Sector index warns of 'trouble ahead'

A new report published today offers a snapshot of the UK’s hospitality industry, revealing that productivity increased in April to combat rising employment costs. The Hospitality Sector Index (HSI) is the first edition of what is set to become a regular monthly series, offering a trusted barometer of financial and people trends across the sector.

The research is produced by the hospitality specialist team at professional services firm Moore Kingston Smith. WMT Troncmaster Services Ltd, part of Moore Kingston Smith, manages tronc allocations for over 300 hospitality businesses across 1,000 sites. The index uses the data from the firm’s proprietary software, TroncBox, which handles the majority of these allocations.

The index compares changes in like-for-like revenues and hours worked compared to the prior month, providing valuable insights into performance and trends within the hospitality industry. Offering a broad indication of performance changes on a month-by-month basis, an index above 100 shows improved performance; below indicates a decline.

The HSI presents valuable market intelligence, enabling hospitality operators to benchmark their own performance, understand broader market dynamics and leverage the analysis to inform strategic decision making.

The first edition, based on data from April, shows a positive index of 105.9. This suggests the sector has boosted productivity in response to growing employment costs.

Key findings:

• Like-for-like revenues went up by 5.66%, primarily as a result of the Easter weekend boost. Hospitality businesses have also been increasing prices to cope with inflationary pressures, including the impact of higher employment costs in April.

• There was a marginal 0.26% decrease in hours worked despite the extra demand of the Easter weekend, illustrating the caution hospitality businesses are exercising due to rising employment costs.

  
  

Peter Davies, Partner and Head of Troncmaster Services at Moore Kingston Smith, said: “While the boost of the Easter weekend did much to mask or delay any immediate downturn following employer National Insurance and national minimum wage increases, there may still be trouble ahead.

“Revenues across casual dining remained stable with small increases for pubs and bars, with the combination of the Easter holidays and unseasonably fine weather likely drivers.

“The hotel sector has begun to recover from a slower than expected start to 2025, with international inbound travel, particularly from the US, lower than anticipated.

“Businesses had to make tough choices across February and March to prepare for rising costs in April, including recruitment freezes, and coping with demand by increasing full time staff hours while cutting back on part time workers, which the National Insurance rises have hit the hardest.

“A 6.19% increase in fine dining revenue was achieved with just a 1.91% increase in hours worked, showing improved efficiency, productivity and guest spend.”

The use of tronc allocation information provides a valid data source following the introduction of the Employment (Allocation of Tips) Act on 1 October 2024, which requires 100% of service charge (and tips) to be distributed among all employees without deductions, no later than the end of the month following its receipt.

Typically, restaurants, pubs and bars distribute tips and service charge at the end of the same month the gratuity is received, however given the nature of the business and the regular use of agency workers, it is commonplace for hotels to make these distributions to workers in arrears which means there is an inherent lag in the hotel sector data.

Published monthly, each Hospitality Sector Index will build on earlier editions to track performance over time, with year-on-year analysis available from October 2025.

Data primarily from London, as well as other regions, enables geographical comparisons and insights into specific locations, as well as the ability to analyse the effect of noteworthy events, such as major concerts or weather conditions, on local hospitality performance.

Read the report on Moore Kingston Smith’s website.