Consumer behaviour and socioeconomic factors are slowing recovery and driving disparity, according to the latest analysis from IGD, with the hotel and leisure sector expected to be hit hardest.
The overall eating out sector is now not expected to return to its pre-pandemic state until at least 2024.
Pubs and restaurants will experience a slow recovery with mid-market operators squeezed as consumers eat out less or down-trade, predicts IGD. However, high-end restaurants will be protected to an extent, it says.
The quick service restaurant (QSR) sector, which targets more price sensitive customers, is the driving force behind market growth, it says.
Hotels and leisure will find recovery the most challenging as discretionary spend is scaled back by more consumers. While staycations will continue at higher than pre-pandemic levels due to pre-booking, international tourism will still be considerably reduced, says IGD. Income from domestic and international business travellers will remain significantly depressed this year.
“During the pandemic, we saw an unprecedented and accelerated level of diversification and innovation in the sector that enabled survival for some businesses. As the market recovers from the shockwaves of the last two years, there are a new set of challenges to face, such as the rising cost of living and inflation, and now, the significant implications of the war in Ukraine,” says Nicola Knight, IGD senior analyst.
“Recovery will be at a slower pace than industry would have hoped. Our low-mid growth forecasts are most likely to play out, meaning that the market will not return to its pre-pandemic state until at least 2024.”
“Recovery will also vary by sector and QSR is currently the driving force behind growth, offering a convenient, consistent and value-driven alternative to eating at home, providing the “lipstick effect” for consumers. That said, city-centre and transport hub focused brands will continue to chase 2019 sales levels.”
A focus on customer experience, investment in technology and mitigating costs will support recovery, adds Knigt
“There’s no denying, the industry is facing a challenging time; planning and prioritising must sit at the top of the agenda for businesses to navigate the year ahead and beyond.
“Priorities will vary by sector, but there are clear behaviour themes driving the industry forward which include an enhanced focus on customer experience and loyalty, investment in technology and implementing strategies to mitigate costs.”