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Revealed! The Mazars Hospitality & Leisure Survey 2015

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Revealed! The Mazars Hospitality & Leisure Survey 2015

May 12
10:12 2016

Mazars Accountants have released the findings of their annual hospitality and leisure survey. For the fourth year running, a cross section of finance directors, HR managers and owner-proprietors in the hospitality and leisure sectors were asked for their views on the events of the past 12 months and the challenges and opportunities that lie ahead.

Designed to uncover the key factors affecting the industry and compare these to the findings of 2012, 2013 and 2014, the survey was conducted during October and November last year.

AberdeenProblems in Aberdeen (pictured left) aside, the main concern for 2016 was the introduction of the national living wage (NLW), with more than a third of respondents saying they will probably have to raise prices in order to accommodate the changes, and some claiming they will need to make cuts elsewhere within their businesses.

However, while the true impact of the forthcoming changes have yet to be determined, initial research indicates that hospitality establishments are more likely to absorb the additional costs than reduce staff numbers.

On a more positive note, the rate of consolidation appears to remain in decline, while growth through external investment and mergers-and-acquisitions continues to increase. Once again, though, the economy and pricing competition dominate the agenda and, it seems, will continue to do so for the foreseeable future.

Here, we’ve picked out the most relevant findings for the Scottish hospitality operators…

According to the survey, the top three concerns for what might adversely affect business performance over the next 12 months included:

  • The strength and direction of the UK economy: 27% of respondents cited this as a concern – around 4% lower than in 2014 – suggesting that confidence is returning, albeit gradually.
  • Managing staff levels: 13% of respondents mentioned this last year, unchanged from 2014
  • Retaining key management: A new top three principal concern, 13% of businesses felt that attracting and keeping managers and supervisors would prove challenging this year.

Other factors impacting on sector performance included: increasing costs (30% of responses); pricing competition (26% – the same as in 2014); new entrants to the market (19% – down 3%); and new legislation (20% – down 2%).

And while employment figures are starting to increase, fears over the recent introduction of the national living wage (NLW) have replaced retention and skills development at the top of the agenda.

Indeed, 35% of respondents claimed they would have to raise prices because of the NLW, while 23% told us that they would also have to make cuts elsewhere within their business in order to accommodate it.

A reduction in VAT and National Insurance contributions also featured regularly among respondents.

Meanwhile, low inflation and the Bank of England’s indications that rates will remain low this year have resulted in fears over the ability to raise finance falling from 10% of responses in 2014, to just 1% in 2015. This will due, at least in part, to the increasing popularity of crowdfunding within the hospitality and leisure sector.

Below is a summary of the industry’s main concerns for the next three years:

  1. What top factor could affect the performance of your business in 2016?

Despite the apparent confidence boost of the election to office of a majority Government in May, 77% of respondents claim the economy is still one of their main concerns and will continue to affect business over the coming year. However, this is down significantly from 90% in 2014 and 89% in 2013.Hamm 2

  1. What do you think will change the shape of the market over the next three years?

Almost two thirds (64%) of respondents identified pricing competition as a key factor. Despite significant increases in room supply in the last two years, many operators have struggled to increase room rates, mainly due to the prevalence of price comparison sites, the emergence of AirBnB and the increasing use of online travel agents. And while demand for restaurants and hotel space has never been higher in most of the UK, the dominance of larger hotel groups represents tough competition for independent establishments. Lastly, although the industry will benefit from falling corporation tax rates, this will be somewhat offset by new employment legislation impacting on staff costs.

  1. What are the key risks and challenges associated with the industry today?

Nearly 80% of respondents cited increased costs, while the consumer trend of booking via online agents has heralded a significant increase in commission outgoings for operators. Likewise, competition also scores highly here, as the market gets closer to saturation.

  1. The living wage will be introduced in April. What impact will this have on your business?

More than one third (35%) of respondents said they will need to raise prices, while 23% claimed cuts will have to be made elsewhere in their business. Interestingly, only 15% plan to reduce headcount.

  1. What changes in Government legislation would help improve your business?

An overwhelming number of respondents (74%) want to see a cut in VAT and other taxes. However, the good news is that the corporation tax rate will be cut to 19% in 2017, and then again to 18% in 2020.

Meanwhile, forthcoming changes in National Insurance Contribution rules mean the employers’ allowance will increase from £2,000 to £3,000, while more funding assistance for training and apprenticeships – not to mention the reintroduction of capital allowances – will provide further incentives for operators to invest in their properties.

  1. What do you consider to be the greatest challenge in recruiting top quality staff?

Just over half of the responses (51%) identified the quality of candidates as the main difficulty in recruiting top staff.

Allied to this, a positive change in legislation to reduce the cost of staff training would help with recruitment of quality candidates for key positions.

  1. What technological changes have most improved your business?

The dependence on online bookings and, to a lesser extent, social media, continue to be the main technological changes assisting business in the sector. Respondents also told us that the recent advances in email marketing and LED lights (to reduce power costs) have also improved trade. However, weak mobile signals and Wi-Fi issues continue to have a negative impact on rural establishments. And while respondents didn’t cite mobile apps as a game changer at this stage, it will be interesting to see if they appear in the top three technological changes in the next year or two.

  1. Is brand loyalty more important now than it was five years ago?

Around half (51%) of respondents feel that brand loyalty is indeed more important. However, as the majority feel they will have to raise their prices due to the new NLW, we could see a reduction in brand loyalty as consumer price expectations are no longer met.

  1. Which part of the business cycle is your company currently on?

Nearly two thirds (64%) of respondents believe they are in the growth phase (against 61% in 2014 and just over half in 2013).

Compared to last year, there is a clear move towards growth from external sources and investment (20% in 2015, versus just 10% in 2014), possibly because the availability of external investment is seen to be stronger than ever.

Similarly, the market for transactions is as strong as it has been in the last few years and there are plenty of opportunities for acquisitions.

tips_©SamSavineThe National Living Wage Vs The Hospitality Sector

Arguably the most significant change in pay-related legislation since the introduction of the minimum wage in 1998, the NLW will become a legal requirement this year, and the hospitality industry is expected to be hardest hit.

From April, UK businesses will required to pay £7.20 per hour (£9.00 by 2020) to all staff over 25. However, changes in pay are not restricted to employees currently earning under this threshold; the increase to junior staff pay will bring many in line with the current market rates for team leaders and supervisors.

According to research by the Resolution Foundation, almost a third of employers plan to manage increased costs by improving efficiency and/or productivity.

Other responses included plans to absorb the additional costs (22%), reducing overtime and bonuses (16%), raising prices (15%) and cutting overall headcount through redundancy or slower recruitment (15%).


For more information on how Mazars can assist hospitality and catering operators with accountancy and payroll services, click on the image above.


An international firm providing accountancy, audit, tax and other advisory services in 74 countries, Mazars offers: Audit and assurance • Governance and risk • Internal audit • Business Performance Improvement • Consulting • Tax advisory and compliance • Outsourcing • Corporate finance • Due diligence and transaction support • Restructuring and turnaround services • Forensic and investigations • Employee benefits • Anti-bribery-and-corruption services



Youth action: With the national living wage applying only to those over 25, hotels and restaurants are expected to focus on recruiting a younger workforce



Pull quote:

Those currently paying the living wage may find they have lower employee turnover and HR costs, and greater loyalty and productivity from staff – albeit until it’s compulsory for everyone and then such benefits will largely disappear


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Catering Scotland

Catering Scotland

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