Pubs Outshine Restaurants and Bars in August Sales Surge

In August 2024, Britain’s hospitality industry saw modest year-on-year sales growth of just over 1%, according to the CGA RSM Hospitality Business Tracker. This data, derived from over 100 managed groups such as the Azzurri Group, D&D London, MJMK Restaurants, and Young’s, reveals a sector that is cautiously navigating a challenging economic climate.

While the 1.3% overall growth is a positive sign, it comes with caveats. For the second consecutive month, the growth was below inflation, raising concerns about the sector’s ability to keep pace with rising costs. Nevertheless, there were bright spots, particularly for pubs, which outperformed other segments of the industry.

Pubs Lead the Way in August

Managed pubs posted year-on-year growth of 2.9%, a clear standout compared to restaurants, which saw only a 0.8% rise, and bars, which experienced a sharp 9% decline in sales. The strength of pubs in August is attributed in part to the ongoing appeal of beer gardens and terraces, even amid cooler weather, as consumers continue to seek more casual and affordable dining experiences.

Karl Chessell, director of hospitality operators and food for EMEA at CGA by NIQ, highlighted the resilience of pubs:
“While bars and restaurants struggled with footfall, pubs offered a more favorable environment, especially as the weather encouraged outdoor dining and drinking. Despite a muted summer overall, pubs have been able to leverage their outdoor spaces more effectively.”

The trend suggests that consumers, while still eager to dine out, are becoming more selective with their spending, favoring experiences that offer more value for money, like pub outings. The shift may also reflect a broader behavioral change, where the casual and social aspects of pubs provide comfort in uncertain economic times.

Restaurants: Slow but Steady

While restaurants reported only a 0.8% increase, the segment remains steady but has struggled to capture the same momentum as pubs. Rising operational costs, labor shortages, and changes in consumer spending habits continue to weigh on restaurants, many of which rely on consistent foot traffic and higher average spend per customer. Some restaurants, particularly fine-dining establishments, have found it difficult to maintain margins while grappling with inflationary pressures on food, rent, and wages.

However, the steady growth does suggest that consumers are still willing to dine out, albeit less frequently or with more caution. Restaurants that offer tailored experiences, such as farm-to-table concepts or localized menus, continue to attract a dedicated clientele, although broader economic uncertainty has tempered overall enthusiasm.

Bars Suffer a Decline

In stark contrast, bars saw a significant 9% decline in sales, a troubling sign for this segment of the industry. The drop suggests that consumers are cutting back on discretionary spending, particularly in nightlife settings where higher prices for cocktails and drinks can quickly add up. Bars that traditionally rely on late-night foot traffic have been hit especially hard, with many facing stiffer competition from at-home drinking and lower alcohol consumption trends.

This decline points to the challenges bars face in attracting a consistent customer base, particularly as the cost of living crisis continues to bite. With rising prices on essentials, many consumers are choosing to cut back on luxury spending, including nights out at bars, in favor of more affordable alternatives.

What’s Next for the Hospitality Industry?

While August’s figures represent a mixed picture for the hospitality sector, the final quarter of 2024 is expected to be a crucial period. As businesses prepare for the Autumn Budget on 30 October, industry leaders are calling for more government support to help operators deal with ongoing financial pressures.

Saxon Moseley, head of leisure and hospitality at RSM UK, emphasized the need for immediate intervention:
“After a lackluster summer, the hospitality sector is hoping for further government support in the Autumn Budget. Key areas of focus include business rates reform, a reduction in VAT to bring the sector in line with European counterparts, and a fall in employer national insurance contributions to offset rising wage costs.”

The sector remains hopeful that targeted reforms will help ease the burden on operators, many of whom are still grappling with the impact of Brexit, the COVID-19 pandemic, and rising inflation. In particular, a reduction in VAT for hospitality businesses, which would bring the UK more in line with countries like France and Spain, could provide much-needed relief and stimulate further growth.

Additionally, many operators are looking for reform in business rates—a long-standing issue in the sector. High rates have been particularly burdensome for small to mid-sized businesses, many of which are struggling to compete with larger chains that have more financial flexibility.

Real-World Impact of Policy Changes

If the government moves forward with these reforms, the hospitality sector could see a boost in profitability, enabling operators to invest in improvements, expand their offerings, and better serve their customers. However, without sufficient action, the industry may face a prolonged period of stagnation, with many businesses unable to absorb the continued cost increases.

The upcoming festive season, traditionally a strong period for hospitality businesses, will also play a pivotal role in shaping the outlook for the final quarter. As operators gear up for what they hope will be a busy holiday season, they will be keeping a close eye on consumer confidence and spending patterns. A successful final quarter could help offset some of the challenges faced earlier in the year, particularly for restaurants and bars that have struggled to maintain steady growth.

Conclusion: A Resilient but Challenged Sector

Despite ongoing challenges, the hospitality sector has shown resilience, with pubs emerging as a standout performer in August. Restaurants continue to post modest gains, while bars are experiencing significant difficulties. As the industry looks to the Autumn Budget for further support, the focus will be on ensuring that operators can adapt to the shifting economic landscape and capitalize on future growth opportunities.

With cautious optimism, the hospitality industry is bracing for a crucial end to 2024, with hopes that government support and consumer confidence will help bring about a stronger recovery.