As the hospitality industry faces rising costs, Derek Picot asks if we witnessing the end of the hotel restaurant as we know it.
The collision of Brexit and the pandemic in early 2020 has led to a fundamental re-think for many businesses as to how they will meet Prime Minister Boris Johnson’s vision of the UK as a country with higher wages, increased productivity and growing global trade.
October’s news of an increase to the national minimum wage is a further milestone in the current UK government thinking, but how will this affect the hospitality industry?
James Barr, general manager of The Wesley Hotel in London’s Euston, says: “Significant changes will happen. Staff costs are our most expensive commodity.”
In mid-level hotels, typically room profit contributions turn 80p in every £1, but restaurant profits of traditionally 20p in the pound now make little or no contribution to the bottom line. With the absence of employees interested in serving meals, some London operators report wage costs increasing by up to 20 per cent.
The Wesley Hotel is refurbishing the upper floors of a Methodist Chapel in Camden Town to provide a new property. It is scheduled to open in June and designed to minimise labour costs. “There will be no food and beverage offering,” says Barr. “Guests will self-serve their check-in and vending machines will look after all their needs. Breakfast can be pre-ordered, prepared externally and delivered packaged direct to the room.”
Given the serious challenge of finding post-Brexit labour to work in food preparation and service, which historically was sourced from Europe, the offering planned by The Wesley Hotel may be the only option for many other mid-level hotels. Indeed, the hotels of the future may look more like motels without the parking.
WHERE WILL GUESTS EAT?
What do these developments mean for business travellers? Where will they eat? Barr points to the number of local restaurants near The Wesley Hotel as a solution. Alternatively, Robert Nadler, founder of boutique hotel group Nadler Hotels which rebranded as The Resident in early 2020, says many hotels will focus on offering “affordable luxury” by stripping back facilities, such as restaurants and bars, and instead providing in-room mini-kitchens.
This means that the hotel restaurants of the future will either have to be high-end with gastronomy and service as a focus, or low-priced, with speed and limited choice the main aim.
Inevitably, prices for restaurant-goers are going to increase. Since the UK government bumped up the VAT element from 5 per cent to 12.5 per cent, prices have already risen, and they will further rise as VAT goes up in April 2022 to 20 per cent. For comparison, in France and Spain the VAT element of eating out is 10 per cent, and in Germany it is currently 7 per cent.
Industry pundits reckon that with the planned increase in UK VAT next year the average meal ticket will rise about 25 per cent from 2020 prices.
In addition, European wines will all but disappear from menus with small lists and be replaced by Australian, Argentinian or Chilean bottles. One supposes that if there is ever a trade deal struck with the US we might see a bottle or two of Californian wine.
“Look on the positive side,” a leading chief executive of a large consortia of national hotels recently said. “A lot of mid-range mediocrity will go to the wall and that is what the government policy is dictating. If the industry doesn’t transform its product and the way in which it organises itself to sell it there will be no business. Hotels will have to re-think the food and beverage operation and the focus will be on amenity and facility. What are consumers most interested in? A gastronomic menu or a comfortable bed?”
Take heart, though. UK Hospitality, the industry’s voice to government, is running a campaign called ‘VATsenough’ and hopes the Chancellor of the Exchequer will look kindly upon eateries and the people who support them. Unfortunately, the proof was not in this year’s budget pudding.
Derek Picot has been a hotelier for more than 30 years, and is author of Hotel Reservations.