It is understandable that most analysis over the past few years have constantly looked back to 2019 as the benchmark for measuring where the market stands on the road to recovery.
However, it is also right to now ask if it is time to move on as so much as changed and we will not be going back to the same world which existed in 2019. We do now need to look ahead and understand the major challenges yet to be faced.
It is interesting that many are noting that they will be back to 2019 trading levels in 2023. There is certainly evidence to support this but one needs to also note that figures today have been understandably inflated through inflation and other factors.
Inflation in 2018 and 2019 stood at around 2.3%. Food inflation was only at 1.8%. in 2018, it stood at 1.6%; a long way from the 19% which is being recorded today. It will naturally distort all comparisons and the challenge today is to look ahead.
There are many who are arguing that we will see a full return to workplaces by June 2023 but is this really likely? The TFL figures are still noting that travel is at 84% of 2019 levels and this includes evenings. The truth is that we are probably at 60% and it may recover to 75% but this is the new norm until companies do rebuild teams and workforces. Many companies are expecting to downsize their property portfolio or lease out.
The interesting question today is what is reasonable value in 2023? When one considers all the cost increases and also how the cost of living crisis is impacting on talent, the question must be asked – what is reasonable value today of a lunch on the High Street or a burger in a restaurant?
The cost of the High Street has been remarkably static since the early 00s. Now it is under major strain and still not close to 2019 trading levels. However what is a fair and reasonable price for a burger? Is it £15? £20?
The same can be asked in relation to hotel rooms who have enjoyed a good 2022. City Centre hotels did take a major knock during the pandemic but have seen a strong recovery this year. The argument has been that consumers have had a higher level of savings than previously due to the lockdowns, higher levels of savings, less dining out and less travel. Hotels have this year taken rooms off-sale, reduced occupancy and driven room rate which all served to build a stronger recovery than could have bene expected in the dark days of 2020. However, will this strategy continue and where is the right balance in value?
Most especially in a cost of living crisis when many are struggling. One of the noted concerns today is that the gap between society has never been as great since the 1930s.
As we look forward to 2023, it will see a new narrative emerge and it is now time to look forward as 2019 will be unlikely to return.