Riders on the storm
The face of Britain's leisure industry has changed dramatically over the past 10 years. An evening out, eating and drinking, is no longer reserved for special occasions or just the preserve of the rich - it is now within most people's reach.
The leisure industry has responded with a dizzying number of new concepts and brands - and cities and towns are alive with evening entertainment seekers.
"Eating out is not a luxury anymore - it's expected," says Alan Creevy of Glasgow-based Creevy LLH. But do all good things come to an end? The economy is certainly telling conflicting stories. On the one hand, house prices keep rising, an indicator that there is still money out there to buy, and unemployment is at its lowest level for years. Yet, on the other, some businesses are putting expansion plans on hold, profit warnings are in the headlines and companies are laying-off staff.
Words are floating around such as downturn, market correction and the most feared term - recession. If the good times are set to stop rolling or at least to slow down, the inevitable belt tightening may make diners and drinkers think twice about where and when they go out. So which licensed leisure offers are a safe bet to weather the storm?
The last six months have been a testing time for leisure operators. Pub chains have been changing hands, brands have been sold off and concepts have expanded throughout the regions, though some groups have not been performing quite as their shareholders would like.
Diners and drinkers are a changeable bunch, and most observers believe further signs of economic slowdown will make that fickleness even more acute, particularly among those that frequent the heavily-branded chains.
"People aren't as discerning now as when tides turn. People will be choosier about where they go. Why pay a lot for a pint and half-decent food when they can go somewhere else more quirky, with cheaper beer and good food?" asks Ted Schama of London-based leisure property specialist Shelley Sandzer.
He adds: "People aren't fussy at the moment, but the tighter the control of the wallet, the more picky they will be about where they go." Mark Cutler of Knight Frank agrees. "If people are not eating out as frequently, they are going to be more choosy about where they go. Cost and quality will be a factor," he says.
Quality environment
He goes on to point out that it will be the whole package that a restaurant or bar/restaurant offers - the quality of food and service, the atmosphere and most importantly value for money.
Creevy adds that this doesn't necessarily mean cheaper when times are tougher. He believes people don't mind paying as long as they get value for money.
"A recession focuses the attention on good business practice. Operators who don't run their businesses properly go bust. A recession sorts out the good from the bad," he adds.
Creevy believes increased competition is a good thing for the market, and Jeremy Simmons of leisure property specialist Berkeley Simmons Davis agrees. "It is a healthy time to shake everyone up and see who comes out on top," he says.
The heavily branded pub chains have already had a question mark put over them. Fashions change quickly and Mike Rodda of Jones Lang LaSalle goes as far as to say that drinkers are getting bored with this type of offer.
But this is not to say the death-knell chimes for all chains. The consensus seems to be that companies like JD Wetherspoons will do well. Creevy says this is because the pub chain is adaptable and there is no single brand within the group. It also offers discounted food and drink. As Schama explains: "People always trade down but I don't necessarily believe they stop going out."
James Grimes of AG&G believes that pubs and bars are more resilient to slump than eateries because people tend to cut down on eating out, rather than drinking. Perhaps again because of fashion or boredom with high-street brands, or the prospect of leaner times, some predict the resurgence of community pubs.
As Grimes says: "We are seeing many of the older brewers such as Green King and Young & Co again finding favour in the City. Their advantage lies in a strong community estate without any of the baggage associated with expensive brands.
"The vast majority of their respective estates are held freehold. These old economy stocks offer a safe haven in a weak market. Come what may, there will always be a place for a community local."
Like the branded pub chains, there is a view that restaurant chains may suffer a similar fate. The Chez Gérard group recently announced a profit drop, which it has blamed on fewer tourists. Simmons of Berkeley Simmons Davis believes this is due more to the group's premature regional expansion - though he says certain brands within the group, such as Livebait, are doing well. It is thought Pizza Express will also do well because it has quality and value, and there are the likes of Nandos at the market's lower end.
There is disagreement, however, about how the top end of the restaurant market will fare. White-tablecloth offers, as some describe them, are likely to lose out only if the slowdown is severe, says Creevy.
Varying effects of downturn
JLL's Rodda agrees, saying that the sort of customers who can afford to eat in the finest restaurants such as The Ivy and Mirabelle are the least likely to be
affected by a slowdown. He believes it is the next tier of restaurants down that will suffer as they attempt to emulate them. Knight Frank's Cutler agrees. He says, at the top end, money is not a factor. "There'll be more fall out in the mid-range because people can choose where to go."
Schama of Shelley Sandzer disagrees.He says: "It is the top end of the market that is most vulnerable. They have to provide good value, not necessarily cheap offer, but it just has to be perfect. Therefore, they are more likely to be criticised.
"The upper to middle market, for example Browns and Living Room, provide a classy environment, and yet customers are only paying mid-spend prices - so they could be winners."
The argument comes back to value, quality and service. And it seems that operators are already starting to take note. Tony Lyons, a licensing expert with Leeds-based Addleshaw Booth, highlights Inventive Leisure as one such company.
He says: "Inventive Leisure focuses on identifying a strong brand within the bar/restaurant trade, and reinforces this with a focus on excellent customer service - measures which have already seen them through difficult trading periods."
Ultimately, it will be the customer sharpening the knives, and those operators that get stabbed in the back will be the ones who fail to provide best experience within their customers' price range.
Licensed and Leisure Property Supplement, Autumn 2001
A joint supplement by Estates Gazette and Caterer & Hotelkeeper magazine
