Staff shortages and costs are a “constant problem” for Scottish hospitality operators and particularly so for businesses with a food offering, with Brexit among the contributing factors, a sector expert has declared.

However, Brian Sheldon, hospitality director for property agent Christie & Co in Scotland, also highlighted his belief that banks had been more patient with businesses in the sector amid, and coming out of, the coronavirus pandemic than they were during the global financial crisis.

He believes Scotland’s hospitality sector is proving “resilient” amid the various challenges it faces. And he flagged a wide range of buyers for hotels.

Mr Sheldon, observing from his decades of experience that the sector would always “bounce back”, declared: “Has it bounced back as strongly? Maybe not, but there is bounce-back and that is positive.”

Flagging challenges facing the hospitality sector, he said: “I think staff costs and staff shortages are a constant problem…with the living wage going up and the availability of staff [issues]. We talk about staff across hospitality being a problem – trying to get good staff whatever sector you are in can be difficult. Particularly those outlets where you have got food - I think where you have food you have that specialism to operate the kitchen as opposed to bar staff.”

On the question of whether he had solutions to suggest to address the staffing issues, he replied: “Without going down the political landscape, probably not.”

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Mr Sheldon flagged a need to pay staff “a bit more” and make the job more attractive to people but also highlighted the impact of the pandemic and the UK’s departure from the European Union in making it more difficult for operators to find employees.

He said: “Perhaps on occasion hospitality is not viewed as passionately as it was…Dare I say it, Brexit as well – Europeans who are no longer here, not as many as there once was.”

Mr Sheldon noted demand from at home and abroad for hotels which were coming up for sale.

He said: “We are seeing a wide-ranging buyers set – particularly with hotels. We are seeing lots of private investment, international money, private equity. We have got local, regional, international buyers across the country. Rural hotels are still in demand.”

Mr Sheldon flagged Edinburgh-based Apex Hotels’ recent purchase of the Pine Trees Hotel in Pitlochry, a transaction in which Christie & Co was involved.

Commenting on the level of transactions being seen by Christie & Co in the Scottish hospitality sector, Mr Sheldon said: “The pipeline is healthy. While the first six months of 2023 was a bit slower than 2022, we are playing catch-up. By the end of the year, we will be there or thereabouts, maybe slightly behind where we were in 2022.”

He noted there had been a “spike” in activity in 2022.

Mr Sheldon said transaction activity in the Scottish pubs sector had been “a bit sluggish” but added there was “a bit of a kick-on at the moment” in this segment of the market.

He noted that pubs with food had previously been more in demand but observed: “We now see the reverse happening, where pubs without food [are] more attractive than pubs with food.”

Commenting on the lending environment and distress levels for Scottish hospitality businesses, Mr Sheldon said: “I think for the last three or [so] years, since the pandemic, we talked about when is the distress going to hit the market and, every year, we are surprised there is not a lot of distress coming to the market.

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“I think IPs (insolvency practitioners) are getting busier. That is what we are detecting from them. I think we will see distressed businesses coming to the market – whether they are forced through an administration or insolvency process or whether they will allow them to sell the asset consensually before the bank put a bit of pressure on them.”

However, he added that it was “anyone’s guess” to what extent distressed businesses came to the market.

Mr Sheldon said: “Compared to the last downturn, banks are being more supportive, which I think is right.”

He added: “I think the banks have been very, very tolerant and very supportive, which I think is fantastic, unless it is almost inevitable, where it has got to the stage where the only option is to call it a day.

“Across the business landscape, I think there is data out there that will show there are more insolvencies and administrations across all businesses than there has been. You don’t have to be a rocket scientist to work out it is going to hit hospitality at some point.”

He flagged high inflation and the increase in interest rates as other “headwinds” facing hospitality.

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Mr Sheldon noted that disposable incomes and profit margins were squeezed.

He said the 20 to 30 age group was “out spending anyway”.

Mr Sheldon added: “You have then got the older brigade, who probably still have got the discretionary spend, disposable income, that probably still want to go out…They might not spend £200 on a Saturday night out at the top-end restaurants.”

He noted that many families with two or three children would face a particular squeeze, and might not go out as often as they had in the past.

Mr Sheldon meanwhile also highlighted the impact of hybrid working on hospitality businesses, citing the effect on some in the sector in Glasgow city centre as an example.