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Navigating the Headwinds: Challenges and Solutions in Scotland's Hospitality Sector

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The hospitality sector in Scotland, renowned for its vibrant culture, picturesque landscapes, and historic attractions, is facing unprecedented challenges in the post-pandemic landscape. These obstacles are multifaceted, stemming from socio-economic shifts, legislative changes, and broader geopolitical events. Understanding these challenges is the first step towards devising effective strategies to not only navigate through them but also to thrive.

Challenges Facing the Hospitality Sector in Scotland

Staff Shortages Post-COVID and Brexit: The twin impacts of COVID-19 and Brexit have severely strained the workforce in the hospitality sector. The pandemic led to global travel restrictions and local lockdowns, disrupting the industry's rhythm and workforce stability. Brexit compounded these issues by restricting the free movement of workers from the EU, traditionally a significant source of the sector's workforce.

Economic Downturn: The ripple effects of closures and the demise of the high street have been palpable. A combination of decreased consumer spending and the shift towards online services has led to a challenging environment for hospitality businesses, many of which rely on high street foot traffic.

Financial Pressures: The sector is grappling with rising costs across the board - from ingredients to utilities. High energy prices and the ongoing cost of living crisis further squeeze both the businesses and their customers' spending power, creating a cycle of financial stress.

Regulatory Changes: Recent and upcoming changes in regulations, particularly concerning alcohol marketing, pose additional challenges. These changes require businesses to adapt their marketing strategies, often at a considerable cost.

Strategies to Retain Staff

In light of these challenges, retaining a skilled and motivated workforce is more crucial than ever. Here are strategies employers can adopt:

Create a Talent Pool: Proactively recruiting and maintaining a pool of potential candidates can help businesses quickly fill vacancies, minimising disruptions.

Inclusive Hiring: Broadening hiring criteria to include those with less experience, coupled with offering training opportunities, can tap into a wider talent pool.

Employee Benefits: Enhancing benefits and considering incentivised pay structures can make positions more attractive.

Positive Work Culture: Cultivating an environment where employees feel valued, and part of a team can significantly improve retention rates.

Training & Development: Investing in employees' growth not only boosts motivation but also enhances overall business performance.

Attracting Staff with Benefits

To attract top talent, employers should consider offering:

Healthcare and Wellbeing Programs: Demonstrating a commitment to employees' physical and mental well-being can distinguish a business as an employer of choice.

Competitive Wages: Fair compensation remains a primary concern for most job seekers.

Paid Time Off and Retirement Plans: Benefits that support a healthy work-life balance and long-term security are highly valued by potential employees.

Employee Discounts and Sales Incentives: Direct benefits and performance-based bonuses can enhance job satisfaction and loyalty.

Training and Development Opportunities: Facilitating professional growth can attract ambitious individuals looking to advance their careers.

The hospitality sector in Scotland faces significant challenges, but with these come opportunities to innovate, adapt, and thrive. By focusing on staff retention and attraction through fair practices, competitive benefits, and a supportive work environment, businesses can navigate through these turbulent times. The resilience and adaptability of Scotland's hospitality sector will undoubtedly be a testament to its enduring appeal and significance.

Risk Transfer as a means to protect the business from external threats

The threats to hospitality businesses are not limited to its workforce, operational risks play a large part. Businesses who invest in risk transfer are more likely to recover from an unfortunate event. 

Threats from Cyber Criminals: Whilst most cyber-attacks are focussed on financial institutions, phone & IT providers and critical manufacturing, SME hospitality businesses are not immune from this threat. Data security for hotels is as important as physical security. The interruption to businesses following a denial-of-service attack, which shuts down networks can be devastating and expensive. 

Regulatory Requirements following a data breach: The reporting of breaches involving customer’s personal data must be reported to the Information Commissioners Office within 72 hours of becoming aware of the breach. Customers whose data is vulnerable should also be informed, leading to reputational damage, financial loss and the potential for legal action. ICO fines for infringement of the Data Protections Act 2018 can be up to 4% of turnover. 

What can businesses do to reduce this risk? 

Create an Incident Response Plan (IRP): In 2023 *59% of SME’s had some sort of cyber   incident and more than three quarters of the companies polled had no plan in place to deal with a cyber-attack. 

Employee Training: Successful attacks depend largely on access to your network, this is via phishing emails or attachments, inadvertently clicking on suspicious links or using public Wi-Fi. According to Cyber Training Platform Phished, training staff to identify phishing emails can reduce the risk of cyber-attacks by 96%. 

Insure: Cyber Insurance will provide SME businesses with access to cyber professionals when they need it most. From cyber forensic experts, legal advice and crisis communication. Cover can also include reinstatement of data, business interruption and cover for fines and penalties resulting from a regulatory investigation. 

Other common areas where businesses transfer the risk of loss.

Insurance Programme: Appointing a broker who understands the risk your business faces and the solutions available allows businesses to focus on their strengths, providing visitors to Scotland with Scottish Hospitality. 

Underinsurance: According to our data, 1 in 2 properties in the UK are underinsured, this means if you have a claim and underinsurance is evident, your settlement will be reduced by the proportion of underinsurance. 

Sum Insured: Setting the right “Sum Insured” is imperative, as such we recommend if a business or property owner hasn’t had a Reinstatement Cost Assessment within the last 24 months, one be completed. If alterations and improvements are made, this should be accounted for within the sum insured. 

Understand the risks associated with your business.

Risk Management and the Regulatory arena: All business in the UK have an obligation to comply with Health & Safety Executive regulations including Electricity at work, personal protective equipment and Food Hygiene Regulations. Also, within scope are Acts of Parliament such as the Fire (Scotland) Act 2005 and Employers Liability (Compulsory Insurance) Act 1969

Identifying threats to the business: there are over 100 separate pieces of legislation which are enforced by the Health and Safety Executive, these are in addition to the duty of care principle. 

Competent Assistance: Given the legislative landscape, for businesses to comply across the various Acts and Regulations is nigh on impossible without having trained staff dedicated to this topic. As such external support is vital, not only does this ensure the business is operating within the framework, but it also allows businesses to do what they do best, run their business!

Claims Defensibility: In the event of an injury at work, Employees have the right to claim for compensation, this is made up of general compensation for pain and suffering, loss of earnings and medical care. Businesses who can demonstrate they have in place a robust system to protect employees from injury are less likely to be prosecuted by the Health & Safety Executive. This also has a knock-on effect of putting you ahead of the competition for recruitment and potential cost savings with suppliers, including insurance premiums. 

Reputation: A robust approach to managing risk can support your reputation with both staff, guests and suppliers. Creating a culture which supports risk management and sees this as a benefit and not a hindrance to productivity. 

For more details please contact:

Saba Haran  Employee Benefits
  Saba Haran
  Director Pension & Employee Benefits Scotland
  [email protected]
  M: +44 7596 872 749
Shani Barclay  General Insurance 
  Shani Barclay BA (Hons) Dip CII                                           
  Account Executive 
  [email protected]
  M: +44 7741 314 985 
  

*Department for Science, Innovation & Technology, Cyber Security Breaches Survey 2023, Emma Johns, Maddy Ell.