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Tourism & leisure businesses invest despite mixed results

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Tourism and leisure businesses in the region have made heavy investments in weather-proofing attractions which have helped increase visitor numbers and given a boost to the £8 billion visitor economy across Norfolk, Suffolk and Essex, according to the annual tourism, leisure and hospitality business survey from MHA Larking Gowen.

A combination of unusual weather and rising rent, rates and staff costs mean that while 49 per cent of businesses saw revenues increase in 2018, nearly one in three saw a decrease in income. One in three businesses increased profits by over 10 per cent but nearly a third of businesses in the sector saw profits fall.

Chris Scargill (photo, right), partner at MHA Larking Gowen who coordinates the survey, said : “While we, as families, all got to enjoy the opportunity for being outside more, once the warm weather arrived, our spending habits changed, and we enjoyed more of the low cost outdoors but this has had some significant impact on a number of businesses in the sector.  It certainly isn’t all doom and gloom though, and we have seen some real positives, but there is no doubt that the unusual weather patterns impacted a number of businesses, and it came at a time when businesses are seeing rising costs in rents, business rates, rising staff costs through legislation.

Income

“In 2018, we continued to see the loss of swathes of the high street and the national restaurant chains, with some only being saved by entering into CVAs with their creditors and heavy negotiations on rents. For some, it really is quite tough out there. The results of the survey indicated that while 49% of businesses saw revenue levels increase, nearly one in three (31%) suffered a decrease in income.”

A big issue in 2018 was the increasing awareness on plastic waste. The tourism sector has clearly been doing its bit, with the majority of businesses reducing plastic in their cooking, cleaning, and purchasing habits. More can clearly be done around plastic waste; 61% of businesses felt local government could help them more in their endeavours, with 57% feeling the drive should come from central government.

Employment

In this region the sector employs over 150,000 staff and three quarters of the businesses surveyed employed staff. One in four of those businesses indicated that staff retention was an issue. For the majority, staff numbers stayed the same; just over a third of businesses have increased their full-time and part-time staff numbers, and one in ten reduced staff.  Flexibility in working hours is seen as a real bonus for the sector; 51% of employers surveyed provide zero hour contracts, two thirds of which are providing, on average, between 11 and 30 hours per week. Articles in the survey results publication outline a focus on making the sector a positive career choice.

All business sectors have seen a rise in pay for staff. Near full employment levels suggest that the National Minimum Wage (NMW) and the more recent National Living Wage (NLW) have been a success. However, calculations also highlight the impact these have had on businesses. An individual working 35 hours per week, earning the NMW in 2015/16 at the time the NLW was introduced, would have cost an employer, in total, £12,550 in the year. Now, for someone 25 years or older, and following the introduction of pension Auto Enrolment, that cost is £16,077 – a rise of 28% over four years.

The introduction of the NLW and pension Auto Enrolment has been a real boost for employees as it has also had a domino effect across all staff levels, but as the costs of employing staff have increased, cuts in staff numbers or other areas of spend are being impacted as the customer is resilient to price changes. However, the survey results show that 27% of businesses are planning price increases to accommodate these legislative changes, whereas 18% accept it will simply hit their bottom line.

Social Media

Marketing spend was increased by a third of businesses, but the results highlight greater efforts in the use of social media and the selling of an experience. While the level of increase in the use of Facebook and YouTube, as marketing mediums, has remained consistent, Instagram has seen more activity, with 80% of businesses this year reporting an increase in their use of the format compared to the previous year.

Profits

The results indicate that the consequence of all of the above factors provided mixed results on business profits, with only two in five businesses seeing an increase in profit levels. Chris Scargill said: “Profit levels are essential to allow businesses to keep reinvesting, so it was good to see profits rise for a significant proportion of the sector, especially the fact that one in three businesses increased profits by over 10% compared to last year. But with nearly a third of businesses seeing profits fall, this could be a worrying trend, particularly as two-fifths of those making a loss this year are anticipating losses in 2019.”

“This clearly brings to question sustainability and risks investment long term. However, for now, investment continues, with 16% of businesses planning to extend their premises and three in five planning site improvements and refurbishment to help improve business. 2019 will inevitably be another interesting year for the sector.”

Last Updated ( Wednesday, 12 June 2019 12:05 )