Hospitality companies still need Brexit, labor answers
Hospitality companies still need Brexit, labor answers
10 JULY 2018 8:08 AM

The lack of clarity on Brexit continues to dominate U.K. commercial activity and thinking, but hoteliers and restaurant company executives stressed the complicated issue must not distract from opportunities to underline the importance of the hotel sector for jobs and market rejuvenation.

LONDON—The “B word”—Brexit—continues to raise its head at every hotel and hospitality conference held in the United Kingdom.

The cry from hoteliers and restauranteurs is that they want clarity on the complicated issue.

During a “State of the nation” panel at principal lobbying association UKHospitality’s summer conference, Travelodge CEO Peter Gowers said he believes the critical question is how the industry can place itself at the center of the conversation around Brexit.

“We have to magnify our importance—not just hotels, but pubs and restaurants, too. ... We have to push the government ever harder,” he said.

Recent developments might make this task more difficult.

While the conference took place, arguments among members of the British government’s cabinet led to the resignation of two critics of Prime Minister Theresa May’s latest document laying out the U.K.’s exit from the European Union.

David Davis, the secretary of state for exiting the EU, resigned on 8 July. He was followed a day later by Boris Johnson, secretary of state for foreign and commonwealth affairs.

For the moment, this means the hotel industry does not receive the clarity it wants, panelists said.

“We’ve been asking for clarity for some time. Yes, (Brexit) is a complex business, but it is time to tell the people the truth of the matter. We’re not having an honest conversation, and the clock is ticking,” said Gowers, who added Travelodge has more than 550 hotels in the U.K. and more than 14,000 employees, 25% to 35% coming from Europe.

Labor headaches
Staffing remains a central issue for the hotel industry, panelists said.

“What we were told a year ago was that (the government) would write to us in a few months and tell us what we could expect from Brexit,” said Steve Richards, CEO of Casual Dining Group. “That clearly has not happened, and that spells uncertainty. What is the game? I have received no letter yet.”

He added his company employs more than 9,000 people, 65% to 75% of whom are from mainland Europe.

“Investors, and a lot of us are private equity-backed, are very worried. They understand the importance of people,” he said.

Apart from retaining staff, there’s also the issue of hiring staff in the first place, said Dermot King, managing director at Bourne Leisure, which among other companies runs Butlins, a British seaside resort chain with 57 properties and 16,000 employees.

“Sixty-two percent of our employees are under 25, and half of them are foreigners,” King said. “The question is how do we go from being an industry that creates jobs to an industry that creates careers? This is the thing we have to prove to government the case of.”

Peter Marks, CEO of The Deltic Group, which operates bars and nightclubs, said a good number of employees have moved back to their home countries because of the lack of clarity in the U.K.

“I have had employees who have returned to Spain, to Poland, as they cannot see their future in the long term. This is about people who might want families, and that is the nub of the thing,” he said.

Also, hotels and hospitality cannot continually be looked at as a cash cow, panelists added.

“(National insurance contributions) have to be reduced for the low paid, and business rates, which are evidently unfair, need to be reorganized,” Richards said, referring to payments employees make to fund the welfare and health services and the taxes businesses pay to local government based on real estate values.

Panelists said there is a real fear that money needed for the National Health Service will be funded by an increase in NIC, putting further pressure on employees and industry CFOs.

“At the heart is the government’s inability to understand the (key performance indicators) of every sector and sub-sector that say they are caring for,” Marks said. “There is an erosion year after year after year, with the government wondering who they can tap up. The answer is none of us,” Marks said.

Being heard
The panel discussion came immediately following a keynote by Michael Ellis, the government’s parliamentary under-secretary of state at the Department for Digital, Culture, Media & Sport, who left the conference as soon as he had ended his speech.

The panelists thought the minister might be holding the wrong end of the stick.

“The minister suggested we need to put our houses in order to encourage staff,” Marks said. “That was pretty clear, and there is no need to read between the lines. We are doing that, but that would require higher salaries.”

The solution is not just salaries, Gowers said.

“We currently have record high employment, but the problem is that not everyone is working as many hours as they want,” he said. “At Travelodge, we brought housekeeping in-house and scrapped zero-hours contracts, but the single biggest barrier is transport costs. Most of our employees can walk to work, but transport is becoming one of the biggest hurdles to employment.”

Richards said current political uncertainty also might affect gross domestic product.

“You feel obliged to say (your biggest headache) is people, but the wider economy is the football pitch on which we will play, and this is how we will fall. We all are discretionary-spend,” he said.

Changing landscape
Panelists spoke about other changes, pressures and—underlying a general buoyancy across the stage—opportunities for the flexible, smart and innovative.

“The future will be about niche segmentation and on how to apply digitalization and automation into the industry, which definitely is something that will change in the next five years,” Gowers said.

The rise in vacation, staycation and travel spend means the hotel and hospitality industries have to be at the forefront of political interaction and high street renewal, panelists said.

The remodeling of regional and seaside U.K. cities is critical, panelists said.

“The rejuvenation of the high street is vital,” Gowers said. “Look at (19th Century painter J.M.W.) Turner’s paintings of Edinburgh. In his streets, there are pubs, hotels, a few shops and a lot of houses. High streets require balance.”

He added one solution might be “a moratorium on business rates in exchange for capital investment.”

Richards agreed.

“Deansgate (a central district of Manchester) was not rebuilt via manufacturing but by what I call the Goldilocks approach of hotels, bars and restaurants that then encourage retail,” he said.

Long-suffering seaside towns would benefit from this methodology, too, panelists said.

“Blackpool will not return due to fisheries and agriculture,” King said.

“Where regional U.K. cities have bounced back in the last 20 years has mostly been driven by forward-thinking local governments,” Richards added.

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