The current state of the Hospitality Industry 

Tim Jones who has had so many fingers in so many pies (Chair of business councils, Local Enterprise Partnership etc)  for ?20+ years takes no responsibility for the situation:

Tim Jones

There has been significant press coverage regarding the current state of our hospitality, leisure and tourist sector. This is a crucial part of the local economy. Across Devon, Tourism is around 10% of the total economic activity (Cornwall around 20%).

For Northern Devon, however, this percentage goes up to between 25-27%. Some alarming statistics have emerged over the post Brexit and Covid period.

The estimate is that around 25% of the operators in this market have disappeared. This shrinkage is largely at the end of the market comprising boarding houses and guest houses. Regionally there have also been some major casualties at the top end of the hotel market. Fortunately, this experience has not been in Northern Devon. A look ahead is even more concerning. According to UK Hospitality, around 32% of establishments are at risk of closure in the next 12 months.

The reasons for this have been covered by our media outlets for the last three years. Covid clearly was a huge shock to the system. Just when we thought we were recovering from this, a wave of new crisis emerged. The Ukraine situation has dramatically effected energy costs, which in many cases have risen to levels five times higher than previously.

Many tourist outlets think they are now working for the energy companies. The effects of global unrest unsettled financial markets. Inflation took off like a rocket. Many tourist outlets are now experiencing dramatic increases in the cost of debt.. Previously loans were taken out at interest rates of around 1.6-2%. Many of these were fixed for two years. Renewal costs are now likely to be between 4.5-5% interest rates. This means an increase in monthly repayments x 3. The sector is still experiencing food inflation costs which are the highest they have been for 45 years.

The difficulties of securing staff have also been a major factor. UK Hospitality lost around 200,000 overseas workers as a result of Brexit. It is perhaps of no surprise to any of us that the sector now has a national shortage of around 170,000 workers. For owners and managers of premises this means cutting capacity or reducing opening hours.

Despite the fact that this problem is well known, it is considered unlikely that it will improve before 2025. Even the impact of rail strikes has now been costed and is estimated to have reduced this sectors turnover by around £1 billion.

It would be fair to say that the government instantly recognised the problems all of these issues would cause. They stepped in quickly and helpfully. Energy bills were subsidised, there was a short term reduction of VAT rates. Business rates were subsidised. Much red tape and bureaucracy was removed. Who remembers the Eat Out to Help Out Allowance?

Undoubtedly this assisted many businesses who would not have survived otherwise. Effectively now, however, all of this support has ceased.

This picture is horribly depressing. We need also to recognise that healthy hospitality equals healthy retailing. Many of our High Streets thrive as a result of popular tourist seasons. For every full time job within the sector, there are around a further 50% of indirect jobs supported.

These stark facts quite simply mean that every possible effort should be made to assist these businesses to survive and thrive. All our Local Authority colleagues are more than aware of this and doing everything they can to help. We should not forget that the owners and managers of these businesses are a resilient bunch. Many are family businesses, some going back four to five generations. They will fight to survive and keep reinventing themselves to be attractive to the new customers within this market. We are now moving into the beginning of the tourist season. Easter was not a disaster.

The weather has not helped but is improving. The famous ‘green shoots’ are definitely now visible. What we must not do, as we seek to build the capacity to much nearer to 365 days a year, is to compromise in any way on the quality of the offering. This is not just a task for tourist businesses but for all of us to ensure that the best possible welcome and respect is given to Visitors. This will encourage them to return.

This also means going that extra mile to ensure that the internationally recognised attractiveness of Northern Devon and its environment is maintained and enhanced.

Written by Tim Jones, Chairman of the North Devon Biosphere Foundation

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