibiting caution in the face of market distress and reduced margins
Sustainability Initiatives: While immediate survival has taken precedence, sustainability occurs somewhat by default as operators seek cost reductions. Measures such as transitioning to LED lighting, reducing food waste, and optimising energy use in kitchens are contributing to a more sustainable operation.
Predictions for 2024
Mid-Market Dining: This sector is expected to continue facing challenges in achieving real growth. However, there is potential for some return to profitability as menu prices stabilise and inflationary costs decrease.
Franchise Expansion: The report anticipates continued expansion for franchise brands, offering a greater variety of dining options. This trend is driven by the model's rapid and secure growth potential, appealing to entrepreneurs and consumers.
Market Landscape: A further contraction in the number of dining establishments is predicted, coupled with an uptick in insolvencies. However, these challenges could create openings for new entrants in the market as confidence gradually returns.
Consumer Behavior: There will likely be a sustained shift towards value-oriented dining experiences, impacting the mid-market segment. The report suggests that the dining sector must adapt to these changing consumer preferences to remain competitive.
Investment Trends: Focus on investment in premium sites with proven sustainable EBITDA in sought-after locations is expected. The sector may see a polarisation towards economy and luxury segments, with the midscale segment being squeezed.
Christie & Co's "Business Outlook 2024" report indicates a year of resilience and adaptation for the UK hospitality sector. Despite the challenges, there are significant opportunities for growth and innovation, especially in areas that align with changing consumer preferences and economic conditions. The sector's ability to navigate these dynamics will be critical to its success.