Well, that was quite a year, wasn't it!

There’s no need to run through the full details and the (limited) highs and (multiple) lows of the rollercoaster year that we’ve had, as we have all shared in the painful experience.

What is required however, is a cool clear assessment of the state of our Hospitality nation as we head into 2021 with a glimmer of light, but starting from a rocky base. There has been so many statistics flying round that it has been really difficult to get a true sense of how bad the whole of hospitality has been affected. Every operator will know how their business has suffered and will have a good idea of how their competitors have fared, but knowledge about how other sectors have performed and how consumers are spending their money differently, is generally unknown.

We saw the sudden shock of the first lockdown, the booster of VAT reduction in July, the highs of EOTHO in August, the gradual descent into Lockdown 2.0, the wailing of Tiers for December and the Government at 6’s and 10’s! We end the year with the majority of the country, and Hospitality, in highly restricted Tier 3 and Tier 4.

Throughout this year however, consumers have also been adapting to this switching on and off, pivoting themselves between doing nothing and seeing no-one, to seeing everyone and eating out more frequently than ever during July and August. Some of their switches will be permanent, such as the growth of Delivery usage, some of them will return back to normal.

We’ve seen deserted city centres but strong performances from suburban sites, as the ‘Polo-mint effect’ sees consumers staying closer to home and switching their spend; We’ve seen tourist hotels in London with barely 15% occupancy, whilst destination staycation hotels in Norfolk, Cornwall and the Lake District have been virtually full at certain times.

It has been such a confusing and complex period that running any comparisons in 2021 is probably going to be easiest just to refer back to 2019. However, we believe it will be essential to know what happened to the sales revenue of all businesses and sectors during 2020, so that strategic planning in 2021 takes into account some of the permanent changes of this crazy year.

In January we will be releasing a new forecast for the future of the sector and the rebuilding of hospitality from 2021 to 2025, however this needs a firm base from which to build the forecasts from. The base needs to state the value of hospitality in 2020.

We have been building that base for the entirety of hospitality (excluding accommodation), including contract catering, hotel F&B, food to go and of course, pubs and restaurants, analysing all the data points from many sources, including analysis of consumer card spending by HDI, which we believe provides the largest (most credible) sample and the most detailed analysis.

Recent data from the Coffer Peach tracker showed the -21% LfL drop in September, -33.9% in October, and -79% fall in November, but this only covers the branded restaurant, pub and bar sectors, and generally only a fair slug of larger operators, so doesn’t show the picture for the independent operators, nor for fast food, contract catering, coffee shops etc – but don’t get me wrong, the Coffer Peach tracker is an excellent indicator.

Analysis from HDI, (run by @DarrochBagshaw, former Insights & Pricing Director at both Greene King and M&B), which accesses card spending data from c.11million consumers, shows that 16% of all consumers have either become absent from spending, or have switched out of spending, in Pubs, Bars and Restaurants, in the period from July to November. There are still some consumers who have not been ‘Out’ since March.

Following on from this, further deep-dive analysis of c.900,000 consumers showed that 51% had reduced their share of total spending through Pubs and Restaurants, whilst 34% had actually increased their share; the difference between those two can, in very simple terms show some of the decline in sales in Pubs and Restaurants.

Further analysis by HDI, of total spending in Pubs, Bars and Restaurants, shows the following declines in consumer spending across all venues (branded, independent, and tenanted):

May (-96%) / June (-81%) / July (-37%) / August (-23%) / Sept (-31%) / Oct (-41%) / Nov (-87%)

It is also important to remember that the VAT reduction from the 15th July will have boosted net sales for operators by 15%, as the vast majority did not pass the VAT cut onto consumers.

Whilst EOTHO gave a boost in August, which is easily seen from the above numbers, Hospitality has been losing out to other forms of food retail and foodservice, with HDI data showing that there has been a 140% increase in spending on Meal Kits from the likes of Gousto, Hello Fresh, Mindful Chef etc!

Of course, there has also been the switch to delivery services from Deliveroo, Uber Eats and Just Eat, which has seen those providers double their turnover over 2019 figures; Growth in delivery was significant during the first lockdown, but there were still many operators closed, so growth for the month of June for example, was only +67%. As more operators opened up and expanded their delivery services from July onwards, this growth increased, rising to +92% in October before hitting +100.3% growth in November! Many branded restaurant operators will have benefited from this switch in consumption, indeed Wagamama’s recent results show positive sales in re-opened sites as a result of delivery.

Other useful reference points in assessing the state of the nation are the ONS study, which surveys consumers, and showed a -89.5% decline in all hospitality and leisure spending in Q2 which was fairly obvious; we await the results from its Q3 study.

Taking all these data points into account, together with company reports, performance data and industry surveys, we have been developing a highly detailed, granular calculation of the total revenues of all hospitality & foodservice (excl Accommodation) revenues for the whole of 2020, to be at ￡51bn, a 48% decline on 2019 figures of ￡98.1bn.

This highlights the monumental challenge that the industry has had to face and takes into account the number of sites that have closed; including in Pubs, Restaurants, City Centre Fast Casual, Hotels, and Leisure operations. It also includes the breadth of the impacts, with Contract Catering -56% lower than in 2019, and Travel foodservice is barely half of what it was, with rail and air food outlets decimated.

Pubs have seen significant declines, achieving only 46% of 2019 levels, brought down especially hard with the tiered restrictions and the 10pm curfew. Restaurants fared slightly better thanks to the EOTHO scheme but lost a large number of sites through the branded chain CVA’s. The Fast Food sector has been the hardiest survivor, achieving 72% of 2019 sales, stealing share of the declining market through the sector’s ability to provide drive thru, takeaway and delivery services, at low prices.

This ‘State of the Nation’ base calculation hits hard, but then prompt the questions of what will 2021 look like, and when will we see recovery? Questions also have to be asked as to who will continue to retain their market share in the next few years, and whether some of the losses will be permanent. We aim to answer those questions with forecasts for the rebuilding of hospitality over 2021 to 2025, in the new report being launched on the 11th January 2021.

The macro-economic impacts for 2021 and beyond are going to be really influential on Hospitality, with many negative pressures, but there are some positive indicators; as one example, the Bank of England has calculated that household savings have increased by c.￡100bn in 2020, despite the job losses and reduced incomes from furlough, so we can be optimistic that some of that will be spent in 2021, especially if Brits retain their taste for staycations.

If other market segments such as meal kits have been successful in getting consumers to switch their spend this year, then Hospitality will need to fight back by providing a great experience that cannot be replicated at home. There will be no place for operators caught in the middle, neither offering a brilliant experience, nor delivering value. There will still be a large section of consumers who will be economically affected next year, and value will be equally important as experience.

The first quarter of 2021 is still going to be painful I’m afraid, as Tiered restrictions, consumer confidence and unemployment impacts take their toll. Yes, the vaccines will start to change things around, but we can also expect more business failures at the end of March as the rent moratorium comes to a stop.

There will be pent-up demand from consumers for all the services and experiences that our fantastic industry provides, and that will feed through into improvements in 2021, but we do have to remember that comparisons need to be made with the real picture of 2020, as well as with those wonderful halcyon days of BC!