Written by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
On the face of it the Eat Out to Help Out scheme has been a roaring success, with bookings between Monday to Wednesday soaring by up to 70% compared to the same period last year as diners make the most of cut price meals. However, Thursday to Sunday bookings in August appear to be well below last year’s rates. Given that many restaurants rely heavily on weekend trade, it may be that spending has just shifted to earlier in the week with potentially a lower spend. But social distancing rules also mean that restaurants can accommodate far fewer bookings than they did before the pandemic which will also partly account for the drop in weekend trade.
What appears to be more encouraging is the ONS survey which shows that there is a growing appetite to eat out – with double the number of people saying they feel comfortable eating inside at a restaurant compared to the start of July.
Rishi’s cut price dishes might have done the trick in enticing more people back into their favourite eateries but the question is will they keep coming back in high enough numbers once the promotion ends? The research also indicates that almost three in five people still don’t feel comfortable with dining inside and that is a huge challenge for the restaurant sector as we head into the Autumn and fears of a second Coronavirus wave mount. Given this, there could be rewards for innovation in the sector and for restaurants that are able to generate income outdoors, even in the colder months.
It’s estimated the scheme will cost the Treasury around £500 million and this sudden inflow of cash to hospitality businesses struggling in the sector could be make or break for some firms. In the short term it will be a welcome boost for family orientated restaurants such as Wagamama and Frankie and Benny’s owner Restaurant Group which in June announced the closure of 125 restaurants with 3,000 employees losing their jobs. However, the group’s long running problems around restaurant location persist with its focus on out of town retail parks and shopping centres already reeling from the closure of big name department stores.
The cut in VAT from 20 to 5 per cent will go some way in helping the sector’s recovery, with most large chains cutting the price of popular items on their menus to entice people in, but with that temporary reduction due to end in January, winter could still be bleak for the industry.