Christmas for hospitality sector risks being ruined by strikes

I suspect I’m not alone in having opened an email in the past week detailing the plans for this year’s works Christmas do.

While current cost pressures are having an impact on budgets, in a post-Covid world many employers just want the chance to show their appreciation to their workforce for a job well done in what has been a particularly difficult year for many of us.

But before I could pick out my party outfit, I realised that once again I’ll have to wait to find out if trains will be running on the date in question.

Christmas is traditionally considered the ‘golden period’ for retailers and hospitality businesses, a time when people are prepared to splash out more than they normally would.

I don’t think any of us expected the degree of industrial action that has impacted the country for the last 18 months or that those disagreements would last as long as they have.

One sector that is keeping everything crossed that some kind of agreement can be reached with rail workers in short order is the hospitality industry.

It’s been estimated that the cost of rail strikes to the sector since last June has been in excess of £3.5 billion, with the trade body UKHospitality estimating at least £1.5 billion of that hit came last Christmas.

Latest figures from Barclaycard suggest the consumer is cutting back further on non-essential spending as higher borrowing costs tangle with continued cost-of-living pressures.

Golden period is tarnished

Christmas is traditionally considered the ‘golden period’ for retailers and hospitality businesses, a time when people are prepared to splash out more than they normally would to celebrate with friends, family and colleagues.

So, the prospect of another year of disruption, off the back of 2022’s strikes and the previous two years of Covid restrictions, is causing more than a little concern.

In the last couple of weeks 37 of the UK’s biggest hospitality brands have written an open letter in association with UKHospitality, urging rail unions not to hold further strike action over the Christmas period.

The bosses of FTSE 350 listed companies Fuller, Smith & Turner (FSTA) and Marston’s (MARS) were among the signatories, urging the Government and unions to redouble efforts to resolve the dispute saying that ‘the significance of the festive season to our sector cannot be overstated’.

Investors are paying attention to external factors, from strikes to the impact of changing work patterns which have affected city centre activity in particular.

In an interview with the BBC ahead of the latest round of walkouts, which coincided with the start and end of the Conservative Party conference, Mick Whelan, the leader of the train drivers’ union Aslef, refused to rule out December strikes.

How hospitality and leisure businesses have performed since rail strikes started last June

Source: Sharepad

Facing into lots of headwinds

Clearly the sector has had more to deal with than just the disruption from strike action. Increased costs, strained margins and a consumer under pressure have all added to share price declines of chains like Wetherspoon’s (JDW) and Restaurant Group (RTN).

But investors are paying attention to external factors, from strikes to the impact of changing work patterns which have affected city centre activity in particular.

They’re looking at pub and restaurant locations and they’re considering which companies are being cushioned by increased spending from families looking for a cheap night out at a bowling alley or because they’re got a budget hotel chain in the mix.

Rail strikes force people to change their plans, and some will choose to tack on a night in a Premier Inn just so they can be where they need to be even if the trains aren’t running.

Mostly people will think twice. Workplaces won’t want the hassle of having to rearrange big events for hundreds of people if there’s any possibility they can’t go ahead.

Who will win out

There will be winners; certainly, one listed airline seemed to be quids in during the last lot of strike action which saw the price of a single flight from Manchester to London shoot up six-fold.

But hospitality businesses might be forgiven for feeling hard done by. The last few months of the year usually provides them with a cushion to make it through the first few months of the new year when budgets are tight and the weather often dismal.

Without clarity they can’t plan, and neither can the public whose patronage they rely on. Rail workers undoubtedly feel they have no choice but to keep the pressure on after a long, hard struggle.

Reaching a resolution seems a long way off but if the economy is to deliver the kind of growth political parties of all stripes say we need, then a resolution must be reached and reached quickly.

Past performance is not a guide to future performance and some investments need to be held for the long term.