The hospitality industry is set to thrive

The hospitality industry is set to thrive

The value of the hospitality industry to the UK economy may be overlooked, but it is poised to sustain economic revival

The hospitality industry is set to thrive

As thousands of students start a new university term, no doubt many of them will be hunting for bar work or jobs as waiters to help fund their studies. They will be working in the UK’s fourth largest industry, representing 10 per cent of gross value added to GDP, equivalent to £143 billion, and they will probably view it simply as a cheap and disposable job to bring in some beer money.

“Hospitality is often regarded as the Cinderella industry,” says Robert Barnard, partner and head of hotels and hospitality at business advisers BDO. “Historically, we have not had a culture of service in the UK and recruiting school-leavers is still difficult.”

But hospitality matters to the UK economy. Not just because of its size, creating one in five new jobs since 2010 and aiming to generate a further 100,000 new jobs by 2020, according to the British Hospitality Association (BHA). But because it has been growing in economic importance, moving up from the fifth largest industry in 2010 to the fourth and employing more people than education, manufacturing or construction.

“Hospitality touches everyone every day, from a coffee stop on the way to work through workplace catering to family celebrations and drinks with friends,” says Peter Ducker, chief executive of the Institute of Hospitality, a trade group. “Hospitality is deeply woven into the very fabric of our society.”

Migrant workers

The hospitality industry is also critical to what makes Britain into a must-see destination for reasons of history and culture, as well as a global financial capital. The government has set ambitious tourism targets, aiming for 40 million visitors by 2020, with annual receipts of £31.5 billion, according to a 2015 Mintel Leisure Review. But can the industry, which is hugely reliant on migrant workers – around 69 per cent of hotels in London are staffed by migrants, according to the BHA – function as well post-Brexit.

For too long, hospitality has been regarded as low skilled and badly paid with unsociable hours to boot

Ufi Ibrahim, chief executive of the BHA, says: “The true impact of the referendum result will not be understood for many months. Hundreds of thousands of employees have come from EU countries and their willingness to work in all regions of the UK has been vitally important.”

But it is not only Brexit that will affect working practices; issues such as the national living wage and apprenticeship levy are changing practices too. For too long, hospitality has been regarded as low skilled and badly paid with unsociable hours to boot.

“One of the questions for the industry is to shed the image that it is a part-time job, not a long-term career,” says Philip Shepherd, senior partner in the hospitality and leisure team at advisers PwC.

Employers are facing the need to change their practices. While only about 30 per cent of employers have policies in place to support work-life balance, the increase in staff retention from these companies is about 80 per cent higher than those who do not, according to the Institute of Hospitality’s report, Spotlight. In an industry where 41 per cent of workers intend to look for other work within the next 12 months, according to a recent report from recruiters Reed Hospitality and Leisure, improving retention rates by valuing employees more could have a dramatic effect.

Government help

The government is often urged to offer a greater helping hand; VAT, for example, is a key pressure point. A report in March 2015 by Professor Adam Blake, a Treasury adviser, urged the government to cut tourism VAT to 5 per cent, calling it “one of the most efficient, if not the most efficient, means of generating GDP gains at low cost to the Exchequer that we have seen”.

The government also has a key role in in developing the wider context, says Mr Shepherd, pointing to infrastructure projects such as HS2 and the development of the “northern powerhouse”, not to mention the maintenance of Britain’s cultural heritage, a key factor in why visitors come to Britain. “Supporting the hospitality industry is about lots of things that come together,” he says.

Meanwhile, an industry disruptor such as the sharing economy – models such as Airbnb – is one known unknown. “It’s clearly here to stay and the proposition is very attractive,” says Mr Barnard. “But the big issue is the lack of regulation.”

Nor is it only hotels that face competition as the rise of the experiential meal, from pop-ups in a private home to mobile street food, is changing how and where we choose to eat when we go out. “We are seeing much more targeted and experiential tourism – a greater segmentation of the market,” says Mr Shepherd.

Another known unknown is the increasing transparency of the industry; review sites such as TripAdvisor combined with cost comparison websites put an unprecedented level of power in consumers’ hands.

According Simon Bullingham, managing director of Journey, a hotel marketing agency, getting the message right in the right places is key to success. “Consumers want things to be easy. They want great user experiences online – websites that are easy to navigate,” he says.

Consumers are constantly pushing for higher standards at every price point. As hospitality looks to the future, it is the flight to quality that must top the agenda.

As seen in "Future of Hospitality" Future of Hospitality Download this report

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