Prices at pubs, restaurants, hotels and bars could increase by as much as 6% in the next year, analysts predicted.
The national living wage (NLW) will jump to £11.42 in April 2024 and will be applicable to 21 and 22-year-olds for the first time, chancellor Jeremy Hunt announced in yesterday's Autumn Statement.
Premier Inn-owner Whitbread PLC (LSE:WTB) and Hollywood Bowl Group PLC (LSE:BOWL) are the best equipped to deal with the changes due to having strong margins and an efficient workforce, according to broker Shore Capital.
Whitbread is expected to suffer a £40 million hit to underlying profits, while Hollywood Bowl could shed £3 million annually.
JD Wetherspoon PLC (LSE:JDW), Mecca Bingo-owner Rank Group PLC (LSE:RNK) and Loungers PLC (AIM:LGRS) are most exposed to the changes as price increases aren’t practical tactics for their business models.
Hospitality companies, where many employees are paid the minimum wage, are expected to charge an extra 2% to cover the salary hikes.
This is on top of the already-planned price increases of 4% to help negate cost inflation and recover margins.
However, a boost in wages could increase the disposable incomes of customers and may slow the drain of hospitality workers in Britain, the broker concluded.
ShoreCap have given Hollywood Bowl, Whitbread, Loungers and Rank a ‘buy’ rating and Wetherspoon a ‘hold’.