The Budget unveiled at the end of last month was bad news all round for hospitality operators. While all sectors will suffer from the increases in the cost of doing business, ours is a sector that famously operates on low margins, is labour intensive and cannot automate to reduce employer costs like the increased ENIC.
The 75% rates relief given to our English counterparts was never applied in Northern Ireland. Due to our market’s composition featuring more small- to medium-sized operators, the Barnett consequential funding would not have amounted to 75% relief being applied here, but it could have funded some relief for operators in desperate need.
Instead, the funding was used to plug other holes in Executive funding, and we are concerned that the Barnett consequential of the new 40% rate will be put to much the same use.
Adding £2,500 per employee working a 38-hour week in ENIC costs is impossible for hospitality businesses to absorb. We are not the only sector to suffer from these increases, but our margins and labour-intensive industry are between a rock and a hard place. We will struggle to pass costs on to customers already stretched by the cost of living crisis, but we don’t have the profit margins to absorb this increase.
The Executive needs to recognise the sector’s importance: hospitality is the fourth largest private sector employer in Northern Ireland; it contributes £2 billion per year to the local economy. The Department for the Economy has made tourism a key part of its plans for regional and economic growth. The truth of it is that hospitality accounts for two-thirds of tourism spend; without us, there is no tourism industry.
In response to the pressure created by the Budget, business may look to new pricing models. No, I don’t mean surge pricing, but driven by increased taxes, hospitality business may have to look at how they balance price increases, whilst looking at opportunities to encourage more customers into to their premises at quieter times.
Rather than rising prices across the board, one option might be a different price for parts of the week or even day.
For example, rather than raising the price of a pint by 25p across the board, could we see pints at the weekend go up by 50p whilst weekday pints don’t go up at all? In effect, you could call it a discount rather than surge pricing.
While I am only speculating about pricing, I do know that the Executive needs to provide targeted financial support to ensure the hospitality industry is there to deliver on tourism and regional employment plans.
We know the budget is tight, but a solution must be found. We are ready to work with them.
- Colin Neill is chief executive of Hospitality Ulster
