BALD » The one about the state of hospitality

Executive Summary

The UK hospitality sector stands at a critical juncture. Despite contributing £93 billion annually to the economy and employing 3.5 million people, the industry faces unprecedented challenges that threaten its long-term viability. From the devastating impact of COVID-19 to current cost pressures and workforce shortages, hospitality businesses are operating in an environment more challenging than any seen since the 2008 financial crisis.

The National Picture: Resilience Amid Adversity

Market Performance and Economic Impact

The UK hospitality market, valued at £61.23 billion in 2025, represents a sector in transition. While growth projections suggest the market will reach £72.76 billion by 2030 at a 3.51% compound annual growth rate, this masks significant underlying pressures. The sector's economic contribution of £93 billion in 2022 generated £54 billion in tax receipts and supported £20 billion in exports, underlining its importance to the national economy.

However, these headline figures belie a more troubling reality. The hospitality sector now offers the lowest hourly pay of any UK industry at just £12.39 per hour, a mere 18 pence above the national living wage. This represents a 10% decline in wages over the past year, despite the sector's substantial economic contribution.

Operational Recovery and Challenges

Hotel performance data reveals a mixed picture of recovery. London hotels achieved an 82% occupancy rate in 2024, matching pre-pandemic levels, while regional properties reached 76% occupancy. However, average daily rates in London declined by almost 1% to £228, suggesting competitive pressure remains intense.

Revenue per available room (RevPAR) growth projections for 2025 indicate modest expansion: 3.0% for London and 1.9% for UK regions. These figures reflect an industry still grappling with the structural changes brought about by the pandemic and subsequent economic pressures.

The Employment Crisis

Perhaps nowhere are the sector's challenges more evident than in employment statistics. The hospitality industry maintains the highest staff turnover rate of any UK sector at 52%. Current job vacancies stand at approximately 107,000, representing a 5.1% vacancy rate compared to 3.2% for the economy overall.

More alarming still, the sector experienced 109,000 job losses in May 2025 alone, with hospitality accounting for 45% of all job losses across the UK economy. This represents the steepest decline in hospitality employment since the immediate aftermath of the 2008 financial crisis.

The root causes are multifaceted. Increased employer National Insurance contributions, rising minimum wages, and elevated operational costs have created a perfect storm. The National Insurance rate increase from 13.8% to 15%, combined with a National Living Wage rise to £12.21 per hour (a 6.7% increase), has disproportionately impacted an industry where labour typically accounts for 35% of operating expenses.

Digital Transformation and Innovation

Despite these challenges, the sector has embraced digital transformation at an unprecedented pace. The pandemic accelerated adoption of contactless payments, QR code menus, and mobile ordering systems. Research indicates that 80% of diners now choose QR payments when available, while 66% of restaurants have implemented QR code ordering solutions.

Artificial intelligence and automation are becoming increasingly prevalent. The global hospitality robots market is projected to reach £2.9 billion by 2032, growing at a 25.5% compound annual growth rate. Hotels are deploying AI-powered chatbots, automated messaging systems, and robotic assistants to improve efficiency and reduce labour dependency.

Regional Focus: Shropshire's Hospitality Landscape

Economic Contribution and Growth

Shropshire's tourism and hospitality sector presents a more positive narrative than the national picture. The county's visitor economy generated £910.5 million in 2025, representing a 4.2% growth from the previous year. This growth trajectory outpaces many comparable regions and demonstrates the county's increasing appeal as a destination.

The sector welcomed over 10.5 million visitors in 2025, with tourism spending reaching record levels. Notably, glamping sites and self-catering accommodation saw visitor numbers rise by more than 5%, while traditional serviced accommodation recorded a more modest 3.4% increase. This shift reflects broader consumer preferences for flexible, private accommodation options that emerged during the pandemic.

Employment and Business Landscape

Shropshire's hospitality sector employs 8,474 full-time equivalent workers across approximately 1,280 tourism-related businesses. The sector supports both direct tourism employment and broader economic activity, with every four direct tourism jobs creating an additional indirect position.

The county's hospitality businesses are predominantly small and medium enterprises, reflecting the national pattern where 99% of hospitality businesses fall into the SME category. In areas such as Shifnal, tourism accounts for 26.6% of all jobs, while in Highley it represents 16.9% of employment.

Market Characteristics and Visitor Profiles

Shropshire attracts a distinct visitor profile compared to larger destinations. Research indicates that 55% of visitors come from Shropshire, the West Midlands, and Staffordshire, suggesting strong regional appeal. The average visitor spends £76 during their stay, with overnight visitors staying an average of 3.16 nights.

Market towns across the county are experiencing particular growth. Market Drayton, for example, welcomed 180,327 visitors in May 2025, with 21.9% spending between 60 and 90 minutes in the town centre – an optimal duration for shopping and dining. This demonstrates how smaller destinations can benefit from the county's overall tourism success.

Infrastructure and Accommodation

Shropshire's accommodation sector shows healthy diversity. The county offers 5,727 serviced bed spaces operating at a 49% occupancy rate in 2022. However, the significant growth area lies in non-serviced accommodation, which saw a 28.1% increase in value to £197.19 million, representing just over half the staying visitor market by value.

This shift toward self-catering and alternative accommodation reflects broader market trends. The global alternative accommodation market reached £4.47 billion in 2024 and is expected to grow at 15.9% annually to reach £12.58 billion by 2031.

Key Challenges Across Both Markets

Cost Pressures and Financial Viability

Both national and regional operators face unprecedented cost pressures. Energy costs, which rose dramatically following the conflict in Ukraine, continue to impact profitability. Analysis by the Liberal Democrats revealed that 595 hospitality businesses in Shropshire face a combined energy bill increase of £2.6 million, averaging £4,330 per business.

Food inflation, supply chain disruptions, and increased wholesale prices compound these pressures. Many operators report that like-for-like sales have only occasionally outpaced inflation throughout 2024, making meaningful growth extremely challenging.

Workforce Challenges and Skills Shortages

The sector's workforce challenges extend beyond simple recruitment difficulties. Brexit resulted in approximately 120,000 EU workers leaving the hospitality sector since 2019. This departure, combined with changing work preferences post-pandemic, has created a structural skills shortage that shows little sign of abating.

The immigration system changes have further complicated recruitment. The minimum salary threshold for skilled workers rose from £26,200 to £38,700 in April 2024, effectively excluding many potential hospitality employees. The replacement of the shortage occupation list with the immigration salary list, which currently excludes hospitality roles, has limited options for international recruitment.

Regulatory and Compliance Pressures

New regulations continue to burden operators. The forthcoming Terrorism (Protection of Premises) Bill, known as 'Martyn's Law', will impose additional security requirements on venues accommodating more than 200 people. While necessary for public safety, such measures add complexity and cost to operations already struggling with thin margins.

Similarly, the upcoming UK food waste legislation in March 2025 will require enhanced waste management and environmental reporting. While supporting sustainability objectives, these requirements demand additional administrative resources and system changes.

Adaptation Strategies and Innovation

Technology Adoption and Efficiency

Forward-thinking operators are leveraging technology to address workforce shortages and improve efficiency. Self-service kiosks, which were primarily confined to quick-service restaurants, are expanding into full-service establishments. These systems allow operators to reallocate front-of-house staff while maintaining service levels.

AI-powered forecasting systems are becoming essential for managing the volatility in demand patterns. Traditional manual forecasting approaches prove inadequate for handling the complexity of modern hospitality demand, particularly with the rise of remote ordering and changing consumer behaviours.

Experience-Driven Offerings

Consumer preferences continue shifting toward experiential dining and unique offerings. OpenTable data shows a 72% increase in experience dining year-over-year, with tasting menus, bottomless brunch, and dinner-show combinations proving particularly popular.

This trend offers opportunities for operators to differentiate their offerings and command premium pricing. Group dining has also seen resurgence, with bookings for parties of six or more increasing by 13% year-over-year.

Sustainability and Local Sourcing

Environmental consciousness among consumers creates both challenges and opportunities. Two-thirds of UK diners actively seek sustainable venues, according to the Sustainability Restaurant Association. This demand encourages operators to invest in sustainable practices, from renewable energy to locally sourced ingredients.

Shropshire's strong agricultural base and artisan food producers provide particular advantages in meeting this demand. Local sourcing not only appeals to environmentally conscious consumers but also supports regional economic development and reduces supply chain vulnerabilities.

The Path Forward

National Implications

The UK hospitality sector requires urgent policy intervention to address its structural challenges. The industry's role as the third-largest employer, contributing £93 billion annually to the economy, warrants targeted support measures.

Key policy priorities include reviewing National Insurance increases, extending business rate relief, and implementing VAT reductions for the hospitality sector. The sector's Social Productivity Index ranking – first among all sectors for providing jobs to diverse workforces and enabling social mobility – strengthens the case for such support.

Regional Opportunities

Shropshire's hospitality sector demonstrates that regional destinations can thrive despite national headwinds. The county's 4.2% growth in tourism spending, combined with increasing visitor numbers and longer stays, suggests effective destination management and marketing.

The formation of the Telford and Shropshire Local Visitor Economy Partnership, with VisitEngland accreditation, provides a framework for continued growth. This collaboration, managing a sector worth over £1 billion and supporting more than 10,000 jobs, offers a template for regional hospitality development.

Conclusion

The UK hospitality sector stands at a crossroads. While facing the most challenging operating environment in over a decade, the industry continues to demonstrate remarkable resilience and adaptability. The acceleration of digital transformation, focus on experiential offerings, and commitment to sustainability provide foundations for future growth.

However, the sector cannot overcome structural challenges through innovation alone. The current trajectory of rising costs, workforce shortages, and regulatory pressures threatens the viability of many businesses. Without targeted policy intervention, the UK risks losing a sector that provides essential employment opportunities, particularly for young people and those entering the workforce.

Shropshire's success story demonstrates that regional hospitality can thrive with proper destination management, partnership working, and recognition of changing consumer preferences. The county's growth in tourism value, combined with increasing visitor numbers and business confidence, offers hope for the sector's future.

The hospitality industry's importance extends beyond economic metrics. As the research shows, it ranks highest for social productivity, providing routes into employment for diverse communities and supporting social mobility across all regions of the UK. Preserving and supporting this sector is not merely an economic imperative but a social one.

The Critical Role of Consultancy in Hospitality's Future

The findings presented in this analysis underscore the vital importance of professional consultancy services in the hospitality sector's recovery and growth. The complexity of challenges facing operators – from digital transformation and workforce management to regulatory compliance and sustainability requirements – demands specialized expertise that most individual businesses cannot develop internally.

Consultancy firms possess the cross-sector knowledge, analytical capabilities, and strategic insight necessary to help hospitality businesses navigate this unprecedented landscape. Whether guiding technology implementation, developing workforce strategies, or creating sustainable business models, consultants provide the external perspective and specialized skills that enable operators to adapt, survive, and ultimately thrive in the evolving hospitality economy. The sector's future success depends not only on government support and market recovery but on the strategic guidance that professional consultancy can provide during this critical transformation period.