Will the smoking ban de-value my property?
I am worried that property values will fall when the smoking ban comes in. Should I make changes to my pub now or hang on till the last minute?
Yaser Martini, Fleurets
History dictates that any time there is change in the market, there is usually a negative or stalling effect on property prices, at least in the short term.
There will be those making dire predictions about the prices of property, and trading in general, under the ban, but I think these people underestimate our trade and those who work in it. It's a resilient sector.
I'm sure the trade will adapt. Moreover, there will be operators that flourish and grow their businesses under the ban.
One piece of advice: when entering the trade always have an exit strategy in mind. By this I mean, plan for the time that you will want to sell your lease or freehold and act accordingly. If your plan is to sell your pub at the start of, or shortly after, the ban, then I suggest that you act now. When people buy a pub they are going to look at historic trading figures and with the advent of the ban they will, in most cases, be comparing pre-ban figures with those post-ban.
These clearly are different trading conditions, and potential buyers are likely to play on this uncertainty.
With this in mind, consider making the conversion to no smoking sooner rather than later and offer prospective buyers an accurate look at your trading conditions on a like-for-like basis.
In summary, I recommend you make provision for the ban now and discuss the details of the ban with customers, making them feel part of the change in culture and not victims of legislation.
www.fleurets.com
Hugh Caven, Walbrook Commercial finance
To do nothing is to choose to remain the same - but my advice would be that this is not an option.
It is no coincidence that Caterer has been inundated with advertisers promoting patio heaters, BBQs, awnings and all things outdoors. The ban is no longer up for discussion. To enjoy a drink and a smoke in a pub will be illegal next year.
But to move to non-smoking ahead of the ban has already proved a financial mistake. A local pub near me implemented a total ban, but six months later this was lifted. The landlord estimated that for the last three months of the ban they had
sold thousands of pints fewer than over the same period the previous year. Most
importantly, they felt that they had alienated their local customers.
In January JD Wetherspoon announced its intention to ban smoking in all its 650 pubs by May. But by March, an initial trial in 49 of their units revealed a fall in sales of 7.6%, which led them to lift the ban and wait, like everyone else, for the bill to become law.
So, those establishments that can should be showing their smoking customers that they value them and should be preparing now for next year. The ban is not of your making, but statistics show that up to 30% of your trade could be affected. Businesses which show their customers they are prepared to invest will suffer the least in terms of trading.
If you have a beer garden, do not treat it as a casual overflow. Next year it could be your greatest asset. I am sure there are plenty of pubs in your area that don't have garden facilities to promote, and you should be aiming to attract those who will feel displaced from their usual haunts.
www.hotelandpubfinance.com
Chris Morton, Chris Morton Associates
It depends upon your objectives. If you plan to sell the business soon, then you're probably better off leaving well alone, maximising revenue, identifying how the business can be adapted and then moving on. However, if you're here for the long term, plan now.
Does this mean introducing an internal smoking ban now? Ask your customers. Try it out and see, unless your core customers are entrenched smokers. In that case you're probably causing upset when you don't need to - and you can blame the Government for your actions later on. This doesn't stop you planning, though.
It is highly likely we will see an extension of the current shift towards the voluntary creation of no-smoking establishments. Can you benefit by being ahead of your competitors? If so, then early action will be beneficial.
You do not have to ban smoking altogether. You can provide outdoor drinking areas and part-covered areas too. The new law applies to "enclosed spaces". What is an enclosed space? At the moment no one in England knows; but in Scotland it means that more than 50% of the perimeter is enclosed, and it is likely to be the same in England. So, part-enclosed areas will probably be acceptable, and several firms are selling "bus shelter"-type structures to help you.
One major fear, of course, is the effect of the ban on property prices. As profitability is a crucial part in any business valuation, there will surely be losers. However, early action now to identify what suits your customers best will minimise any downturn that may occur.
