Where we Stand and Where we are Going
By Kevin Stockslager, EVP & Partner, Wray Executive Search
Without a doubt, the past 18 months has been a challenge for most industries, but the restaurant and hospitality industries have been hit particularly hard by the COVID-19 pandemic. The first few months of the pandemic brought unprecedented shutdowns imposed across the country, drastic cuts to restaurant industry jobs, and substantial revenue loss throughout the industry. The restaurant industry lost 2.5 million jobs, industry sales dropped by $240 billion, and an estimated 100,000+ establishments were forced into temporary or permanent closures during 2020. Much of those same trends continued into the early part of 2021, as many states and municipalities continued to impose capacity restrictions and consumers remained wary about large scale events and gathering indoors in close quarters. While the availability of vaccines has helped to drive an increase in activity, recent surges in COVID variants have given many pause. The National Restaurant Association recently released their 2021 Mid-Year State of the Restaurant Industry Update, highlighting the industry jobs, sales, reopening, rising food costs, and a look ahead.
So far in 2021, the restaurant industry staffing growth has continued month over month. However, the industry remains 1M+ jobs below pre-pandemic employment levels, representing an 8% shortage in employment. Recruiting and retaining top talent has always been a top priority of restaurant and hospitality industry leaders. During the early stages of the pandemic, almost 20% of leaders responded that retaining talent was their top challenge. Those challenges have intensified dramatically over the past few months, as more than 70% of leaders reported that recruiting and retaining talent was their top challenge. In this tight talent pool, competition for talent has been intense and wages have increased as a result. Look for the industry to continue to add more jobs through the end of the year, but still a long way to go to reach pre-pandemic employment levels.
In terms of sales across the industry, the full service and bar segments were hit demonstrably harder than limited service establishments in 2020 due to the restrictions on indoor dining, difficult personal financial situations caused by the pandemic, and lack of consumer confidence in in-person dining. With increased vaccination rates, lifting of restrictions, and more robust off-premise programs, the full service segment sales have increased almost 25%, bars and taverns up a staggering 91%! With this growth, industry sales for 2021 are expected to total $789 billion, almost 20% higher than sales in 2020.
While the industry has shown signs of recovery through 2021, several challenges remain. Although the rate is slowly climbing still only 54% of the U.S. population is fully vaccinated. With the introduction of COVID variants, we are certainly not out of the pandemic. Additionally, several states are still imposing capacity restrictions on indoor dining. With the winter months approaching, indoor dining establishments in cold weather states could suffer. Global supply chain issues brought on during the early stages of the pandemic remain, resulting in higher food, fuel, and menu costs. On the operating side, the tight talent pool and staffing shortages are likely to continue, as the industry slowly adds more jobs to get back to pre-pandemic employment levels.
The first eight months of 2021 have shown promising trends in the industry, with increased hiring and sales numbers. Several factors will play a major role in the continued recovery of the industry through the remainder of 2021 and into 2022, including vaccination rates, COVID rates and the impact on state and local dining restrictions, supply chain issues, and the continued challenge on the staffing front. Over the years, the restaurant industry and its leaders have been a resilient and innovative group, the next few months will provide a great window into the future health and recovery of the industry. Here’s to brighter days ahead!
All the best,
Kevin Stockslager, Ph.D., EVP & Partner