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UK hospitality to face staff shortages, margin pressures

4 years ago
in Features, highlights, Home, home-news, latest News, Lifestyle, Opinions, Tourism, Travel
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The UK hospitality sector is facing staff shortages as the pandemic restrictions are gradually lifted and demand returns, Fitch Ratings says. EU nationals who have left the country following Brexit and employees who have switched sectors during the pandemic are the main reasons for the anticipated shortages.

We expect hospitality companies such as pubs, hotels and restaurants to incur the additional costs of hiring and training new employees, although such margin pressures are likely to be temporary.

The UK pandemic restrictions are being gradually phased out following successful vaccination rollouts so far and reduced infection rates: pubs’ and restaurants’ outdoor serving reopened on 12 April in England and is enjoying surging demand, indoor mixing is expected to be allowed from 17 May, and all legal limits on social contact could be removed on 21 June.

Given uncertainties surrounding travelling abroad, demand for domestic holiday accommodation is strong, with most popular destinations already fully booked for the summer.

UK hospitality operators are facing staff shortages as activities resume. Before Brexit, EU nationals made up between 12% and 24% of the total workforce in the UK hospitality industry, according to KPMG.

Many of them left the country during the lockdowns. EU nationals now have to obtain a visa in order to enter the country to work, which entails securing a job offer that meets minimum salary levels, among other requirements. The hospitality sector also lost employees to other businesses that remained open during the pandemic.

Staff shortages may be uneven within the sector. Those operators that employ directly, such as Whitbread, are likely to see more employees returning to work than those that employ via agencies or part-time. London and other large cities face greater shortages as they relied more on foreign workers. Remote locations with tighter links to local communities are less affected.

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We expect hospitality operators’ costs of hiring and training to increase in the short term, putting pressure on their margins. They may face increased salary requirements, for example in order to attract EU nationals, particularly during high summer and early autumn seasons, or to hire skilled employees to train workers with no prior experience. Furthermore, the national living wage in the UK was increased by 6.2% on 1 April.

However, we anticipate these pressures to gradually dissipate and the sector to increasingly recruit within the UK, including employees laid off from other client-facing sectors – such as retail due to permanent shop closures. Some extra costs could be offset by strategic price increases, such as removing food discounts by some pub operators.

The path of revenue recovery and liquidity buffers remain key rating drivers in the industry. We anticipate a quick revenue ramp-up due to pent-up demand once the pandemic restrictions are fully lifted. However, a full recovery may take time and differ by subsector.

We forecast revenue in the pub sector to reach pre-pandemic levels on a quarterly basis by end-2023. For hotels, we forecast revenue per available room to be below 2019 levels by 15% and around 10% in 2022 and 2023, respectively.

Available liquidity has been gradually reducing for many operators as cash reserves were depleted by the lack of trading. This is despite cost-mitigating measures implemented by operators and support from the UK government schemes, such as furlough and business-rate holidays.

Many companies cut their capex, although some have invested selectively in improving premises and services or expansion. We expect cash-burn rates to reduce as trading resumes and operators should eventually return to cash-flow generation.

Source: fitchwire
Via: norvanreports
Tags: Covid-19hotels and restaurantspubsstaff shortagesUK hospitality sector
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