This week HOSPA chairman Bob Silk attended a webinar about The Cut Back Economy. We love a new trend as much as the next person, although this one does sound a little more ominous than ‘staycation’ or ‘bleisure’.
The main point of concern was something we’re all familiar with - rising inflation - with the report accompanying the webinar warning that it would hit 11% this year. Depending on how you choose to measure inflation, it’s already there.
Grant Thornton, which hosted the webinar, reported that almost nine in 10 UK consumers would be forced to reduce their spending to help cover essentials, whether by trading down, shopping less frequently, or sacrificing certain purchases altogether.
The least affluent were projected to cut back 9.6% of their annual household spending, compared to 8.1% for the average household. Even the most affluent (top 20% wealthiest households) were expected to cut back 7.6% of their spending.
This varied across different areas of consumption, but the group estimated that households would cut back a total of £24.9m in discretionary spend - which included restaurants and takeaways. The hospitality and leisure sectors were expected to miss out on £8.5bn, or 9.3% of annual household spend.
The webinar reassured that ‘consumers don’t always live in a permanent state of fear’. Well that’s OK then. So how to get some of the cash that’s left? Consumers will be looking for ‘new relationships with new brands’. These brands would, of course, be brands offering a, well, more competitive price point, but also those who can build relationships with their customers - we all need friends in tough times - but also those using data to help drive decisions. Oh, and a side of ESG to make everyone feel better about the money that they’re spending once they’ve decided to be parted from it.
This week saw Fuller’s, one of the sector’s strongest performers, expressing concerns. Chief executive Simon Emeny said: “The industry-wide inflationary cost pressures around food supply, labour and particularly energy are showing little signs of abating. Our premium offer and effective supply chain management provide a degree of protection, but we are not immune from its effects on costs or consumer behaviour.”
Emeny was confident the group would prosper, but it seems it won’t be the Roaring Twenties we were promised after the pandemic. The pandemic which the sector is still recovering from.
We’ve all been here before. But the good news is that the pandemic has made everyone more limber. It has encouraged the adoption of technology. It has taught us to do more with less. And that will be our much-vaunted ‘new normal’. There’s a catchphrase for everything.