EDITOR’S VIEW: It’s been a desperate time for every operator but SSP has sailed into the eye of a perfect storm

Andrew Seymour

Even when the furlough scheme was announced by the government at the end of March, there was an instant expectation from within the industry that the easing of lockdown measures – when they came – would bring a wave of redundancies among operators.

Scientists have made a habit of pointing out that Covid-19 does not discriminate when it comes to individuals, and the same can be said of businesses too.

High street names that have always appeared invincible due to their brand reputation and enormous scale have had the wind taken out of their sails through no fault of their own.

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Whitbread revealed this week that it suffered an 80% decline in sales during the first quarter. At the start of this year, it could never have ever imagined it would be reporting those kinds of numbers to investors. But that’s what happens when an entire hotel estate isn’t allowed to open to the public.

Then there is Pret, a bastion of the food-to-go market in Britain and a fixture on every major street in London. It now faces the prospect of closing a string of stores after revealing that some sites are trading at a sixth of what they normally do.

A pilgrimage to Pret is a daily routine for tens of thousands of office workers and commuters, but like Whitbread and its empty hotels that doesn’t mean anything when everybody has been told to work from home.

Brands such as these and many others are merely victims of exceptional circumstances rather than flawed strategies.

But as the number of redundancy and closure announcements keeps growing, it struck me that one operator really has sailed into a perfect storm like no other: SSP Group.

If there was one operator that looked untouchable before all this, it was SSP. Years of solid growth and a prolific global expansion strategy have seen it build an empire of nearly 3,000 units, spread throughout 180 airports and 300 rail stations. Last year it racked up an operating profit of £221m on revenues of £2.8 billion.

But this month it announced it would have to axe a massive 5,000 jobs in the UK, possibly the most drastic head-cutting measure announced within the restaurant sector yet.

Once again, it is largely a victim of circumstance rather than reckless decision-making since its entire business model is based around the travel and transport sectors.

Ordinarily, these are places where high volumes of traffic are guaranteed; where people don’t think twice about the cost of the food or drink because convenience is what matters. On that basis, it’s hard to think of a more robust formula.

But when hardly anybody is commuting through railway stations, and airports are desperately bare, it is a doomsday scenario.

SSP’s intention was to reopen units and bring back its teams as rapidly as possible once passenger demand recovered, but it now admits the “reality” is that passenger numbers still remain at very low levels.

In the rail sector, which represents the majority of its UK operations, throughput is 85% down on last year’s figures.

The proposed introduction of air bridges and the start of the holiday season may lead to some limited return of short-haul air travel demand, but capacity is expected to be significantly reduced, meaning fewer people are moving through airports buying food.

While many restaurant operators around the UK are manoeuvring towards a position where the majority of their sites will be operational again by the end of July, SSP’s expectation is that by the autumn only around 20% of its UK units will have opened.

This predicament is what has led to the need for such a dramatic reshaping of its UK business and the potential loss of so many jobs.

There are vulnerabilities in every business model, but in ordinary conditions it normally takes a combination of factors – bad decision-making, competitive behaviour, unforeseen shifts in consumer patterns – over a prolonged period of time for those weaknesses to be exposed.

As we know, however, conditions are anything but normal, and the usual rules and trends that govern market landscapes have gone out the window.

One of the questions surrounding SSP and others when the storm does eventually settle is how many years will this episode have set them back? What will it take to return to the level they were at before March? And do they even have the appetite for it?

The recovery won’t be a simple one for everybody.

Tags : Editor's viewopinionSSP Group
Andrew Seymour

The author Andrew Seymour

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