I think we had all hoped that life would return to normal post-pandemic, but it feels like the repercussions of the coronavirus are set to last far longer than the virus itself. The lockdowns gave us the head space to plan and give real thought as to how we can improve our people, training and innovate our business. We were optimistic about our place in the wider economic recovery and the feel-good bounce back of the nation.

 

But all of this has now been completely overtaken by a cocktail of challenges that have entered every area of the business at Malvern Inns. I don’t know whether the lack of staff, in particular kitchen team, are the biggest challenge, or whether the constant failure of the supply chain is now taking more management time. The result of these challenges is that, as a management team, firefighting has taken over and we are not spending enough time on innovation and growth.

 

Before we know it, VAT and rates will be back to normal and we will have a cost base that has grown to a point where we are not making enough money. This article is a reminder of what we are now trying to focus on to drive our business for the long term. How quickly we will get round to them is a different question.

 

At the moment, our key priority is recruitment and training. Without the right team in place, our senior team will be in the weeds. Currently, we can’t meet the demand on most days, particularly on Sundays, and so being able to recruit and train to meet Sunday demand is a priority. It does seem to be getting better though. The end of furlough has triggered some people to look for work, but more importantly for us has been young people (students or school leavers) wanting to get back into the workplace. This is building up our team one person at a time. Even this week, one of my managers said a third of the candidates turned up for their interview, which is a higher number than normal. Our real challenge, however, is how we up our game in the long term on recruitment. My guess is that how we have recruited historically will not be good enough for the future, and we will need to connect better with young people and be more persuasive about the personal benefits of time spent in hospitality.

 

Pay is a real conundrum at the moment. I think we are all worried about ratcheting it up in the short term and then being unable to claw it back, but equally wanting to find the right level for the long term. I am also really puzzled by the challenge we seem to face in tips. I don’t think our staff actually understand what they earn when they add base pay and tips together, and we have lost staff who think that they are being paid more in other jobs when the opposite is true. We are seriously thinking about whether we can morph our service charge into price and remove tips from the equation, but it is another big step that may then prove to be wrong. Pay matters, and we need to help people understand the pay they already receive before piling more on the top.

 

As our costs go up – whether it be staff, electricity, VAT, rates, food, drink or all of the above – we need to decide how much to put our prices up and when to do it. My straw poll suggests that most people are considering a 5% to 10% price rise currently, but we want to do it in a way that ensures we lose the least volume we can. A lot of thought needs to go in to when we do it and which lines we do it on. We also need to spend more time than we have looking for more meat-light dishes, which will both reduce cost and fulfil the market move to a lower level of meat in our diet. However, of all the eight blokes I had dinner with yesterday, only one chose a meat light dish – chicken pizza!

 

The government seems to have made it very clear that they are not going to let in heaps of Europeans to help us out of our staffing challenge, so we are all going to have to find customer-friendly ways of driving productivity. We have not yet gone down the self-ordering or self-payment app road, but we will have to look at all the IT-led productivity solutions and pick the right one for our customers in time. We also need to address some of the basics that have slipped a bit, such as how well we deploy staff and how we are managing them to be as productive as possible on shift. This is the challenge of the firefighting regime.

 

We have just signed up to the Peach-led Net Zero regime. I don’t yet know what it entails, but recognise that we need to do the right things in the right way, and I know our customers will be supportive. I also think we can take some more steps in packaging waste and our use of plastics, but this will increasingly become something we need to work with our local suppliers to solve.

 

Overall, our sales have held up pretty well over the last few months. In truth, we have had the demand there—if only we could fulfil it. However, the looming cost moves mean we need to address our core profitability even more urgently, as we know the time from now until April will come quickly. Hopefully we will be fully staffed by then and made enough moves on the four Ps – pay, price, productivity and planet – to make sure we have maintained our underlying profitability.

 

Will the UK government invoke Plan B this winter and introduce covid passports – proof that you have received both doses of the covid vaccine – as a condition of entry to nightclubs? If we leave aside the difficulty of defining “nightclub”, or the logic of seeing nightclubs as vectors of transmission but not vertical drinking bars, then there are two questions that require an answer. Why pick on nightclubs? And what useful purpose will be served if the government does so?

 

It seems nightclubs symbolise all the worst fears of middle class moralists – they attract those dangerous creatures “young people”; they are places where the aforementioned young people take drugs and drink alcohol; it’s where they meet to hook up and engage in nefarious social and sexual adventures; they involve people getting hot and sweaty together on a dancefloor. All a bit steamy – and even the images of Michael Gove showing us his dance moves in a Scottish nightclub hasn’t dispelled this deep-rooted suspicion that dancing is dangerous.

 

The 19th century Catholic theologian Francois Xavier Schouppe summed it up thus: “There are balls which are gravely licentious, either on account of immodest dances or of the costumes and dresses introduced at them. In these no one should take part. Even modest dances are rarely without danger, and a Christian should not frequent them from choice and of his own free will.”

 

Well, there you have it! I am not suggesting that anyone in government is consciously thinking this way, but I do think there are some implicit cultural assumptions deeply ingrained in the subconscious of those in government and in the modern public health movement, whose instincts are puritanical and who actively promote a much more controlled society. 

 

In Scotland and Wales, we have already seen the introduction of covid passports as a condition of entry to nightclubs. In Wales, the legislation to introduce them was passed in the Senedd by a majority of one – 28 votes to 27 – because of a Conservative member not being able to vote remotely for reasons that have not been properly explained.

 

In Scotland the SNP government, in alliance with the Greens, has introduced them because, well, it would, wouldn’t it? The Celtic obsession with the evils of drinking is well known, and combine that with the determination of the devolved administrations to prove how divergent they can really be from Westminster, and you have a level of stupid that is simply not amenable to reason.

 

But what of the second question – what useful purpose will covid passports for nightclubs serve? I think this is more about nudging young people to get the jab than it is about the risk of nightclubs being vectors of transmission. The requirement to prove your vaccination status to gain entry to a nightclub, but not a city centre bar that doesn’t have a dedicated dance floor, simply ensures that any transmission risk that might emanate from the unvaccinated will be displaced from clubs to bars.

 

Will England follow Scotland and Wales down this road? Well, it’s anyone’s guess, but my mine is it probably won’t. I can’t claim this is based on anything other than my intuition, which is that I sense the Tory government wants to put covid in the rear-view mirror. It senses that voters feel that now everyone who wants a vaccination has had one, and there are some promising new treatments that might also reduce the death toll, that people will ask themselves: “What more can we do?” There is a growing feeling that people want to see life return to normal, and we don’t want to spend the rest of our lives worrying about this.

 

But with the covid death toll running at about 800 people a week – some 40,000 a year – it may prove difficult for the government to say we should just treat this like flu. It is interesting the public don’t seem unduly alarmed at his level of mortality. It seems people react to change – good or bad – but not to stasis. This level of mortality has now become normalised, and public tolerance of the reintroduction of generalised restrictions will be difficult to sustain. Which is another reason why nightclubs might be scapegoated – it doesn’t affect that many people – the public will not be rioting in the streets if nightclubs are restricted or forced to close. In short, they are a soft target.

 

But where are the democratic remedies for any of this? We have witnessed the appalling murder of Sir David Amess MP, and politicians across the political spectrum rightly condemning this as an attack on democracy. But then, last Tuesday, the UK parliament had the opportunity to vote on whether or not to renew emergency coronavirus legislation for a further six months. The deputy speaker laughingly waved through the renewal, saying there was no appetite in the House for a vote. 

 

Apparently no one in parliament sees the bitter irony of self-righteously denouncing an attack on democracy from outside parliament, and then declining the need for a democratic vote in parliament on the renewal of some of the most draconian powers that this country has ever seen in peacetime.

 

After its most-recent fundraising, digital payments company Stripe achieved a value of an incredible $95bn, as it follows in the wake of the likes of Uber, Deliveroo, Darktrace, Square, Airbnb and Palantir in hitting eye-watering valuations before even considering resorting to the public markets to access late-stage funding.

 

The ability to secure financing from private equity, sovereign wealth funds and other cash-rich sources has made the constantly scrutinised global stock markets rather unfashionable places. This is fully reflected in the UK where, according to research from Statista, the number of companies trading on the London Stock Exchange stood at 2,004 in September 2021 compared with a much healthier 2,429 in January 2015 – a chunky decline of 17%.

 

While the quarterly reporting and media scrutiny can be a pain for busy chief executives and finance directors, there is no doubt that listed status has been something of a godsend over the last 18 months or so. Pretty much every hospitality company on the stock market has used its equity or tapped into capital markets to raise funds to bolster their balance sheets, while many businesses in private hands have found it much tougher to access funding.

 

There is no doubt that many of those in the latter camp will continue to find it hard to recover from the debts they have taken on during the pandemic. Government support schemes have undoubtedly kept many companies on life support. From the second quarter of 2020, when the covid restrictions were brought in, up to the second quarter of 2021, when things began to open up again, there were just over 11,000 registered company insolvencies, according to the UK Insolvency Service. This compares dramatically with the same period in 2020, when there were almost 17,000 insolvencies. The 31% quarter-to-quarter jump in the second quarter of this year gives a dark indication of what we can expect to come. 

 

It is hard to see such businesses being in the frame for expansion, whereas in complete contrast, we have the listed operators increasingly flexing their financial muscles as they take the opportunity to grab new sites. Many of these outlets would simply not have been available pre-pandemic, or they would have been significantly less attractive financial propositions.

 

With almost 1,000 licensed premises having closed between July and September, according to the Market Recovery Monitor from CGA and AlixPartners, and numerous retailers shutting up shop or slimming down their portfolios, there are myriad deals to be done for cash-rich listed hospitality companies.

 

In recent weeks, Clive Watson of The City Pub Company has been extolling the virtues of being a quoted company, while Nick Collins, chief executive of Loungers, has detailed how the strength of its plc covenant has enabled the business to not only stick to its 25 sites per year opening strategy, but also take advantage of the company voluntary arrangements of retailers to pick up units in locations where they had fruitlessly been looking for many years.

 

Tortilla has only recently gained listed status, but already its chief executive, Richard Morris, appears almost like a kid in the candy store with his pocket money safely held in his hand. As he surveys the many site opportunities in locations around the UK, he has stated: “I have been running restaurants for 30 years and I have never seen a property market in the favour of this sector ever. This is a once in a lifetime opportunity, and we are delighted to have got the initial public offering away and been given the opportunity to make the most of it.”

 

He has found rentals typically dropping by 20% to 30%, and it is a similar story at Fulham Shore, which having undertaken equity fundraisings, is now confidently looking at as many as 150 sites for its medium-term plans for Franco Manca and The Real Greek. Like his listed contemporaries, David Page, chairman of Fulham Shore, is enjoying debt-free status and having the firepower to take advantage of rental discounts and significant landlord contributions.

 

It is not solely the listed players that are active in the market, because the likes of D&D and the Rooney Anand-led RedCat Pub Company are on the hunt for more sites, but it is probably fair to say that the public markets have not looked as attractive for quite some time for expanding operators. That’s why the likes of Giggling Squid, Hawksmoor and BrewDog will be hoping the current uncertainty in the hospitality industry begins to settle down, and a window within which to undertake initial public offerings opens up again.