Rail strikes risk turning operational headaches into a big hotel headache

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  • Publicly-listed ad companies are losing ground on worries about lower spending.
  • The strikes are expected to worsen labor shortages across the hospitality industry.
  • Hotels, bars and restaurants were already grappling with soaring energy costs and supply chain disruption.

Snapshots of the NSO showing the problems faced by hospitality industry in June.

The risk of a railway strike

“The railway strike threatens to turn operational headaches into a real headache for the hospitality industry. Restaurants, bars and hotels were already grappling with the pressure of exorbitant energy prices, supply chain disruptions and ongoing labor shortages, and now the mass walkouts are set to cause further financial hardship. As the transport network shuts down, reservations are set to plummet as lucrative lunchtime clientele stay home and late-night revelers cancel reservations amid fears they won’t be able to get home at the end of the night.

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Shares of pub chain Mitchells & Butlers plc (LON:MAB) fell 1.4% today amid concerns over lower spending. Wagamama owner Restaurant Group PLC (LON:RTN) also fell 0.7% and pub and restaurant owner Whitbread plc (LON:WTB) reversed earlier gains to fall into the red.

Many pubs, venues and restaurants close at the start of the week as staff cannot get to work. Workers already felt overwhelmed, with the accommodation and food services sector reporting the highest number of businesses experiencing labor shortages, with 35% of businesses saying it was a problem in mid -June.

Hospitality bosses are also worried about soaring electricity, gas and fuel bills, with almost half of businesses (47%) saying energy costs were a concern, up from 29% in May. To add to the cacophony of issues, sourcing of key products remains a real issue for many companies, with more than a fifth (21.7%) of companies still facing supply chain disruptions.

After the big Jubilee explosion, it seems buyers are already showing signs of getting their spending under control. Visits to ‘retail and leisure’ have fallen by 12% this month and there is evidence that we are using our cards less frequently. The CHAP indicator for UK credit and debit card purchases fell 6 percentage points to 102% from its February 2020 average in the week to June 9, 2022, with declines across all expense categories.

Although suburban spending may hold up, with more commuters staying home and venturing more locally instead, the strike is set to empty the streets of urban areas. The possibility of a sunburn for sales in town centers and city centers is fading, as far fewer outings are scheduled and those venturing outside are likely to hurry to go home to avoid being stranded.”

Article by Susannah Streeter, Senior Investment and Market Analyst, Hargreaves Lansdown

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