The UK government has announced a “roadmap” to reopen the economy, which will enable hospitality businesses to fully trade once more.
While welcomed, the news has been met with calls from several corners, to provide the sector with further support, to prevent further business failures over the coming months. A committee of members of parliament is the latest group to join others such as industry group UKHospitality, calling on chancellor Rishi Sunak to get hospitality up and running once more.
Restrictions will ease in stages over a number of weeks. Pubs and restaurants will be able to serve outdoors from 12th April, and family holidays will be permitted, so long as the accommodation is self-contained with no shared common spaces.
From 17th May, hotels can reopen for business, while pubs and restaurants will be permitted to operate restricted indoor business, and events involving larger indoor gatherings can restart. If all goes well, there will be an end to remaining restrictions from 21st June.
While welcomed for the guidance it provides, the roadmap has at the same time drawn criticism for its slow pace, and for the fact that hospitality venues will not be allowed to open sooner. While the government has indicated it will extend furlough schemes into May, there are calls for additional relief, including a continued VAT discount for hospitality, and a reduction in alcohol duties for pubs and restaurants.
“The job for the Government now is to make sure that our sector survives this further period of closure intact,” said Kate Nicholls, chief executive of UKHospitality. “The chancellor has just nine days to save thousands of businesses and hundreds of thousands of jobs that simply will not be there without a substantial package of compensation. According to the latest research nearly two-thirds of hospitality businesses will run out of cash before May, before they are allowed to re-open. In the immediate term, we need a generous compensation package that goes beyond what was offered in January if we expect businesses to survive.”
And the All-Party Parliamentary Group for Hospitality and Tourism, an 83 strong group from across the political landscape, has called on the chancellor to cut the sector some slack, in his upcoming budget. More furlough, more VAT cuts, and more business tax relief is needed, for up to a year ahead.
“Our hospitality and tourism sectors are some of the best in the world,” said Sally-Ann Hart, co-vice chair of the group. “Despite unprecedented financial support from Government, unfortunately many businesses have been lost and they have taken hundreds of thousands of jobs with them. These are businesses that are critical to communities around the country. They are focal points for social lives and drive inward investment. Ongoing Government support through to the end of the pandemic and through the recovery phase is critical to rebuilding this industry and creating jobs.”
Co-Vice Chair Alison Thewliss added: “The Chancellor needs to act positively and extend the VAT cut and the rates holiday to our fantastic hospitality and tourism sector which can help to re-grow our battered economies. Support must also be extended to workers in the hospitality and tourism sectors for the entire period that restrictions are in place.’’
The news that from 17th May, hotels will be able to operate as normal, taking leisure and business guest bookings, has led to a spike in reservations as consumers look for an opportunity to travel after lockdown.
Whitbread reported an increase of almost 400% in searches on its Premier Inn website, for coastal hotels during May, with strong interest in July and August too. At Oyo, June proved the most popular month for forward bookings, as the roadmap was revealed, with the company seeing demand for both coastal and city hotels in its listings.
At aparthotel brand Staycity – whose York site was caught up in the early discovery of covid-19 cases in the UK – bookings across the group’s 11 UK properties rose 333% in the 24 hours after the announcement, compared with the previous week. On one day alone, more than GBP312,000 of business was booked, with the operator saying sites in London, Birmingham and Manchester among the most popular.
“This demonstrates the pent-up demand for travel and the fact guests are keen to book trips and to have something to look forward to,” said CEO Tom Walsh. “It’s a huge relief to us, and the hospitality industry as a whole, to have this clear evidence that people are keen to make up for lost time.”
But despite the optimism from Walsh around city centre demand, others see a bleaker immediate future. In Bristol, more than 50 staff at the city’s Radisson Blu hotel are reported to have been laid off, as the company has opted to delay a reopening until sometime in 2022.
At the same time as UK accommodation is busy taking bookings, tour companies have been marketing their summer packages to European destinations.
Consumer interest has been strong despite some comments from government ministers, that UK residents should not rush to assume international travel will be practical. Spain’s tourism minister has been talking of creating travel corridors, or of accepting a vaccine passport, as a way of facilitating arrivals from the UK.
Greek tourism minister Haris Theoharis has gone further, suggesting his country will accept visitors from the UK with a vaccine record, or simply with a negative Covid-19 test taken before travel. He said the Greek vaccination record is digital, with proof available via QR code.
UK conference hotels are now also weighing up how they will reopen. “The clear intention to reopen for events to a maximum of 1,000 as early as 17th May and large-scale events as early as 21st June, provides us with optimism that business will start to return in some capacity as early as Q2,” said Jane Longhurst, chief executive of the Meetings Industry Association.
“However amidst the intended promise, we must remain conscious of the sector’s biggest challenges, of which many are far from resolved and are still in desperate need of intervention. We remain acutely aware of the vulnerability of many organisations within the sector, as our latest research has shown almost half forecast their organisation will become unviable by June 2021. It is therefore paramount that intermedial support is provided to ensure that organisations cannot just prepare for reopening but survive up until the outlined return date.”
Pointers as to the way forward may come from Israel, widely regarded as the lead nation globally for vaccination, which started easing lockdown restrictions in the second week of February. Now, the country has announced that restaurants and bars will be able to open from early March, while hotels are allowed to reopen for room-only bookings. The country’s health ministry has established a “green passport” that allows individuals to prove they have had two vaccinations, and access to some premises will be allowed only on production of this proof.
HA Perspective [by Chris Bown]: What has been most interesting in the last week, has been what has not been said. Based on the coy responses I got from several organisations I tried to speak to, there remains considerable nervousness in the sector. While positive stats about bookings are uplifting, there’s a big overhang of accrued debt and liabilities – and clearly concerns that a twitchy government could tear up its roadmap at any sign of increasing covid-19 cases.
Based on his behaviour to date, it feels as if the UK Chancellor will accede to at least some of the requests being bandied about. There are plenty of people hoping just that.
Meanwhile, some of the stats provide solace for those in city centres, which failed to gain much trade through last summer. Comments from both Staycity and Oyo suggest that city hotels – at least at the more budget end of the market – will recapture leisure trade. More worrying is the immediate future for four star properties. As the tough decision taken by Radisson in Bristol suggests, there could be pain for some time, as business travellers take their time in returning.
Additional comment [by Andrew Sangster]: The recession caused by Covid has been unlike most other recessions in a number of ways. Economically, one of the most remarkable features has been that both consumers and corporates have, on average, strengthened their balance sheets.
The latest Bank of England research out earlier this week showed that households saved a net GBP15bn during January. The average saved per month in the six months to February 2020 (the start of the pandemic) is GBP5.6bn. In other words, during the worst recession in 300 years, consumers are saving at three times their normal rate.
In addition to this, corporates are repaying debt. During January, non-financial corporates repaid GBP1bn of bank loans. The average cost of lending is now just 1.7%, which compares to 2.7% a year earlier. The BoE said that between march and December 2020, businesses’ deposits increased by an average of GBP17.3bn, “much stronger than in previous years”.
We are entering the recovery with both businesses and consumers who, on average, are financially stronger than they were going into the recession. This means that unlike normal recoveries, consumers and businesses are not looking to repair balance sheets. They will be much more focused on seizing opportunities.
For consumers, travel, tourism and hospitality is going to be right at the top of the list of opportunities to be seized. For businesses, the opportunities are going to revolve around gaining a share of the economic growth that is coming.
Today [Wednesday], the UK budget was accompanied by the usual economic forecasts from the Office for Budget Responsibility. These put GDP growth this year at 4.0% and at 7.3% next year. For the three years following 2022, growth is forecast to average 1.7%.
This is astonishingly good news given what was projected even a few months ago. Most importantly, employment in the UK is forecast to decrease only modestly and be back to 2019 levels by 2023. This year it will bottom out at 32.3 million, just 500,000 fewer than the peak of 32.8 million in 2019.
The recovery then, is set to be robust, both in the broader economy and for the hospitality industry specifically. Helping to boost returns, VAT is being held at 5% for hospitality businesses until September and then put at an interim rate of 12.5% for a further six months. Grants of up to GBP18,000 per unit are being offered under a hospitality restart scheme costing GBP5bn.
As we have written before in Hotel Analyst, this year looks set to be particularly strong in the UK given the uncertainty about overseas travel. With the added bonus of Government handouts, the industry should be particularly profitable.
This will not entirely compensate for the past year of misery endured by hospitality businesses and some balance sheets will not recover. Waiting in the wings are increased business taxes (from 2023), increases in the National Living Wage and likely labour squeezes thanks to Brexit. The Government also (again) ducked the issue of fixing the business rates regime, picking a less generous rebate for hospitality in England than that offered in Scotland (where it is a devolved matter).
But, despite these reservations, the UK looks to have a sensible route out of the pandemic. Kate Nicholls, the CEO of trade group UKHospitality welcomed the Budget, subject to poring over the details, as offering crucial support.
The key issue, rather than support, is having a clear backstop date in the 21st June for the ending of restrictions. During the weekly THMC Hospitality Insights Call, Nicholls gave a powerful presentation that broadly supported the Government’s roadmap as it hit her three key points of offering indicative dates, a commitment to provide businesses with sufficient notice of changes and the hard backstop of the 21st June.
Many in hospitality were hoping there would be a quicker reopening but the Government is facing balancing the wishes of a population where two-thirds favour continuing lockdown against getting the economy back into action.
Having a slower start that speeds up is preferable to a long drawn out lifting of restrictions. Prior to the roadmap, anything that suggested even nightclubs will open by 21st June would have looked hopeful.
Provided there is a proper ending of restrictions on the 21st June, then the summer looks set to start with a bang. There are still understandable reservations, but with every passing day, confidence is growing. After the very worst of times, there is the tantalising possibility of the best of times.
Despite this, not all will thrive. On the THMC call, Nicholls summed up the situation: “After the Black Swan of Covid, we face the Grey Rhinoceros of debt and continued uncertainty that will cause many more businesses to fail.”