Business Confidence Survey from Fourth and CGA explore what operators are planning for.
The latest CGA Business Confidence Survey reveals that operators remain deeply pessimistic about both market prospects and the future of their own businesses, with a third (32%) of senior executives anticipating the need to permanently close pub, bar and restaurant sites.
Most businesses across Britain’s eating and drinking-out market are now actively engaged in planning for life after lockdown – although the majority of bosses are not expecting to reopen until June or July, if allowed, and then taking a phased approach.
The poll of over 120 senior executives and entrepreneurs was conducted by CGA, in association with hospitality technology specialist Fourth, during the week beginning April 20.
Life after lockdown
“This is undoubtedly the most important business leaders’ survey we’ve delivered in a decade,” said Karl Chessell, Director of Food & Retail at CGA. “At this critical juncture, how hospitality leaders plan for the recovery will be critical to the long-term success of their businesses.”
Just 36% of leaders believe they will eventually re-open all of their sites for trading, with another third yet to decide on closures. But almost all expect to see a much-reduced market overall in the future, with somewhere between 70% and 80% of sites across pubs, bars, restaurants, late-night venues and hotels continuing to trade.
The vast majority (81%) of operators have now started recovery planning, with most considering a range of different scenarios. But, 13% said they were still waiting for more information before starting, while 5% did not currently have the capacity to plan.
Most businesses will be starting recovery from scratch, as only 27% of those surveyed had any sites open, either for delivery (8%), grocery and food supply to the public (4%) or for NHS or community support (14%).
When the poll was taken, most leaders assumed lockdown would be lifted in one to three months’ time, with 39% predicting between one and two months and another 29% between two and three.
The vast majority (96%) of bosses are expecting a phased reopening for hospitality, with half believing that will be based on a number of criteria including sector, location and type of site. Only 4% expect a mass reopening.
More importantly, 62% are planning for a phased reopening of their own estates. However, a sizeable 31% expect a full-scale reopening of their operations, but dictated by what the Government allows.
While a third of operators expect to be permanently closing a proportion of their own sites, most anticipate a much-reduced size of market overall, with late-night venues and restaurants expected to be the hardest hit and hotels most likely to survive. On average, they expected to see 69% of late-night operations, 71% of restaurant, 77% of drink-led pubs, 79% of pub restaurants and 85% of hotels to be left in business.
More optimistically, two thirds of bosses believe it will take them less than two weeks to get their sites ready to trade after lockdown is lifted, including a third (33%) who think they can do it in less than a week, while another 22% anticipate a two to four week preparation period.
James England, Senior Vice President at Fourth, said: “Operators are increasingly focusing their thoughts on reactivation. While it’s not yet clear when the lockdown will be lifted, it is apparent that the market will have a fundamentally different outlook when it reopens. Reigniting dormant supply chains and accurately forecasting demand in the volatile climate of COVID-19 will require collaboration up and down the supply chain, across technology platforms and operator to operator. At Fourth, we are determined to do our bit to help achieve this.”
Focus on front-line workers
Losing quality staff during lockdown is a concern for 47% of bosses, although the vast majority of companies have been engaging with furloughed teams at least weekly, and some daily, with WhatsApp and email groups being the most common mode.
Almost all businesses in the sector have furloughed nearly all staff; 83% have furloughed over 90% and 96% over 70%. Three quarters (76%) with furloughed staff are not topping up wages.
When it comes to readying staff for reopening, most bosses (63%) believe teams can be prepped and trained in less than a week, with 32% saying less than three days. Health, safety and hygiene is seen as the main area where training will be required, followed by emotional well-being, people management, and customer service.
Most (73%) operators say they are either confident in accessing the funds needed to reopen or don’t require funding, leaving 27% who are apprehensive about financing a return. In that context, extending furloughing has wide support, with a three-month extension after sectors reopen backed by 36% and a sector-by-sector extension dependent on opening backed by 33%. Exactly half (50%) of businesses back extending furloughing in three-month blocks, with 40% favouring a month-by-month approach.
Adapting to operational changes forced by the continuing threat of the virus is seen as the main challenge after opening, rather than suppliers or staff. Increased hygiene measures, reduced occupancy, reduced menus and reduced hours are the most anticipated changes to business.
That also reflects in part what leaders expect to be the main long-term changes in customer behaviour, namely increased hygiene demands, lower frequency of eating and drinking out, a reluctance to visit city and town centres and a desire to support local businesses.
“The size and shape of the eating and drinking out market is projected to look very different post-lockdown,” added Chessell. “The offer will inevitably change as leaders have to change their operating model to thrive once they open their doors again.”
Against these challenges, the survey found that market optimism had plummeted from a four-year high in February, when 60% of bosses were positive about future prospects to just 5% now, with 89% pessimistic. While, confidence in their own business was slightly higher, with 15% being optimistic that marked a fall from 83% in February and 31% in March. Now 69% are pessimistic about their own company’s future.
England added: “With great swathes of workers on the job retention scheme, businesses are focused on driving engagement with their teams supporting health and well-being and retaining the best workers. Whilst the crisis has brought many challenges, a renewed focus on culture absolutely feels like one of the positives. More and more businesses are seeking ways to further engage their workforce in order to support, train and retain them.
“Social distancing and the fallout from the pandemic will demand that businesses take a fresh look at their operating models and, of course, labour productivity and increased automation. This might see the rise of the ‘host’ role, in order to oversee social distancing measures, along with likely additional bussing and cleaning activities and procedures. Ultimately, hospitality’s post-COVID-19 complexion will look fundamentally different to the start of 2020, but we are a resilient industry that will evolve, adapt, innovate and overcome the challenges presented.”
Chessell concluded: “CGA is already working with partners across the sector, both operators and suppliers, using our range of insight capabilities to help them map out routes forward through what will be an ever evolving landscape.”
CGA’s Business Confidence survey received responses from 120 industry leaders working at CEO, Chair and director level and was undertaken the week of April 20, 2020.
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