Three CAs in the hospitality sector on surviving and adapting to lockdowns and changes in consumer behaviour
By CA magazine
8 December 2022
The UK hospitality industry had barely begun to reopen its doors after two years of lockdowns when it was assailed with staffing shortages and a cost-of-living crisis. Three CAs in the sector tell Cherry Casey how, as consumer budgets tighten, they aim to keep customers crossing the welcome mat
When Collins Dictionary made “permacrisis” its new word of 2022, it might have had one eye on the hospitality sector. In 2019, the nation’s restaurants, bars, clubs and hotels were, broadly, flourishing, contributing £59.3bn to the UK economy – 3% of the country’s total economic output. But a sector largely reliant on travel and public socialising was more vulnerable than most to the impact of lockdowns and subsequent changes in consumer behaviour. While other sectors suffered, for hospitality the pandemic was an existential crisis. Its 2020 output shrank by 42%, year on year; by 2021 the number of hospitality businesses was down by 10%, according to a House of Commons report. The same report, issued in May 2022, found it now accounted for just 2% of GDP.
The most resilient and adaptable businesses were able to survive, but were quickly hit by a multitude of challenges, such as the mass exodus of workers – 90,000 had left the industry by the end of 2021 – and supply chain issues. Looking ahead, inflation, particularly in energy prices, imperils the sector further. Three CAs from across hospitality – all drawn to it by the creative and dynamic career it could offer them – answer the question: what now?
We have to be ruthless and continually challenge every cost line
Gillian Clements CA - Finance Director, Megan's
In 2019, Gillian Clements CA jumped at the chance to take on the role of Financial Controller at burger chain, Byron. “I was looking for a role where I could play a more active part in the company strategy than I’d have at a plc,” she says. But while Byron initially delivered on this front, Clements says that historical business decisions meant the company wasn’t equipped to survive the pandemic. In 2020, she and KPMG had to prepack the company to secure jobs and sites.
Shortly afterwards Clements was approached by Megan’s restaurant chain to become Finance Director. While it was “a huge risk personally and professionally” to move from a secure role to a company with just 10 trading sites, the proposition was too compelling to turn down. “I couldn’t believe the brand was so good,” she says. “I felt I could take my prior experience and contribute to its growth.”
Almost two years down the line, her instinct has proved correct. While other brands closed their doors permanently during the pandemic, Megan’s opened eight new sites. “Every single month we’ve traded, we’ve posted a profit,” Clements says. “We want to open eight new sites a year going forward. There’s no stopping what we think we can do.”
From a brand perspective its success story lies in its offering. “Our sites are beautiful, they’re highly invested in, and we choose affluent areas,” says Clements. Behind the scenes the business is run by Clements and company owner, Vincent McKevitt, both of whom are “in the detail of absolutely everything. We have good relationships with our suppliers and see our landlords as partners – we’re investing in their sites and giving them a return on their units.”
These strong relationships enabled Clements to renegotiate contracts and rent deals – securing six-figure reductions in some cases – to help the business cope with lockdowns. And as a rule, it refuses price increases from suppliers. “We use our volumes and our growth to challenge, and we will change suppliers if we need to,” she says. “We have to be ruthless and continually challenge every cost line.”
While the Megan’s story has been one of undeniable success so far, the challenges facing hospitality are vast, says Clements, drawing particular focus to “grossly unfair” VAT and business rates. “The rates can almost be the same as your rents,” she says. “You can do all the work to negotiate with landlords, but then you’re stuck with some government bill that means it’s unfeasible for you to open in that location.” It’s something that has needed reforming for years but, Clements says, while “hospitality is the third biggest private sector in the UK, it gets overlooked as an industry”.
For now the focus is on securing the future for Megan’s. While forecasting is difficult in the current state of constant flux, Clements’ CA qualification means she has the skills to be agile, looking at everything quarterly and “quickly interpreting data, analysing and drawing conclusions so we can rapidly move forward with decisions,” she says. “Having the CA qualification gives you the ability to understand all aspects of the business – and finance touches every part of it.”
Finance is the most important bit of any business - it's critical for a CEO to fully understand it
David Hart CA - CEO, RBH Hospitality Management
When David Hart took on the role of Group Accountant at hotel managers BDL Management in 2005, it was a move he hoped would get him away from a corporate environment and “closer to the coalface” of industry. “I always wanted to be in a business where I was interested in the end product,” he says. While he hadn’t set out to work in hospitality, that first role 18 years ago persuaded him to stay in what he says is a fantastic industry: “It’s interesting, it’s fun, and the people here love what they do.”
By 2014, Hart was CFO of the company (now renamed RBH) and seven years later he was CEO, a move he credits his CA qualification with preparing him for. “I have always seen finance as the most important bit of any business – and it’s critical that you fully understand that as a CEO,” he says. “The breadth of the CA training is exceptional. It has all come in use in my career. I’m talking to investors today about models I learnt about in 2002!”
Hart needed to be better prepared than most. He took the helm of the firm, and its 50 hotels across the UK, one year into the pandemic. “I thought, ‘Well it can’t get any worse,’” he laughs. “I knew I had a great team around me. It felt we were at the start of something. My mindset then was, ‘Let’s do a fantastic job and take the business forward.’”
The first priority was to build a strategy that the entire team was aligned to. “I always felt we were haphazard in terms of what our strategic goals were as a business,” he says. Within a month, the vision to take RBH to 2025 was set, and today the company is actually in a stronger place than it was pre-Covid – “a ringing endorsement of what we’re doing here,” says Hart.
Another key factor in the company’s success has been the way it treated its staff during the hardest times. “We had an all-in-it-together mentality,” says Hart. As such, everyone agreed to a pay cut. “We talked to the whole team about it and people bought into our logic.” No redundancies were made and today, staff retention is strong – vitally important, he adds, given that “staffing has been the major issue in hospitality for the past couple of years”.
This is a particular factor for the housekeeping departments of the hotels with which RBH partners, as many staff were from the EU. UKHospitality has been lobbying government to ease up on visa requirements to alleviate the problem. Hart agrees that a helping hand from above would be welcome. “It’s a repeating operational difficulty and payroll has rocketed year on year,” he says. “Our hotels are in a good place from a revenue point of view, but a lot of that upside is being lost through the cost base. Ultimately, it’s leading to far worse bottom lines.”
The mindset now is: we will only be as good as our offer
Rory Forrest CA - Finance Director, Signature Group
When CA magazine spoke to Rory Forrest in 2018, he said a desire to see his input translated into tangible, value-added output had inspired his move from corporate to industry. He had become FD of Signature Group, which operates two dozen pubs, bars and restaurants across Scotland. Little did he know then that just two years later, lockdown would make his input more valuable than he could have ever imagined. “The Covid cases became a financial crisis very quickly for our business,” he says, “and everyone was looking in my direction, asking, ‘Can we continue to exist? What does this government scheme mean? When will we get the money?’”
Forrest credits his ICAS training with helping him through such turbulent times, combining core technical skills with “a bit of confidence. Yes, this is a crisis, but the training teaches you to plan for different scenarios, engage the stakeholders and then communicate.”
All 24 Signature pubs survived, but changes have had to be made. “Historically, we would have every venue open Monday to Sunday and think nothing of it,” says Forrest. “Now it’s: how many hours can we afford to open? When do we think the demand is, and what sort of demand? Late Friday drinks are no longer a thing because there’s not as many people in the office, and Monday and Tuesday, a lot of our units don’t open at all.”
The cost-of-living crisis means accommodating consumer needs is Signature’s highest priority right now. “People are going to go out less, so they want a higher-quality experience when they do,” he says. Whereas the focus was on reducing costs, now it’s on “flipping the mindset to say we will only be as good as our offer. We have to ensure that, operationally, we’re producing a quality experience.”
Despite the challenges, Forrest finds fulfilment working in hospitality, particularly from his mentoring role. “It’s an industry that naturally attracts a lot of very creative people, but it’s not awash with financial acumen,” he says. “[My role is] helping harness all these creative ideas to make sure they’re commercially viable”. Doing so helps Signature achieve its overriding vision: creating good times. “That’s the goal,” he says. “Bringing people together to create special moments, especially in times like these.”
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