What is the outlook for the restaurant industry in London and what are the challenges hospitality businesses face in this highly competitive but potentially lucrative region? Here are the key numbers you need to get the full story on running a restaurant in London in 2023.
London is a hotbed for the UK hospitality industry, with nearly 15,000 restaurants (74 with Michelin Star status) and 3,500 pubs. They serve a captive audience of nearly 9 million London residents, plus 16 million visiting tourists in 2022 (although pre-COVID numbers were as high as 29 million people).
Those figures may be impressive for both existing and prospective London restaurateurs but they’re really just the headlines. At ResDiary, we wanted to dig deeper into the state of the hospitality industry in the UK, and at the start of 2023 we conducted a survey of venue owners and operators across the country.
In this article, we share the key data from London, with insights and opinions provided by some of the city’s leading restaurants, pubs, and bars on running a hospitality venue in London in 2023.
43% of London restaurants predicted they would generate less revenue in 2023
Almost half of the people we surveyed in London said they expected to generate less revenue in 2023 compared to the previous year. Just 14% said they expected to generate more revenue. Those that did expect their revenue to decrease expected a drop of 21% in revenue this year.
There may have been a number of factors in play here. As you saw at the top of this article, the number of tourists halved between 2019 and 2022.
The ‘cost of living crisis’ has also been widely reported in the UK in 2022 and 2023, leading to the impression that people are simply dining out less. Our own data shows that most diners (55%) currently dine out in the evening either once or twice per month. This was an increase from (45%) 2022.
The good news for 2023 is that budgets for evening dining appear to have been less impacted by the current economic backdrop. Most people in the UK spend more on eating out in the evening, with almost a third of diners (30%) planning to spend between £51 and £70, while a quarter (25%) budget more than £91 each month.
ResDiary also processed 196 million confirmed bookings in the UK in 2022, compared to 152 million in the UK in 2021!
93% of London restaurants predicted increased operating costs
We mentioned the cost of living crisis above and, for most hospitality businesses, there really is no escaping the fact that it has become markedly more expensive to run a restaurant anywhere in the UK. This is especially true of London where base costs such as rent and staff are already the highest in the country.
According to London Economics, in 2022 on average, businesses experienced a 63% increase in electricity prices and a 124% increase in gas prices between Q3 2021 and Q3 2022. Prices in July-September 2023 will still be more than 60% higher than in winter 2021/22. While there is evidence to suggest that business energy prices have been on a downward trend in 2023, Government data shows that in July-September 2023 will still be more than 60% higher than in winter 2021/22.
Of the people we surveyed who said they did expect their costs to rise, they expected their overall costs to increase by 29% on average. With this in mind, hospitality businesses should be using the data captured in their various systems to make data-based decisions on expenses like staff and ordering ingredients. This could help them squeeze more value from every pound spent and potentially reduce unnecessary spending too.
71% of London restaurants expected to increase menu prices
Perhaps it comes as no surprise that 7 in 10 (71%) London restaurants, pubs, and bars planned to increase their menu prices in 2023. The average expected increase was around 15%.
As well as the added costs of running and manning their building, London restaurants have been hit with other factors such as supply chain issues (reported by 79% of London respondents), which has forced many to make changes to their menus.
As well as potential price increases, more than half (57%) reduced the size of their a la carte menus as a result, and almost half (43%) stopped doing specials.
You may be anxious if you are thinking about raising your prices, which is totally understandable. You may be able to soften any potential blow to your customers by introducing a rewards scheme for regulars or creating special offers tailored to suit your database of valuable regulars.
Almost 6% of bookings result in no-shows for London restaurants
No-shows are a common problem across the restaurant industry as a whole, costing the industry billions of pounds each year in lost revenue. We found that in the UK, between the start of the year and February 2023, 5% of confirmed bookings resulted in no-shows, costing £1,325 to the average restaurant during this period alone.
While the percentage of no-show bookings was slightly lower in London, it still resulted in an average loss of revenue of £934 in January and February of this year for London restaurants, pubs, and bars.
Despite this, 64% of London venues were not taking deposits of any kind. The remainder only took deposits for bookings of a certain size - usually of between seven and eight covers, charging an average deposit of £12 per head.
Deposits are a great way to tackle no-show diners in your restaurant and can have a tremendous impact in protecting your revenue. Learn more about protecting your venue against no-shows in this article.
29% of London restaurants are now open less days
Almost a third (29%) of London restaurants are now open less days per year, with the average being open two days less per week, according to our data.
80% suggested the cost of operations led to this decision, while 60% cited issues with staffing and recruitment.
Almost half (43%) of our survey respondents in London said they opened less hours in the previous 6 months, with the average being between 3-4 less hours per week. Again many (50%) suggested this was due to issues with staffing and recruitment.
Again, venue operators should rely on the vital data captured by their booking systems, EPOS, and any others they use to make data-led decisions about important costs like staffing and stock.
The truth about running a London restaurant in 2023
These numbers tell the story of what it’s like to operate a restaurant, or indeed any type of hospitality venue, in London in 2023. We’ve shared these vital figures with you not to cause panic or alarm for people, but to provide key insights that go beyond the press headlines and come from the front lines of the restaurant industry.
While many challenges and issues were raised by our survey respondents, the fact is thousands of London restaurants still remain successful by tackling them head on and showing incredible creativity in their approach to not just survive, but thrive.
There is a raft of support out there to help restaurants attract more diners and maximise their revenue, and to squeeze more value from every service that you can take advantage of to help your hospitality business. ResDiary is a restaurant booking system that can do just that, and it’s also capable of integrating with other hospitality business systems designed to make running your restaurant as smooth and efficient as possible.