I don’t envy Kate Nicholls’ job as chief executive at UKHospitality. If it was difficult before, it’s really challenging now. In lockdown one, there was real clarity and focus on what all operators wanted. Now, in lockdown three, there is far less cohesion and agreement over what different operators need, largely due to disparities in performance.
For instance, quick service restaurant (QSR) brands have performed well over the past 12 months (McDonald’s UK results on Thursday, 28 January, would bear witness to this) as have brands that have become more heavily out-of-restaurant-focused, including click and collect, delivery and drive-thru. Potential “dine-in restaurant” sales have been replaced by “eat at home” sales. While these QSR brands would undoubtedly want restaurant sales to return, their financial situation is better than many other sector members. Of course, they would like the government to continue to support them with an extension of the VAT cut and rent relief but they are doing OK, generally. It is difficult for them to speak about the situation from the same page as the rest of the market.
Pubs are in a very interesting space right now. It’s tough to argue that it is a sector in difficulties (which it patently is) when there is so much interest in buying distressed assets. While pub sites might be closed and teams currently furloughed, there is every indication good sites will be bought and reopened and teams re-employed. Of course, the issue here is cash burn. Again, VAT and rent relief are critical but not as critical as the reopening of pubs, in general. And doing this only once. Everyone I have spoken to would prefer to open later, in one go and under one set of rules rather than earlier with a complicated tier system and the possibility of quick closure. Under-promise and over-deliver on openings please Boris.
Contrast their position with that of contract caterers who used to have significant revenues generated by the business and industry segment (employee dining) or the sports and leisure segment (customer dining). There is precious little business to be had here, especially in city centres, and no immediate return to working from offices or going to sports events, on the horizon. While they may still be providing services to the armed forces, judiciary, prisons, education and healthcare – it’s often low-margin business and any growth here does not counterbalance the sales and profit decline in their other divisions. What they need is not only continued government support on VAT, rates and furlough but life back to normal – something the government simply cannot promise at the moment.
The casual dining sector has had mixed fortunes in UK hospitality at present. Many have undergone some form of financial restructuring and have rents sorted, leases agreed and poor sites sold. Some have moved successfully into new business areas. There may be some cash burn but they can mostly struggle through until May. Others are not in this situation with rent debt being a huge unsolved issue – one that will see many go to the wall in the next few months. It is difficult to have a unified message on rent debt when not everyone is in the same position.
And then, of course, there are coffee shops, motorway service stations, experiential sites, bowling alleys, holiday parks, caravan sites, hotels, bed and breakfasts and tourist attractions. All of which have slightly different demands of their industry body and the government.