The exclusive research from CGA by NIQ and AlixPartners indicates a 0.4% decline in total numbers between the start of January and the end of March — the third smallest quarter-on-quarter drop since the start of the Covid-19 pandemic.
The current total of 98,745 hospitality venues (inclusive of pubs, bars, restaurants, hotels and other forms of licensed premises) means the market is down by 2.5% year-on-year, meaning one in 40 venues has shut in the past 12 months.
However, the latest three-month snapshot provides 'cautious confidence' that a slight easing of cost pressures may be starting to put the brakes on business closures.
“After a very challenging few years, these numbers give grounds for tentative optimism that hospitality closures will slow as 2024 goes on,” says Karl Chessell, a director at CGA by NIQ.
“While thousands of businesses remain fragile, a downward trend in inflation should hopefully raise the confidence of operators, consumers and investors alike, and protect more venues from closing the doors.”
The Monitor notes a marginal return to new openings for both casual dining and independent restaurants. These two segments recorded a combined net decline of 21.0% of sites between the start of the pandemic in March 2020 and December 2023, but appear to have stabilised and achieved 0.5% growth in the first quarter of 2024.
While lamenting the closure rate, trade body UKHospitality says the growth highlighted by the Monitor is cause for some optimism in the sector.
“This data gives some signs to suggest the sector is beginning to recover,” says Kate Nicholls, chief executive of UKHospitality.
“A slight growth in both casual dining and independent restaurants indicates a potential growth in an appetite for investment in the sector.
“While nascent, these are positive signals, albeit at a time when the sector continues to face tough economic challenges, which continue to put at risk the many benefits hospitality delivers to Britain.
“The closure rate may have halved, but we’re still losing venues and that is not acceptable. It remains the case that the cost burden for the sector is too high, and we need to see those costs rebalanced and reduced, if we are to build on some of the growth we are seeing.”
In total, food-led site numbers increased by 0.1% in the first quarter of 2024, compared to drops of 0.7% and 0.4% in drink-led and accommodation businesses.
Despite improving trends in the eating-out market, the independent restaurant segment remains vulnerable, experiencing a 22% decline between March 2020 and December 2023.
Managed multi-site hospitality groups, meanwhile, have had a resilient start to 2024. While the independent and leased segments of the market contracted by 0.4% and 0.7% respectively in the first quarter, numbers in the managed channel were virtually level with December 2023.
Some groups have been forced to close sites in early 2024, but many vacated premises have been swiftly reoccupied by new operators.
“The economy and the hospitality sector have been impacted by many different and significant factors in the past three years, whether that be the disruption from rapid inflation or the longer-than-anticipated recovery period from the pandemic,” says Graeme Smith, AlixPartners’ managing director, and head of leisure, corporate finance.
“This has been visibly illustrated by hospitality openings and closures. These headline rates have always been among the most meaningful proxy for assessing the overall health of the industry and the operating climate.
“While the number of venues continues to tick down overall, the rate has slowed significantly, and hopefully this a further sign of the easing of some of these big market pressures. Operating conditions are clearly not easy, but the volatility of recent years has calmed.
“Another key indicator for the hospitality market is mergers and acquisitions (M&A) activity, which is building momentum, partly on the back of this easing of market pressures, and also as interest rates stabilise and financing markets open up. Debt is available – albeit more expensive than it used to be. As a consequence, we expect these more stable conditions to continue to translate into fewer closures and more M&A deal activity.”
