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Shepherd Neame and Thorley Taverns bosses cautiously optimistic pubs and hospitality sector will survive cost-of-living squeeze

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Will the cost-of-living crisis stop you from going for a pint or a meal out?

That is the very real dilemma facing the hospitality industry as we tighten our financial belts amid the fierce winds of soaring inflation, the war in Ukraine and the post-Covid environment.

Phil Thorley, operations director at Thorley Taverns

"We're all thinking do we need to spend this, should I save a bit more?" says Rick Schofield from the Ashford office of business advisors Azets UK. "So those hit by Covid are now getting hit again. For the retail and hospitality sector it's complete nightmare."

Statistics from Barclaycard for spending in April revealed a dip in spending on takeaways, bars, pubs and club on the previous month - so is it a worrying sign of potentially worse to come?

Speak to some of the biggest pub operators in the county and there is a cautious optimism - for now at least.

"I think there's an element of nervousness around," says Phil Thorley, operations director at Thorley Taverns, which runs 19 venues in and around Thanet, "but I don't think it's hitting just now. People still want to go out and enjoy themselves.

Phil Thorley, director of Thorley Taverns
Phil Thorley, director of Thorley Taverns

"My concern is for the back end of the summer when things really start to bite and everybody's utility bills will go north.

"I think, as an industry, we are fairly confident for the summer but then very cautious and a bit concerned about the autumn."

Jonathan Neame, chief executive of Faversham brewer Shepherd Neame, which runs hundreds of pubs across the South East, is of a similar frame of mind.

"The optimist in me hopes this phenomenon, which is clearly not what we wanted, is relatively shortlived - by which I mean 12 months or so," he explains.

"Historically, hospitality is quite often the first to feel the squeeze but the first to come out of any downturn. That was true in 2008 and 1991. So long as people are in employment they have tended to cut back on other delayable expenditure - such as improvements to their home, holidays or new cars.

Shepherd Neame CEO Jonathan Neame
Shepherd Neame CEO Jonathan Neame

"Social expenditure is really important to people and particularly now as there's still inherent demand after the pandemic."

Soaring inflation - driven primarily by the extraordinary increases in energy and fuel costs - come as only the latest blow to an industry which was still picking itself up and brushing itself down from the ravages of the pandemic.

Closed for much of 2020 and the first part of 2021, hopes of a Christmas bonanza last year were then delivered a blow amid concerns over the Omicron variant of Covid.

The festive season is traditionally a bumper period for the hospitality sector but this year it now faces taking place in the shadow of yet another sharp increase in our energy bills.

And that poses the question of whether we'll eat and drink out as often as normal during the season of goodwill as firms also ponder the costs of holding the once traditional office party.

There are concerns the autumn may bring new challenges to the hospitality sector. Picture: Shepherd Neame
There are concerns the autumn may bring new challenges to the hospitality sector. Picture: Shepherd Neame

Adds Jonathan Neame: "I think it is likely there will be some impact. It's quite difficult to know how people will behave as they haven't had a Christmas for three years.

"However, I believe companies feel its important to get their staff together, while friends and family feel its important to reconnect at Christmas time. Those are fundamentals.

"It may be the spend is slightly cut back, but I think the basic appetite for going out is undiminished at this moment in time."

Pubs and restaurants have not been immune from the rising prices across the board. The world reawakening after Covid and the war in Ukraine has also driven up the price of essentials such as cereal crops, a key ingredient for beer as well as food price hikes.

Coupled with VAT rising back to its full 20% rate for hospitality outlets in April (it had been cut to 5% during the pandemic), the on-going staff shortages it is suffering from, and soaring energy prices, has forced many to pass those increased costs on to a, so far at least, understanding customer.

Optimism is high for a successful summer - but question marks remain for the rest of the year. Picture: Shepherd Neame
Optimism is high for a successful summer - but question marks remain for the rest of the year. Picture: Shepherd Neame

"No one likes prices going up," says Phil Thorley, "and we don't like putting them up.

"But there's a level when they're put up for us that we need to put it up for our customers, because we've got to pay our staff, reinvest in the properties and keep everywhere clean and secure for them.

"There was an expectation this year of a price rise, rather than a real challenge against it.

"Whether we have to go again with a further price rise is yet to be seen. The brewers put our prices up 7% and we put our prices to customers up by 5%, so we absorbed a chunk of that rise.

"But since that point we've also had food inflation, utilities going up. It's a challenge, but we're going to do our very best.

Prices have already got up in pubs - and more could be on the way
Prices have already got up in pubs - and more could be on the way

"We can't be impervious to passing that on to our consumers."

Adds Jonathan Neame: "We'll always do our level best to offer value for money and control cost inflation, but some is absolutely inevitable I'm afraid and we're seeing that in other walks of life."

The hospitality industry finds itself in a unique situation. While inflation is soaring and budgets tightened, there is none of the high unemployment rates which traditionally accompany such a situation. And that means their customers still have incomes coming in - it's how they choose to spend any surplus that is the big question.

In addition, after two years of pandemic disruption, our appetite for going out and socialising has perhaps never been stronger.

All of which means there is a huge question mark hanging over the sector's future prosperity which one no-one can answer with any certainty.

"You have to weather the storm - and this is a nasty storm..."

Yet there is reassuring optimism.

"Sometimes," says Phil Thorley, "you have to weather the storm - and this is a nasty storm. But we will be doing the very best we can to weather it for our consumers, by offering them the best value for money, and for our team."

And, as Jonathan Neame concludes, it has, in the very recent future, been far worse: "We're open, we're trading. These are very unusual times but I'm confident we'll get through it and very confident the business will ultimately come out stronger.

"I accept there's a difficult winter ahead but in the context of what we've been through I don't believe it will be as difficult as some of the challenges we've already faced in the last couple of years.

"People need to socialise, want to socialise and want to go out as it's an important part of their life. There may be some change in behaviour and we'll have to find every way we can to ensure everything we do is value for money."

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