Hospitality inflation rate rises

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Hospitality inflation rate rises

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The inflation rate for restaurants and hotels rose slightly from 9.5% in June to 9.6% this month despite an overall drop in inflation, according to the Office for National Statistics (ONS).

The rise is driven by a larger than expected increase in wages in the hospitality sector as well as by accommodation services, which saw a 12.2% rise in the year to July, up from 11.3% in June.

Overall, inflation dropped to its lowest for 17 months in July due to a fall in energy prices and a slowdown in food price increases,

ONS data shows consumer price inflation was 6.8% in July, down from 7.9% in June. The easing in the annual inflation rates in July 2023 reflected notable downward effects from food and non-alcoholic beverages.

Food and non-alcoholic beverage prices rose by 0.1% between June and July 2023, compared with a rise of 2.3% between the same two months a year ago. This resulted in an easing in the annual rate to 14.9% in July 2023, the slowest annual rate of growth since September 2022.

Commenting on the figures, Ed Bignold, managing director at Alvarez & Marsal’s Corporate Transformation Services, says: “This is a concerning development for the sector and consumers alike and indicates that hospitality businesses will continue to feel the squeeze, with wage bills making up a significant proportion of all costs.

"There are however some bright spots for business owners. International travel has become increasingly expensive, and many Brits have opted for staycations this summer, helping to increase demand for the UK’s restaurants, pubs and bars, and keeping hotels at higher occupancy for longer. These benefits should continue to feed through in the coming weeks. However, to fully capitalise on this effect amid the cost-of-living crisis, the industry needs to tread the line between affordability for consumers and sustaining margin.

"As we approach the end of the high season for much of the industry, and expect that lower overall U.K. inflation will take time to translate into increased corporate and leisure demand, even if it does prove to be sustained as a trend in the coming months, action needs to be taken by operators to maintain margins and cash for debt servicing.”

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