Hospitality and leisure SMEs anticipate 21% revenue increase

SMEs are now more optimistic than pre-pandemic, predicting a 9.8 per cent increase in revenue this quarter compared to Q1 2021 – jumping to 21 per cent for the hospitality and leisure sector as lockdown restrictions continue to ease, according to research by Barclaycard.

The SME Barometer polled over 670 senior staff working in UK SMEs, also shows business sentiment is starting to look more positive, at 110 points out of a possible 200. This is up from a low of just 79 points in Q2 2020 and means SMEs are back to the same pre-pandemic sentiment levels of 110 last seen in February 2020.

85 per cent of SMEs plan to invest in their businesses over the next 12 months, mainly by recruiting staff, investing in new equipment or technology, and upping marketing efforts. After a tough year for many jobseekers, a reassuring 47 per cent of SMEs also expect to increase their staff over the next year.

Over half (51 per cent) of SMEs expect an increase in revenues from 17^th May, when the next stage of restrictions will be lifted. This is supported by Barclaycard Payment’s acquiring data, which shows that hospitality and leisure SMEs saw the number of payments processed up 105 per cent in the last week of April, compared to the first week, following outdoor hospitality venues opening from the 12^th April***.

Looking ahead, SMEs are forecasting an 18 per cent increase in revenues a year from now, with the hospitality and leisure sector expecting a 42 per cent boost. Many SMEs have an optimistic (33 per cent) or neutral (40 per cent) outlook for the UK economy, which increases to 51 per cent optimistic and 36 per cent neutral about the prospects for their own businesses.

Over a quarter (29 per cent) of hospitality and leisure SMEs expect to see higher demand between now and 21^stJune, when most restrictions are expected to be lifted, compared to pre-covid. This is due to customers being less likely to go abroad (79 per cent), pent up demand after months of lockdown (66 per cent), and visits to hospitality venues to meet up with family and friends (65 per cent).

Hospitality and leisure venues taking reservations are currently booked at half (49 per cent) of their capacity, with more than a third (35 per cent) expecting customers will need to book at least five days in advance to secure a reservation for mid-June.

Despite signs of optimism, potential challenges remain for the coming months. Of those who expect lower demand between now and 21^st June compared to pre-Covid, many (37 per cent) expect, after an initial burst, customers will hold back their spending until 21^st June. Others are concerned that people now prefer to socialise and eat at home (33 per cent) or will tire of social distancing measures (34 per cent).

However, hospitality and leisure SMEs are prepared for customers once they fully open back up, and have invested in free hand sanitiser (65 per cent), signs to remind customers about social distancing rules (61 per cent), PPE for all their staff (53 per cent) and training new staff or those returning from furlough (38 per cent) ahead of May re-openings when most indoor restrictions lift.

Hospitality and leisure SMEs are also looking at ways to increase revenues after a difficult year including increasing prices (21 per cent) and investing in improving outdoor spaces (16 per cent).

Rob Cameron, CEO of Barclaycard Payments, said “As restrictions lift, it’s reassuring to see the highest level of SME optimism since the SME Barometer launched, with expectations of a long overdue boost for the hospitality and leisure sector. With the confidence to plan ahead, small businesses have turned their attention to bulking up their workforce, as well as investing in technology and marketing. We’re looking forward to seeing this confidence translate into sales, and we continue to support small businesses as they further increase their stronghold in the UK economy.”

Kate Hardcastle MBE, Independent Expert, said “Speaking to small business owners, while they’re excited to be back in action, there’s a natural cautiousness about interest dropping off after an initial burst of spending. However, the overarching feeling is one of hopefulness for the year ahead – and with that, a drive to invest in their business and people. What they need now is our support. As we hit the summer months, I would encourage us to all do our bit to help our local SMEs and support their recovery.”

Measure	Score Q2 2021	Score Q1 2021	Score Q2 2020	Score Q1 2020
Business sales pipeline	120	105	87	118
Planned investment	101	92	75	104
Supply chain	124	119	111	131
Legislation impact	92	87	89	96
Cash flow strength	123	115	96	121
Raising finance	112	101	81	116
UK economy prospects	103	80	52	100
Sector prospects	115	100	71	107
Business prospects	124	110	83	118
Business stability	88	71	47	92
NATIONAL AVERAGE	110	98	87	110

Meanwhile, RSM has said that City centre hotels must change their route to market to help secure a greater share of pent-up demand.

The predicted sustained increase in consumer spending over the coming months will see country and coastal operators better placed to enjoy a staycation boom. But city centre hotels, who rely more on the corporate and foreign market will face bigger challenges, particularly with international tourism curtailed.

With less options than their regional counterparts to help offset the many hurdles that face the sector, and with corporate bookings looking likely to stay muted during 2021, city hotels must update their offering and aim to broaden their appeal.

RSM’s call comes just days before hotels in the UK start welcoming guests back after existing lockdown restrictions end on 17th May.

Chris Tate, Partner and Head of Hotels and Accommodation at RSM,  said “Councils and consumer facing businesses in cities will need to work together to boost domestic tourism. Short term initiatives backed up by longer terms plans to invest should give confidence and inspiration to hotels and other retail and consumer businesses.”

“With entrepreneurial spirit and fresh ideas cities can attract visitors once more. This release of pent up demand will also allow for competitive pricing, boosting average room rates for some operators.”

“Whilst operational challenges will be front of mind for the next few months, focus should also be given to the Chancellor’s recent budget and key measures which may bring significant cash savings to the sector. Hospitality grants will be easier for many hotel groups to access considering the change to State Aid Rules thresholds which increased from £3m to £10.9m. The extension to loss carry back from one year to a maximum of three years should also deliver direct benefits to the sector along with the new Super-Deduction relief which will give relief of 130 per cent of costs incurred on capital expenditure as well as 50 per cent first year relief on integral fixtures.”

“Use of the VAT Deferral New Payment Scheme and Time to Pay arrangements should also be maximised and negotiated so businesses agree repayment terms with HMRC.”