Looking on the bright side at HOSPACE - Ed’s letter

So how are those challenges looking? Thomas Pugh, UK & Ireland chief economist, RSM, was chipper, noting that growth in the UK in the first half of the year was 1.1% “which is as much as we got for the whole of last year”. He was then less chipper, with, “There has been a step change, there has been an improvement in growth that you won’t see in the media. It’s not just government spending, it’s also consumer spending, which is up about 1%. There has been an improvement in the economy, so far this year.

“But what we are getting is a sense of deja vu, with growth and then flatlining. The risk is that we’re seeing something similar. Growth in Q3 was 0.1%. We are looking at a real slowdown in growth in the second half of the year, driven in part by worries about what is coming in the Budget.”

Pugh had a number of different scenarios on offer for the Budget, echoing the likely shunting around of blocks the Treasury is no doubt doing even as we speak. He said: “The tension is between upsetting the taxpayer while pleasing the financial markets. If you’re trying to stick to the manifesto then the risk is that it will be inflationary. If we get a Budget which is deflationary it will be painful, but there will be longer-term payoffs. Inflation should come down from 4% to 2.5% by the end of next year.

“It will be painful to go further than you have to [in raising taxes], but the payoff is worth it in the long term in the form of, for example, lower cost of borrowing. The last thing you want to do is have a Budget which pushes up inflation and causes a lot of job losses. I’m optimistic about this. The Treasury has learned from its lessons.

“It would be good to get out of the cycle of worrying about where the next tax rises are coming from.”

And it really would, because the curent fretting has been causing a pause in consumers rushing out into our sector, as Katie Morton Lee, head of hotels, Barclays, pointed out. She said: “Spending declined in October on the year, essential spending fell, but discretionary spending is flat. There is optimism that spending patterns will pick up. They are cutting back on eating out but finding ways to treat themselves within their budgets.

"We have seen a 1.2% increase on the year in spending on hospitality and leisure, with a stark disparity between sectors. Entertainment spend increased by 4.7%, spend at travel agents increased by 7.2% and goal clubs were up 21% in October following Team Europe’s success in the Ryder Cup. On the whole consumers are looking to spend on exceptional, value-packed experiences.”

Was that happening in events? Venue Performance’s Peter Heath told delegates that sales and events were down, but the revenue per delegate was up and the size of the events were up. He said: “Lead times are also getting longer. Businesses are spending less often, but when they do spend it’s more. They go bigger. Looking at the end of the year, delegate sizes are much increased, which is good news for us all. Christmas just might be the saviour for us all.”

So should we be decking the halls and feeling better about everything? First we need to get through the Budget and hoping that the golden goose of hospitality isn’t de-egged any further. As BDO’s Mark Edwards said: “It’s really important that we say to government ‘not us again’. We’re taxed out.”

By the time those who have Advent Calendars open their first windows, we’ll know what our mood should be. The good news for this sector is that, on the whole, our experience in the past few years has taught us the resilience to put on a smile no matter what’s in the red box.