Tourism, consumer confidence and the government could provide bright spots for the hospitality industry, according to the CEO of trade organisation UKHospitality.
Addressing a full house at this week’s Arena Savoy Lecture, Kate Nicholls OBE shared three reasons for optimism in a foodservice and hospitality industry still under pressure.
She said global travel and tourism is “coming back a little bit stronger than we thought”. Nicholls said 2024 saw tourism in the UK get to 96% of pre-Covid levels, in real terms.
“We are expecting to get back to pre-Covid levels of volume and value at the end of this year, and crucially, that is because some of our major markets that have remained missing may well come back to the UK as a result of Trump’s trade wars. I’m thinking in particular about China and also the Gulf states.”
In-bound visitors to the UK were up 5% in 2024, to 40 million visits, she said, with spend up 7% to £35 billion.
“A quarter of that comes from America,” she added. “That’s the vulnerability, but our biggest markets after that are China, Canada, Europe and the Gulf States – all of which have reasons not to be positive about travelling to the United States.” According to Nicholls, since Trump was elected the intention to travel to the US from all of those markets is “down 30-40%”, with strong signals that people will venture to the UK instead.
Nicholls added that the new tourism minister Chris Bryant wants to develop the tourism strategy over the coming months, with the ambition of attracting 50 million visits by 2030. She emphasised the need for key events and activities “like the Taylor Swift tour that added £1 billion to the economy and hospitality”.
Secondly, Nicholls said consumer confidence, though still “incredibly fragile” should recover when consumers “get permission to spend”.
She said household disposable income is growing “as fast as it has ever been”.
“Consumers just haven’t noticed yet, but they’ve had two tax cuts in the form of National Insurance Contributions.”
She said that although the increase to the National Living Wage is painful for businesses, wage increases mean people feel as though they’ve got more money in their pockets.
Thirdly, Nicholls cautiously mentioned the government as a potential positive for the industry.
“There are positive signs from the government that they are starting to formulate an economic plan, and that they may be prepared to look at some of the small-scale areas where we’ve got regulation holding us back, or where we’ve got creative ideas that might drive growth.”
She also said the government is looking more closely at hospitality, retail and the high street because other sectors are affected by tariffs.
However, Nicholls warned that ongoing cost pressures mean operators have fewer resources to cope with uncertainty.
“We’ve seen margin erosion of around 40-50% in most sectors across the hospitality universe since I first talked to you in 2018 – and an inability, therefore, to withstand future shocks.”
She said 25% of hospitality businesses reported in the first quarter of 2025 that they have less than two months’ cash reserves.
Speaking after Nicholls, Karl Atkins, CEO, Foodbuy Group and Alex Demetriou, CEO, Foodbuy UK & Ireland emphasised the need for building relationships and taking a collaborative approach.
Demetriou, who also operates his own hospitality businesses, echoed Nicholls’ points about margin erosion.
But the pair were also enthusiastic about the industry and Demetriou underscored bright spots such as experiences that transcend socio-economic backgrounds – including the Taylor Swift tour – as well as competitive socialising and convenience.
In terms of convenience, he gave the example of a pineapple: “You can buy one for £1.25 or you can buy 20% of a pineapple chopped up for £2.75. The second one outsells the first one 9-1. It makes no sense at a time when money is tight for people – everyone saying they don’t have disposable income, they find it for convenience. It’s our job to make the world convenient for our customers and make it easy for us to work.”
Atkins added that working together as an industry is crucial.
“The strength of a relationship between a customer and supplier, or with industry bodies is more important than ever,” he said.
He went on to talk about supply chain resilience, especially since 40% of our food is imported.
“If you’re bringing in food, you’re immediately exposed to anything that is happening – it’s a globalised supply chain,” Atkins said, adding that domestic sourcing shortens the supply chain.
“This year, we moved all of our pork to 100% British,” he added.
Elsewhere, Atkins highlighted investment in the company’s technology engagement strategy. “We wanted a better system for our clients,” he said, adding that the business has been able to bring all of its data points together and help clients navigate what they are spending money on, as well as find opportunities to improve their purchasing and supply chain.
Continuing on the technology theme, Atkins talked about AI.
“If you’re operating any hospitality business and you’re thinking about, how can you plan your way better? How can you plan your food costs better? There are some amazing technology developments that are here now, doing it every day.
“One of the things that we are really proud of is the way we’re leading with conviction on that.”
The Arena Savoy Lecture is a foodservice and hospitality networking event that takes place in April.
