CGA VP Peter Martin shares his thoughts on coronavirus, what's in store for the eating and drinking out business in the near future and how we can tackle the repercussions of the virus on the industry.
This is not a good time to be in the prediction business – apart from knowing that there is only one real topic of conversation in the market right now.
The coronavirus emergency is casting a dark shadow of uncertainty right across business and day-to-day life in general. Hospitality is feeling it particularly acutely. If the public becomes increasingly nervous about going out and meeting other people, the consequences for this sector are brutally obvious.
The snap poll that I worked on with CGA at the start of March underlined the scale of the concern already among the bosses of pub, restaurant and bar businesses.
It was no surprise that 85% said they were now “concerned” about the threat of coronavirus to their business, including 58% “ very concerned”. Almost everyone is bracing for a hit on sales and profitability, with just over half expecting an “extremely negative” outcome.
The survey added context to the individual tales of half empty restaurants, bars and venues, especially in London, now being shared with increasing frequency on social and mainstream media.
Not that everyone has stopped going out, far from it, it’s still a mixed picture – and a challenge for the out-of-home market is to keep encouraging people to go out to eat and drink, without looking irresponsible. Operators should try to keep the ‘business as usual’ signs over the door as long as they can, although creating positivity in testing times is easier said that done.
What no-one knows is how bad it is going to get and how long it’s going to last – which is not an easy place to start planning from.
The majority of operators are taking sensible first steps: increasing availability of hand sanitisers on-site and producing staff guidelines to encourage hygienic practices, on how to self-isolate and for travel. Just under half say they will continue to pay staff who have to self-isolate. Most are also looking at minimising cashflow risks, as the snap poll highlighted.
Trade bodies like UK Hospitality are also ramping up Government lobbying for relief for businesses if and when the crisis deepens, with UKH’s chief executive Kate Nicholls upping her already frenetic pace of tours of TV and radio studios to give interviews.
For operators themselves, good clear communication is going to be key to keep both staff and customers engaged and informed.
And that’s all well and good, but what next? The industry and the country have faced crises, and the uncertainty that comes with them, before. We’re only just getting over the last financial meltdown, although in recessions (despite what the media might report) people tend to continue going out, if changing the places they visit. This is unlikely to be like that.
But we’ve also endured foot-and-mouth and terrorism. The 9/11 attacks on the US and the 7/7 London bombings are perhaps the two atrocities that most rocked public confidence, leaving a sense that the world may never quite be the same again. But even after 9/11 we started flying again – and after 7/7 we went back on the Tube.
So is it right that we start thinking now about life after coronavirus, even if we have no idea when that might be or the devastation it could potentially cause? The simple answer is we must.
In the short-term, there will be an urgency to protect existing business by making economies and cutting expenditure – and there is a good case for now being the time to make those difficult restructuring decisions that may have been put off. The urge to batten down the hatches is understandable, but it needs to be tempered.
Coming out the other side fitter and leaner is a good objective. Coming out off-the-pace because you have stopped all investment is not desirable. The fact that the pub and restaurant market is already heavily populated by hungry entrepreneurial start-ups eager to snap up market share should be warning enough for the big beasts of the industry not to go into hibernation.
Continuing to invest in people and their development, in smart tech, in clever design and in quality data and insight (not least to monitor progress through these tricky times) will pay off down the line. It will be a balancing act, but better that than stopping everything.
So what sort of post-crisis world will we have? Good question. It’s not a good time to be in the prediction business.
Some habits will change, and developing trends may well be accelerated. It doesn’t take an expert to see that potential winners in these coming weeks and months are likely to be the food delivery companies, and those offering click and collect. If more eating-at-home becomes the norm, it may be a long-term habit hard to shift – and this is not just about hot food, as anyone trying to get an Ocado slot recently will testify.
The crisis may see the big delivery brands, many now involved in wrangles with city authorities around the globe, even turn from villains to heroes. Community-based pubs and restaurants may also come into their own supporting both the vulnerable in their local neighbourhoods as well as stay-at-home workers during the crisis period, reconnecting with their local base.
For a service industry, how other parts of business change and adapt will be just as crucial. The first to react to the worldwide threat of the outbreak have been, by and large, big global enterprises, restricting travel and attendance at events, even closing offices. While largely domestic gatherings are for the most part continuing (under the business-as-usual banner), international events are much more likely to have been cancelled.
With bigger companies more likely to adopt working from home, it’s no wonder that, as The Economist reported, shares in the corporate messaging platform Slack and the video-conferencing specialist Zoom rose 18% and 35% respectively last month, in a falling market. It’s a good bet that technology will become an even greater part of people’s every-day lives.
Also, you might ask, what is the long-term attractiveness of doing business in airports and other travel hubs? It is a fair assumption that the need for travel will return, as it did post 9/11, but in what form, and will this also accelerate the green agenda?
The main focus of business will rightly be on the immediate threat, but spare some thought for the future.
This article was first published on the MCA Insight website on March 10 - www.mca-insight.com/