How will COVID-19 affect the hospitality industry?
Coronavirus has hit the hospitality industry hard, like some great walloping from an unseen weapon. Outside everything seems normal. The birds sing; the clouds traverse the sky; the plants continue to bloom; and the world is just getting on with spring as normal. But things are very far from normal in our own little human bubble. Suddenly everyone is working from home and being advised to limit the number of people they see. Almost overnight the restaurant industry went from experiencing a crippling shortage of chefs to a crippling over-abundance. There have been a wide range of different responses. The first undoubtedly was to panic, but thereafter signs of new life and restaurant businesses in formats we haven’t seen before have started to emerge and could well be here to stay.
What has caused the panic?
This may seem obvious, but it’s worth looking at this a bit closer. The main reason there was such widespread panic was because the government announced its advice to avoid public meeting places like restaurants, bars, and pubs without simultaneously announcing a complete ban or a plan to support the businesses whose revenue streams they’d just denied. Many of these businesses operate on low margins and very fragile cashflow already so the prospect of survival for an indefinite period of time without income seemed very bleak indeed. This has taken a mental toll on already stressed business owners and their worried staff.
While it could be expected that the speed of change in terms of government strategy meant that they were unable to reveal their plans to support businesses simultaneously with the advice to the public, greater assurance that a plan was coming soon, could have helped to alleviate some of this mental stress.
In particular, the question of insurance was one that got the hospitality industry up in arms. The fact that Boris Johnson stopped short of issuing a complete ban, seemed like an almost deliberate attempt to make their lives difficult. This meant that they were unable to claim on their insurance for disrupted business. Boris has since announced, however, that they have been in discussions with the insurance companies and that they have stepped up to the plate to recognise Boris’ advice to the public as paramount to a complete ban. Unfortunately, this does little to help businesses, however, as the insurance companies have yet a further safety net for themselves. It turns out most businesses won’t have opted for a more extended cover that would insure them against the affect of infectious diseases. The best explanation of the insurance situation I have found is on Big Hospitality.
This has led to millions of workers across the country facing the prospect of being out of work without pay or even sick pay, and thousands of businesses having to lay off their most valuable asset: their staff.
What is the government’s current plan to help and will it help?
On Tuesday the government announced its plan to support businesses across the country:
- A package of £330bn of loan guarantees to businesses, with more to be made available if needed
- Interest-free business interruption loans will be increased to £5m, up from £1.2m announced at last week’s budget. No interest will be due for the first six months
- A 12-month business rates holiday for all shops, pubs, theatres, music venues, restaurants and any other hospitality or leisure business
- A cash grant of up to £25,000 for those businesses with a rateable value of less than £51,000
- A three-month mortgage holiday for those in difficulty because of coronavirus
- Cash grants of £10,000 to 700,000 of the smallest businesses
Boris Johnson also promised to follow up with further measures to “urgently develop new forms of employment support to help protect people’s jobs and their incomes through this period.” This has yet to be worked out in detail with trade unions and business groups and will be a critical factor in determining the survival of many hospitality businesses as well as their staff. Rishi Sunak said that loans would be available to apply for as of next week, but for many businesses with acute cashflow issues this could be a case of too little too late. Some restaurants in Chinatown, where sales dropped much earlier, were already on the verge of administration a week ago. The government has also been criticised for issuing loans rather than cash as this just pushes businesses further into debt. Hopefully the business rates holiday for the full year period will help restaurants bounce back and better manage cashflow while paying off these loans.
What have been the reactions?
The most obvious response has been mitigation. Businesses like Hawksmoor, Corbin & King and D&D London have all announced temporary closures and measures to try and hang on to as many staff as possible, but some staff have inevitably been laid off. Hawksmoor founders Will Beckett and Huw Gott have posted about their decision: “We have tried to treat those people as fairly as possible, paying full notice and we are trying to give them every guidance on how they can get extra support during these difficult times…We have also told them that what has happened today doesn’t prevent them in any way from being part of the company again in the future and we will stay in touch with them to offer any support and information we can.” Other businesses have brought forward planned refurbishments to make best use of the time.
Times of crisis can often bring out the best in people. There have been reports of chefs taking unpaid leave in order that other staff don’t have to lose their jobs. The Hari hotel in Belgravia is offering help to those in need by collecting and delivering shopping from supermarkets and pharmacies, posting mail or even just the opportunity for a friendly phone call. StreetCube, a business offering sustainable street food in Wandsworth, is organising the production and distribution of free meals for the vulnerable. The Four Legs at The Compton Arms in Islington has set up a GoFundMe initiative to support their casual staff with the hope that this can go on to support workers industry-wide. Perhaps the campaign should be extended to all workers in the gig economy with zero-hours contracts. A prescient article in The Guardian from June last year points out that the gig economy in Britain doubled in the previous three years and now accounts for 4.7 million workers “laying bare the increasingly precarious nature of employment.”
Hospitality leaders in Manchester have launched a #PayitForward campaign to encourage consumers to buy discounted vouchers at restaurants between now and Easter that they can redeem from May onwards. With each voucher a £1 donation will be made to Hospitality Action, a charity which supports all who work in the UK hospitality industry.
The government’s temporary removal of regulation to allow businesses to carry out a change of use to a hot food takeaway without planning permission has offered a lifeline to innovative restaurants. Tredwells have launched Tredwells To Go offering groceries, meal kits, takeaways and some much-needed alcoholic drinks while The Wheatsheaf in Chilton Foliat is offering veg boxes, meat and dairy alongside pizza takeaways.
As hospitality trainer, Paul Mannering, points out, panic buying in supermarkets makes these restaurant operated veg boxes an ideal way of supporting consumers, restaurants and all the fresh produce wholesalers who would normally supply into restaurants and would otherwise see their produce go to waste. Catering distributors in New Covent Garden Market have also begun mobilising themselves to make veg boxes available online.
And restaurants aren’t the only ones to apply their entrepreneurial brains to the situation. A number of alcohol producers from gin to beer have switched to making hand sanitisers.
What will coronavirus leave behind?
Really this is anyone’s guess. We don’t yet know how long it will take for the epidemic to peak and for us to be allowed out again, but one thing I am sure of is that we’ll all be desperate to meet up with friends over dinner or have a pint in the pub! With proper support from the government I think the hospitality industry stands a good chance of bouncing back quickly, but perhaps not in its former form. It is likely that we will see a kind of natural selection take place among restaurants, leaving space for innovative new entrants. The crisis has already forced several restaurants to innovate by developing new services and perhaps, if regulation allows, these will stick, becoming new models for restaurants in the future and offering them a more diverse and resilient set of revenue streams.