Fladgate was delighted to sponsor the Leisure Property Forum’s Big Leisure Debate at Vue West End, Leicester Square. The past 12 months have seen critical issues impacting the leisure sector – BREXIT, rates increases, wages growth, staff shortages, and technological disruption. Although there have been positives too, with a very high level of cinema admissions, growing diversity of leisure offers including the burgeoning competitive socialising scene, boutique health and fitness offers, budget and compact hotel sector growth, and a rapid expansion in the Food Hall sector.
This event saw seven experts discuss the leisure market, political landscape and economy over the past year, the panel included:
What happened on the day?
Along with my fellow partners, Stephen Lewis (Head of Real Estate) and Matthew Williams, and Associate Nick Wood we mingled with attendees beforehand over traditional breakfast fare before taking our seats in one of the very comfortable auditoria in the cinema.
Topics (unsurprisingly) included Brexit, CVAs and the impact of technology/the internet on leisure but other questions concerned pop-up restaurants/food halls, the sugar tax and looking ahead to trends in leisure in the next five years. On most subjects, the panel was fairly united in their views despite the fact that they came from quite different perspectives within the leisure industry: restaurateurs, marketing, operators and investors.
In relation to Brexit, there was concern about the uncertainty and impact on customer confidence, although many of the panel were upbeat that the UK economy was strong enough to shake it off. There was certainly a feeling that London and the South East would be more greatly affected by Brexit related employment issues than the rest of the country given their greater reliance on EU workers. Operators were keen to focus on their teams and the importance of investing in people so as to minimise the impact of Brexit and encourage “homegrown” talent. In terms of supply chains, there was concern about the ability to continue to import fresh food should there be a hard Brexit, particularly in the crucial Christmas/New Year trading period, and a worry that this might lead to an increase in prices. However, the panel felt that pragmatism would eventually win out since it was in nobody’s interest for food to be sitting on either side of the Channel not being able to be eaten.
In relation to CVAs, several on the panel felt that these were a necessary evil (although they were not in favour of them) since they were a means of “cleaning up” legacy businesses that had expanded too fast and now had huge rent rolls. Most felt that property costs were the main cause of CVAs and that the high rents paid to landlords were not sustainable; I am sure that some in the audience disagreed with this. Panellists said that they were sure that there were operators who were reluctant to go into large retail/leisure schemes, simply because of the high rents and service charge costs, and therefore they opted for cheaper high street locations instead; some operators also avoided London given the higher costs. The sentiment overwhelmingly was that people didn’t use CVAs willingly since they were bad for brand and customers don’t like them.
On a wider point, the panel thought that some schemes simply had too many operators in them competing for business resulting in the customer pound being sliced too thinly for the operators to make money. This was exacerbated by landlords who then added in casual pop-up dining within such schemes. The panel felt it was important for landlords to consider this and try to work with operators so as to minimise the chances of failure for the benefit of all.
The panel was asked about pop-up restaurants and the market hall concept and said that whilst they didn’t feel that these would become the norm, it certainly was the case that they added an interesting mix and would be a growth area. They allowed new entrants to the market to test their wares before investing in leases/bricks and mortar. Some on the panel felt though that for the market concept to really flourish it needed the building to have interesting architecture and for the landlord to provide the drinks offering.
Looking to the future, the panel thought that technology would have its inevitable impact and that there was a possibility of further regulation (such as the sugar tax) if the industry did not self-regulate. There was a feeling that alcohol sales would possibly fall and that there would be a “premiumisation” of the market with customers looking for greater quality, but also being more sensitive to price. Some of the operators present on the panel were hoping for increased visits and realised that the only way to achieve this was to offer low price points and maintain interest and quality. In the restaurant sector, there was a view that solo dining would likely increase as would the numbers of coffee shops opening for extended hours. There is also a need to deal with food trends such as veganism, low fat, gluten-free, less red meat and more healthy options. In cinemas, there was not much fear of the internet given that it had been a record year for attendance and turnover. Although there had been the advent of new competitive socialising operators, this did not push traditional pastimes out of the picture but the challenge for those businesses was ensuring that quality was maintained and the offering fresh and good value. In addition, there was a feeling that competitive socialising was difficult to make work outside London or big cities where there were less corporate spend and less footfall generally.