The cost-of-living crisis and a widespread lack of staff could stifle a potentially multi-billion pound economic recovery of the South West’s hospitality and leisure sector, a report has warned.
A new study has found the release of pent-up consumer demand for holidays and experiences following the pandemic has given a boost to the industry, which was devastated by national lockdown restrictions.
The research from Barclays Corporate Banking found 90% of businesses in the region are confident of growth this year, and are predicting an average 30% uplift in revenue compared with pre-pandemic levels.
The bank estimated this could equate to a £2.8bn rise in annual turnover over 2019, and a £4.4bn increase on 2021.
However, it added that soaring supplier costs and a scramble for talent were threatening to suppress the projected growth.
It found on average utility bills for firms operating in the area had already spiked by 28% year-on-year, while eight in 10 are struggling to recruit, particularly for waiting, cleaning and sales staff.
The report also identified incentives hospitality firms have introduced to attract and retain talent, with free perks, changes to tipping systems and introducing childcare facilities among the most popular.
Almost one in five employers across the country have also increased wages. Senior managers are set to receive the biggest boost to their pay packets, with an average increase of 7.7% - equivalent to around £2,000 a year for a full-time worker.
In the South West, housekeeping staff, delivery drivers and cleaning staff are set to receive the biggest pay rises this year at 5.4%, 5.3% and 5.2% respectively.
Barclays’ also said the industry’s finances currently allow for pay rises and other investments. Profit margins of hospitality and leisure operators in the South West are now at 49% on average, compared to 42% pre-pandemic.
Mike Saul, head of hospitality and leisure at Barclays Corporate Banking, said businesses needed the staff to capitalise on an expected increase in demand for UK holidays, owing to ongoing disruption to international travel.
Mr Saul added: “The hospitality and leisure industry was undoubtedly one of the hardest hit by prolonged periods of lockdown during the pandemic. In the early part of 2022 however, in a society free from restrictions, the sector enjoyed strong sales, leaving many confident about their growth prospects.
“Unfortunately, the worsening cost-of-living crisis is now a serious threat to this growth, and our research shows that talent shortages are another major concern for almost all businesses in the South West.”
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